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Sometimes all you need to start a small business is a workspace and an internet connection, which are essentials that you can often find in your home.
About 50% of small businesses in the U.S. are home-based, according to the U.S. Small Business Administration. Of those home-based businesses, many are in the information industry or construction.
Entrepreneurs start home-based businesses for a variety of reasons, said Ulrica Jones, a SCORE mentor and owner of Eventual Success LLC, a professional development consulting firm. SCORE is an organization providing business education through mentoring and workshops.
You could start a home business to follow a passion or an interest that’s not being fulfilled, Jones said. A home-based business could also offer a reprieve for workers who have been laid off or fired, she said.
If you’re thinking about taking a home-based approach to business ownership, here are a few home business ideas to get started.
8 home business ideas
1. Tax preparation
Any tax professional with an IRS Preparer Tax Identification Number can prepare federal tax returns. If you prepare federal tax returns for compensation, you must have a valid PTIN for the current year. You can obtain a PTIN and renew your number online for free. Tax preparers typically earn about $12 an hour, according to PayScale.
You could also become an IRS-enrolled agent, which is the highest credential that the IRS grants. After completing a three-part test on individual and business tax returns, you would be able to represent taxpayers before the IRS as an enrolled agent.
2. Alterations or tailoring
A tailor alters, repairs or creates clothing to meet clients’ specific needs — tasks that you could do at home. Although, you may need to have customers visit your home for fittings. You could receive formal training from a college or vocational school, though most tailors learn through experience and practice. The average salary in the clothing alterations industry is $31,000.
Though your business would be headquartered at your home, the work wouldn’t actually take place at your home. Pet-sitting would allow you to care for pets in their homes while their owners are away. Pet-sitting is different than boarding or pet day care, but dog walking could be considered a form of it. The average pay for a pet sitter is $13 an hour.
4. Business consulting
As a business consultant, you would help other entrepreneurs find solutions to company problems and develop strategies to reach goals. You would use your own methodologies to suggest potential improvements to the company. You could host clients in your home office or meet them elsewhere. Business consultants earn an average salary of $72,093.
You could become a certified tutor through the National Tutoring Association — for a yearly $35 membership fee — without being affiliated with a school, tutoring company or formal organization. You could tutor students in a subject area where you have strong knowledge, such as language, science or test preparation. Tutoring could take place in person or online via Skype or FaceTime. Tutors earn an average rate of $17.64 an hour.
6. Freelance writing
A freelance writer completes projects or assignments on a temporary basis for individual clients or publications. You would need to adhere to deadlines and collaborate with an editor. Freelance writers on average earn an hourly rate around $23.
7. Web or graphic design
Web and graphic designers use shapes, colors and photos to design graphics, logos and websites, among other projects. To start a design business, you may need to purchase a computer, printer and software, such as Adobe Creative Cloud. Creating a professional portfolio website could help you land clients. The average salary for a graphic designer is $43,507, while a web designer typically earns a salary of $49,236 a year.
8. Online retail
If you have a product or service to sell, you could create an online retail business. Marketplaces such as Etsy and Amazon Handmade would let you set up a shop online for a fee. If you’re interested in creating your own store, you could pay to launch your business on an e-commerce platforms such as Shopify or Square Online Store. The amount you earn would depend on the items and how much money it costs to produce them, among other factors.
What to think about when starting a business at home
To keep costs low when starting a home-based business, consider the skills you already have, Jones said. You could hire outside help if you have a business idea that you can’t handle yourself or take training or educational courses to learn new skills — but that would entail an extra expense.
“Do an evaluation and assessment of your talent and how that’s going to help you do what you need to do,” Jones said.
Here are other details to consider when starting a home business.
When building a customer base for your home business, you could initially turn to your neighbors, Jones said. You could pass out flyers or set up a booth at nearby festivals or community events, or visit stores related to your business, Jones said. For instance, the owner of a pet-sitting business could talk to people at local pet stores to raise awareness, she said.
“See what the needs are in the community, so you can provide those services,” she said.
Unless you have set aside a room in your home for business activity, you may not want clients visiting on a regular basis, Jones said. You may want to choose a business that allows you to complete the work independently at home, then meet with clients elsewhere to pass along the finished product, she said.
Once you register your business, you would become responsible for paying income taxes, self-employment taxes and possibly excise taxes, depending on your industry. If you are running your home business on your own, you can structure it as a sole proprietorship, a limited liability company (LLC) or a C or S corporation. The structure you choose would affect your personal liability for the company and how much taxes you would owe the IRS.
You would likely need to obtain a permit to operate a home-based business, depending on the zoning regulations of your neighborhood. You could be subject to additional regulations from your city or neighborhood community association, especially if your business involves food, animals, hazardous materials, noise or children, such as a day care. Check with your local zoning and planning committees and community association to make sure you’re complying with all requirements.
Starting small at home
When starting a new business, establishing your headquarters at home could allow you to save on typical start-up costs, including rent, utilities and equipment for an office space, Jones said. Your bills may be higher than usual because you would be home more often, but it would probably still be more affordable than renting and outfitting another space, she said.
Because of the relatively low overhead costs, a home-based business could be a low-risk starting point for new business owners, Jones said. However, you would need to take initiative in marketing and building a customer base, just as any business owner would.
That’s where your neighbors could prove helpful, she said. Consider asking your initial customers to make references for you to develop your client list. It could take time, but you may eventually grow your business to a point where you can set up an independent office or a storefront location.
“Start small first,” Jones said. “Test it out to make sure that it works. The size of the business will dictate whether you can remain at a home base or go and get something larger.”