Understanding Home Business Legalities
Home businesses can be very profitable if executed well
. Home businesses help in avoiding rent for business office space and salary for staff, while reducing significant overhead costs. A home business needs to be planned well in order to be successful and profitable. There are several legalities that come into the picture when one thinks of starting a home business.Business Incorporation
There is no specific mandate to incorporate a home business. If one chooses, one cannot incorporate a business and still run it successfully. However, by incorporating, a business gets an identity among competitors and customers. The process of incorporation for most types of businesses is simple: Obtain permission and complete the paperwork. However, there are certain types of businesses that may include dealing with hazardous material that require extensive paperwork and approval at several levels.
Property Rights
When one decides to incorporate a home business, trademark, copyright, and patent laws must be considered in order to obtain a good name and symbol for the home business. If the business is an online home business or has published material, copyright law comes into picture, and if products are used, patent law comes into effect.
Taxation
Profits made through any type of business, home business or others, are liable for taxation. Whether a home business is incorporated or not, taxes are mandatory on profits. However, incorporating a business can provide certain tax rebates and help in utilizing some of the profits for the development of the home business.
Some of the other types of taxes that are payable by home businesses are state taxes, city taxes, zonal taxes, income tax, sales tax, service taxes, and certain service surcharges. Any or all of these taxes can be applicable to home businesses, depending on state regulations and existing taxation laws. The other factors that determine taxation and the tax rates are the stage of the home businessnew startup or existing for several yearsthe turnover, and the type of businessmanufacturing, literary, or business that includes dealing with hazardous material.
While the city, state, and zonal taxes are payable based on the location of the home business, the income tax is payable on the income and the sales tax is payable on sales made. The service taxes are applicable if services are sold, like computer repair, or literary works, or research work, etc.
Safety Laws
The next set of legalities is the Occupational Safety and Health Act, the Privacy Protection Act, and acts related to information portability. If the home business deals with manual work or usage of chemicals, it comes under the purview of the Occupational Safety Act, which governs the safety of individuals working for the business. If the home business deals with private information of customers, like their health information, or credit card details, or their addresses ad such other private information, the privacy protection law kicks in.
It is advisable to do the necessary groundwork and research before beginning a home business to ensure the necessary paperwork and mandatory requirements are taken care of for a profitable and successful future.
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