Running a Business Out of Your Home in 2023
By RIFO
2023-01-09With rent prices sky-high and working from home becoming more common than ever, the New Year may have business owners wondering what they can do to benefit from these current trends. If you own a service-based business, working entirely from home may be a viable option for you. Growing up, one of our town’s most trusted hairdressers ran her business out of the salon she and her father built in the front room of her house. Recently, she sold her house to move to a smaller lakeside town in Ontario. This made me wonder, what about her salon? Will business owners need to worry about the sale of their house? Today, we will be discussing several topics in home businesses.
Hair stylists, nail artists, eyelash technicians, psychotherapists, makeup artists, dance teachers, seamstresses, personal trainers, and more, are all examples of home businesses in my own neighbourhood that helps the world go ‘round for our community. The number of businesses and services that can utilize home spaces is incredibly diverse. Of course, depending on what your business specializes in, the amount of work, space, and money involved in converting a space in your home into an appropriate business to work out of or invite the public into will vary. The equipment you need and how specialized you are will also determine the nature of your renovations, if at all, that are needed. Some businesses may have a convenient side-door entrance or a basement entrance, keeping your business completely separate from your living space. If customers are frequently entering your home, it is advised that your business follow a separated format.
Aside from renovations, you will also need to check in with local zoning bylaws. According to LegalLine, you will be fine if you simply work from a home office, but other activities may be subject to restrictions, especially if you are manufacturing or produce pollution or noise. Prior investigation will ensure smooth operations, legal compliance and allow you to manage any objections of the local “Karens”.
According to the CRA, home business owners can deduct expenses depending on a few things. To qualify, you must meet one of the following conditions: that the space is “your principal place of business,” or “you use the space only to earn your business income, and you use it on a regular and ongoing basis” for meeting clients or customers. In other words, the space is not used for lounging. Other deductibles may include maintenance costs, home insurance, rent, and more. How much you can claim depends on how much of your house is used for business.
When you operate your business from home, home insurance does not cover business concerns. Home-based business insurance exists, and according to Cooperators.ca, this will be an extension to your current home insurance, as long as it is still considered a small business. According to Cooperators.ca, this insurance plan covers office equipment, inventory, and “off-premise and business interruption insurance” in the event your business suffers to issues with your home. Just as importantly, if your business requires customers entering your space and frequent deliveries, insurance will also assist in the case of accidents.
As I mentioned before, I wondered how my town hairdresser would sell her home with a salon in it. According to LegalLine, something to keep in mind about taxes and the sales of a house involves deductions. When you sell your home, if you claim part of your house as a business space, that part “will not be considered your principal residence.” This means that you have to pay tax on capital gains. We suggest getting professional tax advice to assist you in making the right decisions.
Running a small business where the owner is intimately involved in providing the services, the term “time is money” takes on important new meaning. Any time cut out of a commute can be money in their pocket. This is especially important if the business is a part-time supplement where margins are tight and outside overhead could make the business a non-starter. Owners can also be more responsive to customers and over time this translates into a unique relationship with the community. Your business is a part of the neighbourhood’s fabric - what makes it tick. This comfort level helps people get over any reluctance that they may first have when visiting a home-based service provider. This service delivery channel is common in rural and small-town Canada. It should have little difficulty gaining broader acceptance.
