We like to think of our homes as our castles, but when it comes to self-employment, we may need to think again, especially when our activities involve noise (garage bands, trumpet or drum practice), lots of people (rehearsals, recording studio business, music students, consulting clients, group classes in anything), or traffic (see prior list; add to it deliveries, signage, parking and any sort of retail activity). Even if your home business involves no traffic, no clients, no students, and no noise (Say, you’re a writer or a painter), you may need a business license, or be required to pay a business tax.
Small businesses are generally regulated on the local level. Before I bought my home, I asked the real estate agent about local zoning and regulations for home-based businesses. Her vague answers convinced me that either 1) she didn’t know the answers, 2) She didn’t want to be held responsible for giving me a wrong answer, or 3) she wasn’t going to risk jeopardizing a sale by giving me the information I needed. So I called the offices of the towns where I was looking at houses. Each town clerk sent me on a different path. One town had a clearly articulated policy in its bylaws, which explained exactly which types of home businesses could be operated in which parts of town (Music studios, for example, were allowed in the rural area, but in the more densely populated village center, you would need a special permit). In another town, I was told to talk to the building superintendent, who said that the answer would depend on where in town the building was located; it was his decision as to whether I could teach music there or not.
Unfortunately, even if you conduct due diligence and make the calls; you can get wrong answers: In the town I ultimately moved to, for example, I was told two completely different answers by two different people (the wrong answer came from a former elected offical from the planning board!) While I was trying to find the answer, it turned out that the town was actually trying to update its bylaws and was considering a proposal to only allow by right home-based business that had — are you ready for this? — no customers, clients, students, traffic, or deliveries. If you had customers, clients, students, traffic, or deliveries, you would need to apply for a special permit.
Regulations for business licenses also vary; Very often they are not necessary for sole proprietorships, but towns vary on this issue, so it’s best to check. Is this a rubber-stamp pay-the-fee-and-get-your-license process, or is there the possibility of a long, drawn-out battle? Could the powers that be tell you that you can only have 20 students a week, or 2 cars in your parking lot at any given time, or that you can’t teach after 7 p.m.? ALL of those suggestions were debated in my town at one point before the townspeople voted them down. And in the next town over, a friend of mine has had to place a big piece of black plastic over the sign on his studio space while the town debates whether he’s allowed to have a sign or not.
One of the big reasons you need to know exactly what is and isn’t permitted is that neighbors may object. Sometimes the objections are entirely reasonable: No one wants to hear drum practice at midnight. Sometimes the objections are spurious, but you have to deal with them anyway. In that case it’s good to be well-informed about what the rules actually are.
Good relations are important, too, and may prevent the problem in the first place. When I moved to this area, I first rented an apartment in a two-unit house. I cleared piano teaching with both my land-lady AND with the prospective neighbors. I got lucky: The walls were paper-thin, but my neghbors truly were delighted to dance to the same measure of a Chopin waltz 900 times in a row. They loved it! But not everyone is that accommodating. Before you buy a property where you expect to work, talk with the neighbors and try to suss out potential problems — you might have fallen in love with the house, but the neighbors are part of the package.
Due diligence means looking for problems. Talk not only to your Realtor, but to others in the town who do similar work. Have there been issues? How have they been resolved? And most importantly, get a copy of your town’s bylaws, which is a public document that SHOULD spell out exactly what people are and aren’t allowed to do. You can also talk with the building inspector, the Zoning Board of Appeals Chairperson, or someone on the town’s Planning Board, if there is one. If you are planning to construct a separate building as studio space, you’ll also want to check on relevant zoning regarding outbuildings. Zoning rules can limit building size, uses, and setbacks from property lines.
You may also need formal “DBA” (“Doing business as”) paperwork if you wish to operate your business under a name that is different from your own. (And banks may require evidence of your DBA before they will open a business account for you under your business’s name).
Finally, there is business insurance: If a student slips and falls while walking from car to house, your insurance company may not cover it once they learn that the reason that child was on your property was for business purposes. Business insurance will also cover any business property you have: Computers, instruments, recording equipment, photography equipment, that is above and beyond what a normal personal policy would cover.
This kind of stuff is the reason most of us don’t work in offices — We don’t want to deal with it. But we can’t afford to ignore it. Knowing what the rules are — and what your rights are — can go a long way to prevent the kinds of problems that can ruin our peace of mind.