You're ready to take the leap and open a new business. Maybe you're a consultant, working freelance, an online store or perhaps you're going to create the next garage-incubated technology craze. These are among the businesses you might open in your home. Most cities and counties recognize that today's technology permits a wide range of home-based businesses. Zoning regulations normally prohibit commercial activities in residential zones, so it pays to check how the local government handles a home-based business. Factors like customer traffic, signs, land area, noise and business function are considerations affecting hanging your "open" sign.

Preparing for Required Approvals

Determine if applicable subdivision homeowner association (HOA) rules allow a business in the home or require an association approval. If so, obtain this action before applying for city or county permits. The local government agency may require the association action before it will issue permits. HOAs usually exist in any planned subdivision created after 1975, and most have architectural review committees for this type of proposal. If you are unsure about an HOA existence in the subdivision, check with the county assessor's office. Most HOAs pay property tax for subdivision-owned property.

Categorize your business as either an "office in the home" or "home-based business." This distinction will facilitate the approval. "Offices in the home" are almost always approved over-the-counter and may not require permits. An office in the home is a business office, and there is no inventory or customer traffic to the home. A consulting business is a good example of an office in the home. A home-based business is a business that might include inventory storage, travel to and from customers, or product shipment. A contractor or eBay store with shipping from home are examples of home-based businesses.

List on paper the function and operation of the business, number and type of vehicles expected on a daily or weekly basis, the transaction process and whether the business needs customer traffic for success. These specifications are needed by the local government before it issues home business permits. The agency must determine business compatibility with neighbors.

Access the local government Web site and read the "home business" zoning regulations. List those requirements you meet and those requirements that raise compatibility questions. Many local governments have links for "opening a new business" or "starting a home-based business," with all regulations and requirements explained in plain language. Others may require reading some of the city or county code sections to find applicable regulations.

Obtaining the Approvals and Permits

Contact the planning or business license department of the city or county, depending on home location, to determine whether the business is permitted in a residential area. Have your compatibility list and questions at hand when calling or meeting with staff. Most cities and counties will allow a business that is essentially a home office, but businesses involving retail transactions, personal services with customer contact, or manufacturing are going to require discussion to define their operational parameters.

Review the conditions the agency wants to impose on business operations and be prepared to negotiate requirements impacting business success. Some local agencies have flexibility when the business operations are understood. All local governments have appeal processes if an agreement is not reached or the permit is denied.

Write and sign any "understandings" between you and the staff. This protects you from future interpretive changes if there are neighbor complaints.

Obtain required inspections, permits and licenses before opening the business. Starting a business in the home is a considered a commercial use of land and not a residential property right. If the business opens or operates before permits or licenses are issued, serious and expensive legal action by the city or county can result. Normally there are no implied grace periods or interim permissions unless temporary operating permits are issued when applications are submitted.

Tip

Local governments are not bound to enforce homeowner association rules. If an association denies the request allowing the business, the local agency can still issue a permit if it meets government requirements. However, the HOA may be allowed to pursue other legal actions.

Be honest about operations and processes with the local agency; failure to disclose an incompatibility could result in a business shutdown without hearing or notice, expensive fines or even jail time.

A commercial kitchen separate from the household kitchen may be required by local or state health standards for food-based businesses.

If the permit or license approval process takes a long time, ask about obtaining temporary or interim permits.

Warning

Opening a business after a property owner association denies the request can result in litigation.

A business requiring customer traffic generally is not allowed as a home business because it will generate too much vehicle traffic on a residential street.

A business requiring frequent delivery of large quantities of supplies in large commercial trucks (other than UPS, DHL or FedEx delivery vans) may not be possible in a residential area.

Small manufacturing businesses may have restrictions imposed on noise, waste generation, hours of operation, and how stock and supplies are stored.

Signs of any kind are usually prohibited.