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Building a business can be an exciting venture, so if you are planning to pursue your own business this year, one of the first steps you may need to decide on is office space. That said, what you may not realize is you may already be standing or sitting in your office right now.
Nowadays, the idea of home offices has grown in popularity as they offer cost savings and convenience to many owners. Home offices were big prior to the 1990s, but amidst the era of COVID, home offices have once more gained momentum and an increase in defining the home office space has become popular in the real estate landscape again as the pandemic forcibly transformed the notion of traditional workspaces.
The question, now, is: Can your home truly accommodate a business? Read on to learn more about the important considerations in building a business from home.
Legal and Tax Considerations
Business Taxes
Home-based businesses will have a unique tax situation since they can qualify for certain deductions. First, you must be able to prove that your space is used primarily and exclusively for business. It will be helpful to consult with an accountant or professional to know whether you are eligible. However, the common deductions will include home-related expenses like insurance, cleaning supplies, mortgage insurance, utilities, and property taxes.
If you plan to make repairs or upgrades to your home office, your deductions will depend on whether the expense is direct or indirect. If it is direct, which means the expense is for solely your office, you can get the entire expense deducted. On the other hand, if it is indirect, which means it is for your entire home, you can only deduct the percentage used for your home office area.
Zoning and Homeowner’s Association (HOA)
Zoning regulations are important to know if your neighborhood allows for home-based businesses. If your business operates online and clients do not visit your place, this will most likely not be a problem. However, if your business requires customers to visit your home like a traditional storefront – think barbers, stylists, tax consultants, etc., then you may have to apply for a zoning permit or variance, (if you aren’t already part of mixed-use designation). This, if approved, would allow you to use your property for purposes other than what it is already designated for by local regulations.
Similarly, you must also check in with your Homeowners Association (HOA) to know if you can conduct business activity in your place or on HOA managed property.
Business Structure
Home-based businesses can typically have three different structures: sole proprietorship, partnership, and private limited liability company. Choosing the right structure is important since it can affect the legal obligations, liabilities, and your taxes.
Sole proprietorships are typically good when there is little liability risk, and you have no employees. There are also formal LLC’s, LLP’s, PLLC, Inc, and more… each with varying degrees of liability and risk, tax benefits, legal obligations, and more.
If you are not sure where you should start, it’s important to consult a business attorney, professional CPA, or Tier One Level Bookkeeper. And, if you don’t know where to start, you can start by taking a look at our Concierge Booklet for some great local resources or give us a call for a few personal recommendations.
Making Space for Your Home Office
Once you have decided that a home business is suitable for you, you can proceed to think about how you can make space for that area. Check out these three tips to help you make an office space:
Convert Unused Space
This is your most economical option!
Try to look around your home and see if you have any unused space. Perhaps you have a spare room that is left untouched and can be remodeled for various purposes. If so, converting this space to an office space can help you reduce most of your costs.
Think about that nook off the kitchen that has become your catch-all, or that spare bedroom no one ever uses. Maybe you have an upper level, or ½ story never used for anything other than attic space, or unfinished room in the lower level.
Just remember – adding walls or running electricity may require building permits in your city or township. So be sure to check local building codes through the city or contact a professional home remodeler if you have any questions.Add New Space
If your home is already packed and you do not have existing space to remodel, you might consider adding on. The idea of extra space may sound foreign, but you can do this by going beyond the walls of your home.You have probably heard about the “she shed”, right? It’s not unheard of today for someone to get a large prefab shed, build it out, and add heat and electricity. What about building above the garage, or adding on a 4-season porch space? Build a backyard studio or a room in your garage, both of which are perfect for your home office. Just remember, you will have to obtain building permits for your city and will have to clear building codes for the city, county, and state.
Purchase a New Home
If you are restricted by your HOA and zoning regulations or find your current living space is not suitable for a home office, you might consider making a move. Purchasing a new home, in a different locale, could ensure you have the right space without having to do any major remodel.
The housing market is booming today due to low mortgage rates brought about by the increase in remote work. This makes it the perfect time to buy a house because you can afford MORE home for the dollar right now. And equitable growth is steady – and in fact, growing in most markets – making this another great reason to buy. Team Homes By Ash REALTORS are poised to empower you with the information and professional advice you need to help you find the perfect place to call your next home, and we would be happy to schedule a Buyer Success Planning call when you’re ready.
Designing Your Home Office
Whether you choose to stay in your home or move to a new place, you will need to organize your home office space to boost productivity. Here are some quick tips to help you achieve this:
●Privacy. Maintaining privacy is important. Look for ways to separate your home spaces and workspace, so you can concentrate on tasks at hand. Install a private entrance, choose a room in the far end of the home – away from the daily family activity. Even adding a privacy screen can help create a mental and physical break.
●Set Boundaries. You may be in a situation where you have no ability to create a sound-proof barrier between you and other members of your household – kids at home – dual parents working from home. It’s important to set work schedule boundaries for everyone. This keeps everyone on task during critical times throughout the day and provides privacy and even sanctuary to all when done right.
â—ŹLighting. Having enough lighting is important to ensure you can work productively. Look for a space that has window access, so you can have natural lighting. Alternatively, you can also install a skylight or solar tube to get natural lighting if you do not have windows. At the very least, the installation of newer, brighter light can go a long way.
â—ŹStorage. When working in a home office, you will need space for storage to sort your files and documents. Build some cabinets or install shelves to ensure you have an organized space.
â—ŹErgonomics. You can boost efficiency by having a proper desk space and chair. A sit-stand desk, comfortable chair, and ergonomic accessories can all help create an optimal working environment.
Ready for the perfect space to get your home business off the ground and running this year?
Let the Team Homes By Ash and award-winning REALTOR®, Lisa Ash help you sell your home (safely, of course!) and buy a house equipped with everything you need to build a successful home business.
