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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?"
Don't tell your clients you just learned how to do this on Slashdot forums.
If you don't have commercial traffic to your house, my understanding is that there is no problem with having a business.
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
Beer is proof that God loves us and wants us to be happy. -- Benjamin Franklin
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).
Exactly what I do. But you can't use a PO box. You have to use a PMB (private mail box) like you can get at "The UPS Store" or any other commercial mailing store with boxes for rent. You can then specify your address like 111 Main st. #123 instead of indicating that it's a box.
Check out a nolo press book on the subject here: nolo.com
Here's a quote:
"In some residential areas -- especially in affluent communities -- local zoning ordinances absolutely prohibit all types of business."
In the next line:
"In the great majority of municipalities, however, residential zoning rules allow small, non-polluting home businesses, as long as any home containing a business is used primarily as a residence and the business activities don't negatively affect neighbors."
They sell many books specifically for the small / home buisiness.
Hope this helps, and good luck!
I also base my software company out of my home. I didn't notify anyone. In fact, notifying the city your in will probably just lead to more taxes for you to pay.
I read an article in the LA Times awhile back that some cities are now doing data mining on tax returns to go after home businesses so they can pay all the local taxes. Los Angeles is now doing this.
Your biggest choice is what kind of company are you going to be? I chose to be a LLC. Go to Nolo books to get any legal books you need (I incorporated myself rather than pay 500 bucks to some lawyers). If you don't incorporate then your going to have to post a fictious business notice in the paper.
I started my own e-commerce and computer consulting company (see sig). I started it out of my house. That was a mistake.
I'm all for working from my house. I work from there three days a week. But running a business out of the house is not good. From zoning issues, to mailing issues, to clients that want to show up at the office, to spousal issues, etc. etc. etc.: there are a lot of disadvantages.
I know it's scary starting your own company. I've been there. But if you seriously cannot afford up front even $100-$200/month for a year of rent, or you have so few connections (or marketable talents) that you cannot exchange some sort of service for office space, I strongly encourage you to re-think your decision.
My company takes advantage of free office space from one of our clients. They are our *tiniest* client. We would make no real money from them, but they give us an office for our use, in an attractive building, a nice lobby, a receiptionist, someone to sign for packages, etc. It's a good trade.
I would also say the exact same thing about setting up your business properly (with an S-corp or LLC), and an accountant (at least for taxes and such). It might cost you a couple of hundred dollars to get a lawyer to draw up the corp. paperwork, and it might cost you a couple of hundred a quarter to have an accountant handle your taxes, but it's work it.
Again, not to be harsh, but if you can't afford $500/month for the first year up front ($6000 or so, say) for setup paperwork, rent, phone (do *not* use your home number!) and such, you do not have enough resources to start the company.
I wish you much success! I certainly enjoy having my own company. It was a couple of rough years, but things are much more stable now. I've grown to the point where we have a few employees and long-term relationships and contracts. People talk about the lack of job security when you work for yourself. I disagree. I think that I have more security: I know exactly what the books say, and what my prospects are. I know that right now I have enough cash for several months even if I don't invoice a dime, and I know how much I'm going to invoice. That's a lot more information I've ever had from any other employee. And I can't get escorted off the premesis at 4:30 on Friday and told that my personal belongings will be shipped to me... :)
Linux IT Consulting and Domino Development in Michigan
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.
....". 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.
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
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.
Partner Jody and I wanted to create a consulting business, and decided for various reasons a Limited Liability Company was the right way to go. We visited the state small business office and picked up a very helpful booklet on how to start a small business in Utah. This little book had information on all the various forms you need, who to talk to at City Hall, and how to get a business license if you're not in an incoporated city. Very helpful.
Note: don't think about scamming the business license if you're going to do enough dollar volume to file taxes on. The state tax people will report your income to the city, who will make sure you have a business license. The business license doesn't cost much and is very little additional hassle.
We filed the LLC paperwork with the state first. (An LLC doesn't have to be a business so that paperwork had no prerequisites.) Everything went smoothly and a few days later we got a nice form letter from the State office of something or other notifying us our business name was now registered. The next step was to apply for the business license.
