Millions of Americans operate a home-based business, with most people in compliance with the law. Or are they? Quite easily you may find yourself running afoul of the law, learning of your transgression only when a summons has been received from a taxing authority. There are a number of ways your business can find itself in trouble, perhaps requiring costly legal intervention to remedy the problem.
Lack of Legal Structure
You have launched your business and are running it as a corporation, but you have not filed the appropriate paperwork with your state. A legal structure is not always necessary, but it is if you are seeking certain benefits such as liability protection or tax advantages.
That earlier call you should have made to your business attorney needs to be made at once. Set up an appointment and work with your attorney to file the required paperwork with the secretary of state. Your attorney can advise you on the most pressing legal matters and help provide a pathway for ongoing legal compliance.
Get Licensed
Your business may be in compliance with the secretary of state’s office, but it may lack approval elsewhere. Your state may have other demands that you must meet including the submission of required licenses for your type of business. You may also be required to collect payroll taxes and forward same on a regular basis.
Other areas where home-based businesses get into trouble is on the local level. Many cities require people to obtain a use license, allowing them to operate their business. A use license is routinely granted for low impact businesses, but if you have employees working in your home, you may be in violation of local zoning limits.
Name Problems
You have been using a popular business name for months, but have just received a “cease and desist” notice from another company. It turns out that you did not register your business name. Worse, your name is suspiciously close to another company’s name and they are ordering you to quit using your name.
Will you have to change your name? You may have to, especially if your attorney finds that the order has merit. A cease and desist notice is your warning to comply. Legal action will take place if you do not respond. Too bad you did not register your name from the get go — imagine the hassles you will have as you explain to your customers that your business has a new (registered) name.
Zoning Violation
We already touched on permitted uses of your home for a business, but let’s take it from another angle: your neighbors. Your home-based business may be okay with your city, but if your homeowners association objects, you could find yourself in trouble.
Your planned community is governed by a homeowners association covenant with certain conditions and rules applied. So-called CC&R rules restrict what you can do to the outside of your property, but can also impact what you do inside. Even without an outright home-based business ban, your CC&R can restrict the type of business you conduct, especially if visitors come to your home.
Landlord Problems
If you rent your home, your home-based business may violate your lease. If your business flies under the radar, such as a freelance writing service, your landlord may not care. Still, you might be exposing yourself to an eviction if your business is operating without landlord approval.
Attorney Assistance
Touch base with your attorney if questions about your business arise. Any notice received objecting to the way you run your business, even its basic operation, should be addressed immediately. Ignore same and you may face serious legal consequences.
References
Entrepreneur: Business Zoning — http://www.entrepreneur.com/article/38884
Inc: Is Your Home-Based Business Illegal? — http://www.inc.com/chas-rampenthal/legal-checklist-home-based-business.html
Frank Roberts writes for Swope, Rodante P.A., a Tampa law firm specializing in cases involving traumatic brain injury, wrongful death, automobile collision, and catastrophic injury.
