Starting a Home-Based Software Company?

deanj asks: "I'd like to start a new software business, as I'm sure many Slashdot readers would. I'd like to be able to run the company out of my home, at least until I can afford to move into an office in commercial area. A major roadblock to starting a home business are zoning restrictions, set by both home-owners associations and by the town you live in. So, I'd like to Ask Slashdot: What were your experiences with getting your company zoned properly and started? What did you have to do? What other tips do you have for someone starting their own home-based software business?"

Comments

Don't tell anyone ...

[taniwha]

I know tht;s a bit flippant .... but if you use a PO Box for your company's registration and correspondance and no one ever is going to come to your house you're not going to piss anyone off .... and they probably wont care

This is simple...I've done it!

[NOT-2-QUICK]

To start your own "home business", an individual only requires two primary means of contact...

(1) An Address - that can be satisfied via a PO box at your local post office
(2) A Phone Number - this can be accomplished through something as simple as a dedicated cell phone which comes standard with caller ID and VM...

The issue of location rarely, if ever, has come up as I am always more than willing to meet potential customers either at their location or often times over lunch. Seriously, when was the last time you went to the home office of a small-scale software vendor!

Beyond that, I would suggest starting a relationship with a good attorney and create some high-quality (not home printed) business cards!

Of course, you will certainly bomb if you don't have the tallent to back up your aspirations, but that is a different 'Ask Slashdot' topic all together...

Hope this helps...and good luck!

n2q

Fsck the zoning

[rdewald]

If you're starting a business you need to focus 100% on getting customers. Everything else you can do along the way. If you don't have customers, you won't have to worry about zoning. If you do have customers, the solution to any zoning problem will suggest itself. First things first.

As a practical matter, these kinds of things only present themselves as real problems secondary to traffic and parking. If you draw attention to the fact that you're running a business from your home by being obnoxious to your neighbors by bringing a bunch of traffic to the neighborhood, then you'll have to confront the problem. But, if you're that busy, you can afford to move anyway.

Don't sweat this, concentrate on getting customers.

What's next?

[Anonymous Coward]

If you have to do an "Ask Slashdot" for this, I'd hate to see the follow-up Ask Slashdots that you have to do.

* My client is 30 days late on paying, is it wrong for me to hack them?

* What's a 941?

* Should I S-Corp?

* Will people know if I work in my pajamas?

You are WAY early in the game if you want to do this seriously. Best thing to do is to fine 5 experience, older people to use as advisors. Take on of them to lunch each month and pick their brains. I do this with accountants, tax people, lawyers, software execs, sales guys from other companies... whoever I can. Slashdot is not the forum for this. This isn't hard, but it is a different lifestyle and you have to start being an expert in 10 different things (marketing, sales, finance, taxes, etc.) not just one (reading slashdot).

my advice

[scrotch]

I worked as a freelance designer for a couple of years out of my house. There were no zoning issues here (New Orleans) because it was just me and clients didn't visit me, I visited them.

But, my advice, based on my experiences (good and bad) is this: Get a lawyer and ask him/her. Also, get an accountant. Talk with them both before you start. The cost will be more than offset. It's not about how smart you are or whether you Could figure it out. You need experts for these things the same way they need experts to write their software, create their websites and build their cars. Cause you've got other stuff to do.

You want to worry about your business - the parts you know and love, right? You want to worry about software. You'll need to worry about your clients. You don't want to worry about zoning and taxes. The last thing you want is to find out that you're in deep shit with the police, the IRS or immigration or whatever because you were working on a big job that month. Get your experts in order and make sure they handle this stuff for you.

That's my advice. two or three cents.

You get what you pay for.

[Anonymous Coward]

Just use your tax refund next year to pay for the salaries of 10 Indian programmers

Seriously, you get what you pay for. It's amazing the difference in talent between American vs Indian (graduated undergrad and/or grad in India, not of Indian decent) programmers. No, this isn't supposed to be some "yay U.S.A." homer rant. Just an observation from someone that gets to waste time interviewing way too many people for a small handful of entry-level jobs.

What I've noticed is that the Indian programmers are solid when it comes to "I need a function to take X and convert it to Y, it needs to go here." However, they are very weak when it comes to "We need a function to do X, do it". While that may be fine for some simple jobs, most software projects require good problem solving skills

It gets frustrating when HR forwards me 30+ resumes a week all with insanely high grades, all claiming that they're in the top 2% of their class, yet when you interview them, they suck at basic problem solving. It makes one think that all they have out there is a hardcore "learn C++ in 24 hours" curriculum that is extended over 4 years.

Of course, there's always exceptions, and that's why we still interview people...even if our expectations of them have plummeted through the floor.

Re:You get what you pay for.

[shaitand]

You seem to be confused. The typicl racist slander (yours not his) always seems to indicate that for some reason because individuals of a certain group can differ from the averages it's some sin to evaluate the average of the group in one respect or another? To the best of my knowledge this line of crap is bought into more frequently here in the US than Canada but that doesn't mean there aren't exceptions.

Let me give you some examples here are statements that some would call racist without thinking but certainly are not.

Blacks are usually poor.

In the US at least this is actually true. Not every african american is poor. But most are centered in less properous areas, this is nothing bad about the race, it's a statement of fact as defined by research and data, you know those things that trascend some self righteous prick who is itching to play the race card.

Females are better at english than math.

