With continual improvements in IT and communications technology - and the often high cost of renting commercial premises - many more people are choosing to work from home.
A home-based business is one where you operate the business under either of the following circumstances:
At home – that is, you carry out most of the business' work at your home, for example, a dressmaker who does all their work at home, with clients coming to their home for fittings
From home – that is, the business does not own or rent any premises other than your home, for example, a tiler who does most of their work on clients' premises but does not have any other business premises.
Be your own boss
Whether this entails working at home for a boss - or being your own boss - the idea appeals to many people on many levels. It enables new mums to get back into the workforce sooner; it enables workers to live further away from HQ, and it keeps down costs for bosses.
Do your homework
If you are starting your own business from home, however, it's crucial you do your homework first. For example, what type of business are you starting? If it has anything to do with food you could face a mountain of health and hygiene paperwork before you even begin! There are very strict rules are where food is prepared and how it is stored. And that's probably why many such businesses end up leasing commercial kitchen space instead.
Remember your neighbours
Will your business cause a lot of traffic at your home? If so, do you have parking and how will affect your neighbours? It's also best to check out the local bylaws, too. Will you require extra rooms and a separate entrance? The answer is probably yes. In which case it is cheaper to buy a property with those facilities in place rather than fork out for expensive renovations later.
Does your home business involved animals? Again space will be an issue, but more so the possible concerns of neighbours and, most definitely, rules and laws will apply. For example, if you choose to open boarding kennels, you will need to be registered and licence and you will be told how many animals you can keep on the property at any one time.
Rules and regulations
Whatever business you choose, you will also have to mindful about the rest of your home. For example, if customers or clients are coming to your home you might want to look at security and screening options, and you'll have to consider issues such as adequate pool fencing.
Claiming your business expenses
Running a business at or from your home is similar to running any other business. That is, if you operate a home-based business, you can generally claim similar expenses to a business that is not home-based. However, two types of expenses that are specific to carrying on a home-based business are:
Expenses related to the area of your home you use for business
Motor vehicle expenses you incur when travelling between your home and other business locations.
How capital gains tax applies
Generally, you can ignore a capital gain or loss you make when you sell your home. However, you may have to pay capital gains tax (CGT) when you sell your home if you have used any part of it for business purposes.