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Can you operate an online business from home?

Sure, there are benefits to operating your online business from home, but that doesn't mean that it's risk-free.
Sure, there are benefits to operating your online business from home, but that doesn't mean that it's risk-free.
Vico Collective/Erik Palmer/Getty Images

"You never know what kind of greatness can come out of an American garage," promises a 2014 TV ad for Cadillac's CTS Sedan. From Disney and Mattel to Apple and Amazon, countless U.S. business staples have risen to greatness from humble, home-based beginnings.

Innovators have been operating businesses from home for ages. The Internet only makes that easier. The teleworking ranks grew 80 percent between 2005 and 2013. And, although growth of home-based businesses by the self-employed lags behind overall growth in teleworking, studies still show that incorporated home-based businesses grew 17.5 percent from 2005 to 2012 [source: Lister].

The benefits of home-based work are obvious:

  • No commute
  • Tax benefits
  • Better work-life balance
  • Flexible work hours

The benefits of operating an online business from home include:

  • Lower startup and overhead costs
  • More flexibility to scale your business up or down quickly
  • Flexibility to test out new business ideas without incurring as much financial risk
  • Ability to manage a team of remotely-based team members without the strictures of a 9-to-5 workday

Just because there are benefits, however, doesn't mean that operating an online business from home is risk-free. Just like other businesses, home-based companies must comply with federal, state and local regulations and tax rules. In addition, online businesses must comply with special ordinances that apply only to them. Online sellers, for instance, are obligated by the Federal Trade Commission to provide "prompt delivery" to clients who order their products online, and small online businesses hit with unexpected demand or supply delays may run afoul of these legal obligations without even knowing it.

Home-based business also may require special "Home Occupancy Permits" and be subject to local zoning laws. The U.S. Small Business Administration (SBA) recommends that you consult with a lawyer specializing in Internet law who can help you maximize the benefits of working from home while educating you about the risks.

If you're ready to tumble out of bed and into your home office, find out what else the SBA and others recommend for online business startups on the next page.