A 2007 Census Bureau survey showed that more than half of all
business owners run their company primarily out of a home.¹ And
today, that may be on the low side, given recent advances in mobile and
wireless technology, as well as the cost-cutting realities of a low-growth
economy.

If you're considering running your business out of your home,
there are a number of considerations you'll want to take into account.

Is It Legal?

Perhaps the first issue you'll need to address is making sure
your home business meets zoning regulations and that any required licenses or
permits are obtained. Many municipalities and condominiums restrict home
business activities. If customers will come to your home, you may need to
consider parking, disability access, and display of advertising. You may need
to amend your homeowner's insurance policy to cover commercial activities.

Technology

The significant advances in Internet technology and home
office equipment in the past 10 years have made working from home realistic for
a growing number of people, but there are technology issues you should
consider. Find a local support person you can rely on to resolve systems issues
quickly and effectively should the need arise. Save your work often, back up
your files regularly, and make sure you have an alternative should your
computer suddenly crash. Since high-speed access to the Web is a necessity for
most home businesses, check with your local phone and cable company to see
what's available.

Taxes

If you operate a business out of your home, the IRS may allow
you to deduct certain expenses -- such as phone, Internet hookup, a portion of
your rent or mortgage -- based on the percentage of space in your home that the
office occupies.² To qualify, the home office must be used
exclusively for business; a guest room or other shared space will not qualify.
The key to claiming any of these deductions is to prove that they are necessary
for and confined to business use.

Living Considerations

You should also consider how the work-at-home arrangement will
fare from your family's perspective. Will there be tension if you're home all
day? Will your presence cramp your family's daily activities? How will your
family interact with clients or employees? Many former work-at-homers cite
family conflicts as the reason working at home didn't work, so make sure to
give this issue serious thought and discuss it with your family.

Finally, consider your daily interaction -- or lack thereof --
with business associates and employees. Depending on the nature of your work,
you may find yourself isolated and miss frequent interaction with others. Many
people need the social outlet that an office environment provides and may be
uncomfortable spending long hours alone.

Source/Disclaimer:

¹ Source: The Wall Street Journal, "My Home Is
Not Your Home," November 14, 2011.

²Mortgage interest and property taxes are also
deductible under Schedule A and cannot be deducted twice.

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December 2011 — This column is provided through the Financial
Planning Association, the membership organization for the financial planning
community, and is brought to you by Ronald J. VanSurksum, CFP®, a local member
of FPA.

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