This article discusses legal considerations including entity formation, zoning concerns, permits and licenses and taxes related to home-based businesses.
Murphy Desmond, S.C. Lawyers
A home-based business will have a greater chance of success if the entrepreneur is armed with the right knowledge prior to leaping into business. Consider the following factors:
Legal Form of Business. Wisconsin law provides for a number of business forms. Find the appropriate legal form that will best fit your business needs. A sampling of available legal forms are listed below:
- Sole Proprietorship. A sole proprietorship is an individual doing business in his or her individual capacity. It is a simple and flexible business form, but offers no protection to the individual's personal assets against business creditors.
- Partnership. A partnership is an agreement between persons to share the profits and losses of a business enterprise. It is a flexible business form, but offers no protection of the partner's personal assets against business creditors.
- Corporation. A corporation is formal entity that protects its shareholders from the liability of business debts. However, corporate dividends are subject to unfavorable tax treatment.
- Limited Liability Company. Some entrepreneurs choose to operate as a limited liability company. Members enjoy the same liability protection of a corporation, but do not encounter the taxation problems of a corporation.
Zoning. Confirm that the zoning codes permit the operation of a home-based business. Some local zoning codes require home-based business entrepreneurs to obtain a conditional use permit from the local zoning board prior to the operation of his or her business.
Business Licenses and Permits. Consider the need for common business licenses and permits listed below:
- Seller's Permit. Every individual or entity making retail sales of tangible personal property or taxable services in Wisconsin is required to have a seller's permit unless the sales are exempt from sales tax.
- Withholding Permit. A business with employees may be required to withhold both federal and state income taxes from wages. The withholding amounts are tracked through specific identification numbers issued by state and federal authorities.
- Business Tax Registration Fees. Wisconsin charges a Business Tax Registration Fee to all persons who apply for certain Wisconsin permits.
Insurance. Explore the need for additional insurance to protect the business from the risk of customers on the premises. In addition, worker's compensation insurance may be necessary if the business has employees.
Taxes. Investigate whether you are eligible for a tax deduction stemming from your business' home office. The federal tax laws allow a deduction for the business use of a home contingent upon specified requirements.
A home-based business can be an overwhelming adventure. Confirm that you have the right tools to make the road to a successful home-based business a little less bumpy.
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