Just because your business is based in your home doesn’t mean it’s exempt from important legal and financial obligations to customers, employees, and the government. Home-based business owners often make the mistake of not taking their companies seriously as legal entities as others who work in an office. Sure, it’s your company, but it’s still a business. Here is a list of very important legal and financial issues home-based business owners should pay attention to:
There Should be a Clear Separation between Business and Personal Finances
The most important financial tip that home-based business owners should adhere to is a clear separation between business and personal finances. Say you are buying A4 paper for the office and a newspaper for personal reading. Do not mix up these two expenses and jot them both down as business expenses. The newspaper won’t cost much, but the principle still holds. You must clearly document and scrutinize business expenses. The overall profits and wealth of your company will be determined by it. If your personal expenses are getting written off as business expenses, then that will reflect in the profit calculations. Also, later this could pose major problems with the IRA when it’s time to file taxes. Therefore, learn the proper way to separately handle business and personal finances.
You Need a Tax Strategy
All businesses, including home-based ones, ultimately need a tax strategy. This may not be easy to come up with, considering that you are probably the sole owner and employee of the company. It’s highly recommended to hire a consultancy firm like Corporate Business Solutions to come up with a tax plan. Do expect a complicated process. However, if you are in the habit of keeping your business expenses separate, this will go easier than you anticipate.
Protect Intellectual Property
As a home business owner, you may not readily think of protecting intellectual property. You may even wonder whether you own any. The name of your company, its products, and any other innovations could be worthy of copyright. You should register any copyright material, patents, or trademark content right away without delay. If you wait, someone else can swoop in and claim copyright, in which case you would have to spend money on a lengthy court battle. So, be proactive when it comes to protecting your intellectual property. Keep in mind that these count as company assets and can be highly valuable.
Estate Planning is a Must
Estate planning refers to figuring out succession for your home-based company in case something happens to you. If you don’t want the assets and wealth of your company to dissipate after you are gone or retired, then you should name a line of succession. You could give someone the financial power of attorney to handle money matters on your behalf. It’s recommended to set up a last will or a living trust when estate planning for your home business.
Last but not least, you should hire a business attorney for your home-based business. The attorney will advise you on important legal matters pertaining to your home-based business. Hire a lawyer who specializes in your field of business for the best representation.