Business mentor: Benefits and pitfalls of running a business from home

Q. My partner and I have an idea for a business we want to run from home. Can we just start or do we need to do anything first? Any advice would be appreciated.

A. Heather Douglas, of Home Business New Zealand, replies:

Setting up a home business in New Zealand is easy.

There are three main ways you can structure your business: you can operate as a sole trader, form a company, or set up a partnership.

All of these have advantages and disadvantages (outlined in in article found on HomebizBuzz).

If you wish to operate as a sole trader, you can simply print your chosen business name (as long as it does not infringe on someone else's trademark) on your business cards and "open shop".

It may be advantageous to incorporate a company for a variety of reasons, including limiting your liability, and it is relatively inexpensive to do so. The cheapest way is to register it yourself online for about $60 at www.companies.govt.nz.

While professional advisers charge more, their advice can prove invaluable and they help to simplify the process.

Whichever way you choose, you should talk with your legal and financial advisers about your particular situation before deciding on a structure, drawing up your constitution, or incorporating your company yourself. You might also want to protect your intellectual property, such as trademarks - there is lots of information on this at www.iponz.govt.nz.

Forming a partnership is seldom the best option for a home business, and it may increase your individual risk. If you decide on this structure, it is imperative that you consult your own professional adviser.

If you will be earning $40,000 or more a year you must register for GST, but it may be worthwhile doing so even if you are earning considerably less. You will find more information at www.ird.govt.nz.

What you can and cannot do from your home varies depending on where you live.

For the most part, if you do not employ staff and your business is not going to create parking or traffic congestion, use or give off hazardous or offensive chemicals or fumes, create noise, harbour vermin or be an eyesore, and you intend to operate within the law, you are unlikely to run foul of the authorities.

Some council regulations curtail what signage you can display on your property, and may limit or prohibit pavement advertising. Some specific industries - for instance, food preparation or body piercing - are strictly controlled and you will have to find out what legislation or regulations apply.

If you are hiring staff, your local council is likely to have issued controls or guidelines on the number of people who may work on your premises, and you may need to comply with a variety of other employer and workplace requirements.

Working from home can be rewarding, reduce overheads and give you enormous flexibility and potentially a competitive edge.

You need to be disciplined enough to work when you need to - and also allow yourself leisure time.

* Send Mentor questions to: ellen_read@nzherald.co.nz Answers will be provided by Business in the Community's Business Mentor Programme.

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