Learning how to start a small business from home comes down to a few clear steps: pick a business that works from home, test it, handle the basic paperwork, and set up your money and taxes. This guide walks through each step, with links to the official US rules from the SBA and IRS.
The rules below are for the US. Other countries have different steps, so check your local government’s business site.
Step 1: Pick a business that works from home
Good home businesses need little space and low startup costs. Common ones include:
- Online services: writing, design, bookkeeping, virtual assistant work.
- Teaching: tutoring or online lessons.
- Making products: baked goods, crafts, digital templates.
- Local services run from home: cleaning, pet care, repairs.
No idea yet? Read want to start a business but have no ideas? first. Hux also shares five home business ideas here:
Step 2: Test it before you spend
Sell your product or service to a few real customers first. A small test tells you more than any plan. Keep track of what you spend and earn from day one.
Step 3: Write a simple plan
One page is fine to start: who your customers are, what you sell, your price, and how people will find you. The SBA’s guide to writing a business plan has templates if you want more detail.
Step 4: Choose a business structure
The SBA explains the main business structures. A sole proprietorship is the simplest. The SBA notes you are automatically treated as a sole proprietor if you do business and don’t register as another type. An LLC can separate your personal and business liability but has more setup and fees. Many home businesses start as sole proprietors and change later.
Step 5: Register and check licenses
Depending on your state and business, you may need to register your business or its name. Many businesses also need licenses and permits from the state or city.
Home businesses have extra things to check:
- Zoning rules. Some cities limit businesses run from homes, especially with customer visits or signs.
- Lease or HOA rules if you rent or live in a managed community.
- Food rules. Selling food made at home has its own state rules.
Step 6: Separate your money
Open a separate bank account for the business, even a simple one. It makes taxes and tracking far easier.
Step 7: Understand your taxes
- If your net self-employment earnings are $400 or more in a year, you generally owe self-employment tax (15.3%), per the IRS.
- If you expect to owe $1,000 or more, you generally need to pay estimated taxes during the year.
- If you use part of your home regularly and exclusively for business, you may qualify for the home office deduction. The IRS simplified option allows $5 per square foot, up to 300 square feet.
Talk to a tax professional if you are unsure.
Step 8: Get your first customers
- Tell friends, family and neighbors what you now offer.
- Create a free Google Business Profile if you serve local customers.
- Post on one social platform where your customers spend time.
- Ask every happy customer for a review or referral.
Free help and grants
The SBA’s local assistance page lists free or low-cost counseling through partners like SCORE and Small Business Development Centers. Be careful with “free grants to start a business” ads. Real government grants are limited and usually for specific purposes, and you never have to pay to apply.
What to read next
Growing past the first customers? See our business growth hub. Starting it alongside a job? Our Start Here guide covers how to start a side hustle, and our smart money habits section helps with the money side.
FAQ
What is the easiest small business to start from home?
A service using a skill you have, such as tutoring, writing or virtual assistant work. It needs no stock and little money.
Do I need a license to run a business from home?
It depends on your state, city and type of business. Check your state and local government sites, and the SBA’s licenses and permits guide.
Should I start as an LLC or sole proprietor?
Many start as sole proprietors because it’s simple. An LLC can protect personal assets. A tax professional or SBA counselor can help you decide.
Can I deduct my home office?
Possibly, if the space is used regularly and only for business. See the IRS home office deduction rules.