At this point we decided we should get a business bank account and run the checks for all these applications through that account. We tripped down to the local bank that was just up the street from the town hall to open an account, only to be informed we couldn't open an account without a business license. See what I mean about not skipping on the paperwork?
So Jody wrote the check for the business license and we finished our application. In South Jordan home business licenses have to guarantee not to generate business-related traffic; you're not allowed to meet or entertain customers at your home, for instance. Not a problem for us, we were going to sell information and services over the web and do our work on-line or at customer facilities. The hook is, your neigbhors, anyone within 500 feet of your home, get the right to comment at the next town meeting before your license is granted. So the city gave us a list of addresses, we had to write a note to them inviting them to comment at the town meeting and pay the postage. We printed the invites on post cards, got them metered at the Post Office, and brought them back to town hall a few days later. The town clerk looked at the stack, guessed it was about right, and chucked them into their out basket.
The town meeting was a couple of weeks later. Jody and I showed up, nobody else did. We said on our post card that we did our business online and planned to have very few deliveries and no customer traffic, but I doubt most people even bothered to read it. Our business license was approved that night, and the office mailed it to us the next day.
With business license in hand, we revisted the bank and our account was opened in a few minutes. It was shockingly painless. They were happy to add a second signature line on the standard checks for us. We were shocked to find out the same checks that cost $5/box for a residential account are $15/box for a business account, but the account itself was free and we only needed one box of checks anyhow. Be prepared to get charged more for everything from checks to phone lines if you tell them it's for business purposes. When dealing with phone companies, sometimes saying it's for a "home office" will get you the same features at residential rates. Caveat Emptor!
That was it. For the next 4 years we renewed the business license each year, for $35, and filed an annual report to the same State office of something or other with the $15 filing fee, and had no other interaction with the local authorities at all.
We did file for and receive an Employer Identification Number (EIN) from the Infernal Revenue Service (rat bastards), becaus
When I started freelance programming, I really didn't like the idea of working from home. There's just too much isolation from the world, and not enough seperation of work and personal.
Fortunately, I found a few other people in similar situations who felt the same way.
We got together and rented some nice studio space together. We called ourselves the Soup Group, since we're a mixture of everything. To fill the space, we had to convince a few others that they should quit their jobs and go freelance.
Now, 8 years later, we have a great studio, filled with 16 people who like to be around each other. We're an intentional community, not a corporation whose members are decided by the whim of the HR department. There's lots of synergy, as we have programmers, designers, project managers, video editors, animators, and lots of other talents.
We save a lot of money by sharing resources like our boardroom, Internet connections, colour laser printer, fax machine, kitchen facilities, copier, etc. This especially helps people just starting out working for themselves.
Have a look at the Soup studio.
So my advice is to do the same. There are a lot of freelancers out there, and a lot of great studio space. It might take some work to find the people to group up with, but it's worth it in the long run.
So you'd like to think perhaps, but in reality this is bogus. American programmers are no better (I'm interviewing too as it happens) - but they are the MINORITY of those I interview: the order is Indian-subcontinental, ex-USSR (including those via Israel), Chinese-east-Asian then a variety including American. I assume this is because non-Americans lose their jobs more easily. I don't believe this is for reasons of competance. I don't see any particular association between ethnic origin and competance amongst my colleagues - but there is obvious reduction in communication due to language in some cases.
Quite honestly I expect in the next 10 years the center of gravity for software production shifts to India. It will be diffused via the net of course but in terms of money earned most will end up in India by sheer weight of numbers.
Don't tell anyone ...
/. is going to be all over the map. You could do the "tell no one" plan but your personal assets will be liable with out the protection of some type of corporation.
Is a bad idea if you have a nice house, car or other stuff that someone may sue you for over real or imagined damages.
Buy a couple of hours with a local attorney and accountant. Every state and municipality in the US has different regulations so the advice you are getting on
In my previous state I was up and running for less than $500. The attorney advised that zoning and association rules would not be violated if you were unable to tell I was running a business in my house and I could even use my home address. The possible problems he cited where signage and traffic. The accountant advised that it was very important to keep the business and personal monies separate and about tax strategies and their consequences.
In my current state I never made it past the attorney. The company was strictly for side work and not my main employment and I found that I would be taxed and feed out the wazoo by the state and the town. I would have to incorporate in Delaware and get a mail forwarding service and still get partially screwed by my state. So it is on the back burner for now.