While this (and the statement above) could be mistargeted as slander against individuals, the numbers on the subject indicate this to be a statement of fact. Male math related test scores tend to be higher than those of females and the reverse is true of english.

These are a couple I chose because they hit very sore spots for some people but have real basis in fact. It's nothing against the people who fall in those categories. Remember 40% of either group can and in many cases does represent an execption to these statements of averages which means that any given person would more than likely know numerous exceptions to them or possibly only ever meet exceptions without making the averages a hair less sound.

Here's what you really need to do ;-)

[sribe]

Ignore the flippant posts about "nobody will ever know", there are licensing and tax laws and even though the odds of being caught are low, the consequences can be bad enough that it's not worth taking a chance.

1) The direct answer to your question, go down to your city hall, find the zoning department, and ask. Typical residential zoning restrictions have to do with the size of the sign marking your location, parking, foot traffic, animals, children, noise, outbuildings, security lighting, storage of hazardous materials and so on. IOW it's pretty likely you'll find out that none of the restrictions apply to your business and you're 100% in the clear. (I assume that if you're a homeowner in an HOA that you read the convenants before you bought!)

2) Now find the business license department and go ask them what kind of license you need. I have done this in 3 separate locations and each had different requirements: first location no license needed, second location license required with fee based on 1/10% of gross income, third location license required with $15 annual fee (initially, now they've eliminated that charge). If a license is required, it generally requires filling out a simple form.

3) Make sure your county doesn't have its own separate licensing requirements.

4) Check state requirements. Many states have all the information online. In others you can order a booklet titled something like "Starting a Small Business in ....". At a minimum if you make up a "company" name to use in correspondence and advertising rather than just using your own legal name, you'll have to file a "trade name" or "alias" registration with the state so that there's an official record that "Suckus Maximus Software" is actually you--so that people can find you if they want to sue you. In my experience this costs in the range of $5-$20 per year. You probably won't have deal with workman's comp, but you should find out.

5) Go to the IRS site, get these publications and read them: 334 Tax Guide for Small Business, 535 Business Expenses, 583 Starting a Business and Keeping Records. Then keep the records and do it right--you really don't want to screw with the IRS!

6) Check the titles at Nolo Press; they have great info available and it's often a more clear than the government publications.

7) Don't forget the bits about business plan, budget, setting rates, finding customers, getting insurance (property, liability, health, disability), actually doing a good job, and so on. Always remember, cash flow above all else is what will determine whether you make it or not.

For the non-US poster who asked about "zoning": this refers to the local laws governing what you can and cannot do on your property. A city is typically composed of "zones" which are each rated in some category, things like "Residential Low Density", "Residential Medium Density", "Residential High Density", "Retail and Office", "Light Industrial", "Heavy Industrial", "Agricultural". So for instance it's pretty certain that if the poster lives in a building where it's actually legal for someone to reside, then it would be illegal for him to operate a petroleum refinery in his yard. Most residential zoning restrictions don't apply at all to a software developer hiding in his basement. Also, FYI, zoning is not immutable; there is generally a government body in charge of reviewing requests for changes in zoning, or exceptions to the rules--this is how farms are able to become shopping malls.

Not flippant at all

[fm6]

The purpose of things like zoning laws and homeowner agreements is to protect people from inconsiderate neighbors. In places were "zoning" is a dirty word, you can end up with a sweatshop or a nightclub or even a factory next door, and be unable to do anything about it.

On the other hand, lots of people break these rules right and left, and nobody cares, because they're considered good neighbors. I have a friend who's operating a business out of her condo in total violation of her housing association rules. All the other condo owners know about it, but she's such a valued member of the community (networks a lot, goes out of her way to make friends and help people) that nobody's inclined to make an issue of it.

Of course, if she ever does make a enemy who want to shut her down, she's screwed! Worth bearing in mind before you build that illegal granny flat.

Re:Think long and hard

[tmasssey]

I totally agree with the parent post. The $500/month I wrote about was not your total expenses. I'm assuming the person knows how they're going to eat for the next 3-6 months. If they don't: STOP NOW.

When I started my company, I burned through $20,000 in the first 6-8 months before I brought in enough money to pay my bills (barely). That was with my family of three (Me, my wife and newborn daughter) living on $2000 or less per month. That was definitely on a shoestring: after taxes, our $640/month rent took literally half of our income. That doesn't leave much...

However, the mistake I made was in not budgeting an extra couple of hundred dollars a month to pay for office space, accountant, etc. Like everyone else, I assumed that saving money with a home office was a smart move. I see now, though, that it was not. I *had* budgeted for food, clothing, shelter... I just wish I had budgeted and planned on a couple of more services that would have made my life a *lot* easier.

Believe me, $2000 a month is bare *minimum*. For me, $2000 was living expenses. Given $2000/month for living expenses, I would expect to burn through about $3000 a month (assuming no income). And assuming no income is a good thing to do. It took me 3 months to land my first real work, and it took a couple of months to get the money. A software development business is going to be even worse: unless your product is ready to ship *today*, you've got to build the product, let alone start selling it...

Hope the advice helps...

My best advice

[nelsonal]

And like all good advice it's blatently stolen (from Warren Buffet)

Learn accounting, at least enough to read financial statements and the footnotes, it's the language of business.

I can not tell you how much I agree with this, it should not be too hard to either grab an intro accounting book, or audit a class at the closest learning institution. Learning accounting will make your life much easier to see if you are profitable, generating cash, what deals might not be worth trying for lack of proceeds.