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Working From Home - The Downside

 Business woman on a tightrope Lots of people start working from home without any problems at all, but there are potential pitfalls that can be avoided with a little careful thought. Making money at home can be fun and rewarding, but make sure that you consider the downside.
One obvious example is annoying the neighbours. If your new home business results in increased traffic, noise, or perhaps noxious fumes or smells, then there is every chance that your neighbour is going to complain. They may complain directly to you in which case you should be able to negotiate a reasonable compromise, but if they complain to a local authority you may be forced to close your business or to move it elsewhere.

If your home is rented you could run into problems with your landlord because the chances are that your tenancy agreement will specify that the accommodation is for domestic use only. If you are just using your home for an Internet business or as a telephone base, you might not have a problem, but you should still check with your landlord.  Certainly if you are having a constant stream of callers to your property or a business van parked outside, you may find yourself accused of contravening the terms of your lease. Having to move your business is one thing but having to move out of your home is something else altogether.

Be aware of any tax implications that may arise as a result of working from home. Taken to extremes you may find that you have to pay capital gains tax if you ever wanted to sell your property. You could also be liable to business rates on that part of your property that you use for your enterprise and this would be additional to your council tax.

You may also find that you need to obtain certain permissions depending on the sort of activity you are undertaking from your home. You have to be particularly careful regarding the sale of food from your premises

or the sale of food items that you have prepared in your home. Be sure to check if you have to obtain permissions or permits from public health authorities, licensing authorities, the fire prevention officer or the police. You must be particularly careful in relation to fire prevention as well as health and safety if you consider turning your home into a guesthouse.

The other vitally important consideration is insurance. Insurance is absolutely essential if you employ anybody in your business and is a very sensible precaution even if you're working alone. For example, do you need to extend your existing home insurance policy to cover your business activities?  A fire at home could also destroy your business, but this is unlikely to be covered by the standard home insurance policy. Make sure that your car insurance covers you for any business activity.

Several insurance companies now offer special deals for small businesses and have package policies that cover most of the risks you are likely to come across within a single policy. Each business will have different requirements, but a package policy should include some or all of the following:

  • Professional indemnity. This is absolutely essential if you're offering any kind of investment advice and is recommended for other professionals who could be sued as a consequence of the advice or service that they provide.
  • Loss of profits. It's a good idea to be insured against loss of profits that might arise in the event of you having to stop trading as a result of damage to your premises or equipment.
  • Employers’ liability. If you employ anybody in your business this is a compulsory insurance.
  • Product and public liability. This is extremely important if you are manufacturing a product and will cover claims made by customers or the general public.

You may also want to consider life-insurance, permanent health insurance and insurance against jury service.

Small business insurance can be a complicated matter and there is a great deal to consider which can vary depending on the type of business activity that you are undertaking. It is therefore essential to speak to a reliable insurance broker to make sure you're covered for all eventualities.

Making money at home through a small business enterprise is a great way to supplement your income, but make sure that you have covered all of the downside risks so that you avoid any nasty surprises in the future.

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