If possible make your wife or mother 51% owner of the business so you can be a minority owned business. Good luck.
Simply put, you should probably list "do enough business to have zoning problems" as one of your business goals. You have to be doing business before you have to worry about whether doing business from your home--and the Number One issue for startup companies is doing business. Here's a list of things you need to worry about, ranked in order of how often I obsess about them:
The big employers in town worry about "booking the sale" or "shipping the product." You have to worry first, last, and always about getting paid. You have to deliver the goods, you have to send the bill--but you have to make sure to follow up if the check is late, continue to follow up through a dozen excuses, and even drop by to pick up the check if need be. The grocery store does not accept accounts receivable.
Forget what the slick TV ads tell you. If you're doing project work for a limited number of clients, your cash flow (see #1) is at the mercy of your client's accounts payable people. MasterCard doesn't take accounts receivable, either. Use debit cards, require clients to front money for travel, etc., and do not (NOT NOT NOT) float yourself money from a credit card. Loan sharks offer better rates.
Big Charlie from Queens, my sometime employee (and sometime employer) reminds me frequently that if I'm not spending 40% of my time marketing my buns, I'm going to go hungry. In project consulting work, that's a tad high--but not much: even if you are hip deep in a killer project with a fabulously wealthy client, keep networking, keep hustling, keep looking out for the next gig and the one after that.
Working from home can do funny things to your relationships. For some people (including my wife and me) working at home can be a terrific thing--and it can be very stressful. When you're both in that state of just-got-the-big-check euphoria (I'm a programmer, she's a book editor) long walks in the woods while the kids are in school can be a blast. But when you're on deadline, and so is she, the stress level can soar. (When the kids start complaining about having too much junk food, and asking to have things like salad, that's a cue.)
You're not "self-employed," a "small entrepreneur," or "on the cutting edge of new working/living patterns." To 99% of your potential clients you're "some guy who works out of his basement." They've all see the Dilbert "clothing optional" comic strip (and they will all ask you about it) and your choice of working patterns will mean that some of them will never do business with you. Buy a tie, wear a suit, bathe. Shave. Learn to eat with utensils--all the things CDWS (cubicle-dwelling wage slaves) do. The more you look like them, the more you sound like them, the more comfortable they will be.
You have to do more than walk right and talk right. You have to D-E-L-I-V-E-R. Every single time. You will have a tough time to start: your business will start to prosper when you start doing repeat business: because there is no marketing, advertising, or sales promotion like a long list of clients that have hired you repeatedly. A key performance metric should be how often you have worked for the same client.
Lots of startup consultants charge way too little. WAY too little. Worse, lots of startup consultants confuse "being busy" with "working." You need to market. You need to network. You need to find projects to try out new concepts and ideas--and usually those are pro bono gigs. But you need to nail down a chunk of billable hours each and every week. You cannot bill more than 30-32 hours per week without seriously hurting your marketing and networking time--and all the stuff like taxes and billing and collections, etc. You have to bill enough to make enough in those thirty hours. And you have to hit those thirty hours week after week after w
I ran a business out of my house for several months, but decided it had to end when the police were taking a suspicious look at all the people coming and going, shootings taking place outside, etc. I now rent a room at a Motel 6 under an assumed name and make the crystal meth there. Sure, it's an extra $30 onto my overhead, but in retrospect it's much easier than hauling away hundreds of pounds of incredibly toxic by-product.
Also, don't listen to these guys telling you to register your business with the city, etc. That's just asking for trouble.
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.
He obviously haven't. That's probably why he writes: "Of course, there's always exceptions, and that's why we still interview people..."
If someone else won't say it, I will: "You are a racist."He isn't, though. He wrote: "It's amazing the difference in talent between American vs Indian (graduated undergrad and/or grad in India, not of Indian decent) programmers." (emphasis mine). He explicitly states that programmers of indian descent (or, if you prefer the archaic term, "race") are no worse or better than others, but those who are educated in India tend to have some problems. He is criticizing India's education system, not making a slur against Indian people.
I hate racists as much as the next guy, but to pull that term out whenever someone makes a comment about a completely non-racially related aspect of a foreign people is just silly.
Six sick