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You’re tired of office life and ready to try your hand at being your own boss. There’s just one problem: You rent.
Is it legal to run a business out of a rented apartment?
Can you claim the home office deduction if you don’t own your home?
Is there even space for a home office in your tiny apartment?
There are a lot of questions to answer when starting a home business, but don’t let them put a damper on your dreams.
In this guide, we’ll explain everything renters need to know about running a business from home.
Is it legal to run a business from your apartment?
Home business laws are the same whether you own or rent your home. Home businesses are restricted by zoning laws and local ordinances that dictate where businesses can operate and what types of home businesses are allowed. As long as you comply with these, it’s legal to run a business in a rental.
That doesn’t mean you’re in the clear, however.
Check your lease agreement for clauses prohibiting home-based businesses or restricting use of the property for residential purposes.
Landlords may make an exception for online businesses but you’ll need to get permission first.
Licenses, permits, and legal liability
The legality of your home business is just one aspect to consider. Landlords want to know that
their interests are protected in the event your business goes belly-up.
At a minimum, you’ll need to obtain the necessary licenses and permits to avoid penalties related to operating an unauthorized home business. A city or county may require business licenses separate from licenses required by your industry.
Your landlord may also require you to purchase business liability insurance for protection against lawsuits. Many small-time entrepreneurs opt for a Business Owners Policy (BOP) that combines liability and business property coverage.
Finally, consider forming a limited liability company. An LLC adds an extra layer of liability protection because it establishes your business as a separate legal entity. Without an LLC, your personal finances and your business’s finances are treated as one — debts included.
Compared to other business types, LLCs require minimal red tape and don’t affect tax obligations until your Texas LLC grosses $1.18 million or more in revenue.
Can renters claim the home office business deduction?
If you use a space in your home regularly and exclusively for business, it’s eligible for the home office deduction. You don’t need to own the home or have an entire room dedicated to your office. Even a desk crammed in the corner qualifies as long as it meets the criteria.
Taxpayers have two options for claiming the home office deduction:
1. The simplified method, which deducts $5 per square foot of office space, or;
2. The regular method, which deducts a percentage of all home-related expenses.
If you’re an urban apartment dweller, $5 per square foot is probably much less than your space
Before opting for the simplified method, do the math to understand which method
saves more on taxes.
How to squeeze a home office into a small apartment
Are you searching for home office space and coming up empty-handed? Dedicating square footage to a workspace is daunting when living in small quarters. Before splurging on a coworking space, use these tips to do more with less.
Add function to awkward nooks
Oddly-shaped, unused spaces are the ideal spot for a compact home office. Think of the space under the stairs, a second-story landing, or the end of an entry corridor. In a studio, a lofted bed creates a natural workspace while adding privacy to your sleeping quarters.
Divide oversized rooms
Out of wall space? Strategically placing a desk behind the sofa maximizes function in an open- concept apartment. Other ways to divide a large room include folding screens, curtains, and tall. bookshelves or cubbies.
Convert a closet into an office
A closet office — or “cloffice,” if you will — is a small space hack that you have to see to believe. Check out these amazing conversions, from tiny recessed offices to spacious walk-ins, and get inspired to create your own closet office.
Buy space-saving office furniture
Traditional office desks overwhelm small spaces. Go vertical with a ladder desk, make your workspace disappear with a wall-mounted folding desk, or use a console table as a desk in narrow spaces. Then, pair your new desk with a small-profile office chair that hits all the ergonomic checkmarks like adjustable height, seat depth, and lumbar support.
Staying on top of office clutter is a must in a small home. Unfortunately, your options for installing storage are limited as a renter. Look to impermanent storage solutions like rolling carts, desktop risers, and pegboards installed with adhesive hooks.
Optimize your internet connection
There’s one more piece of infrastructure you need for a successful home office setup. A fast, reliable, and secure internet connection is a must when working from home.
If you’re struggling with slow speeds or throttling, make sure your internet plan can handle the increased loads. If you’re paying for speeds you’re not receiving, you may need to upgrade your router or purchase a range extender. Connecting to Ethernet instead of Wi-Fi will also deliver a stronger connection.
Invest in cybersecurity
Don’t forget cybersecurity! Just because your business is small doesn’t mean it’s safe from cyber attacks. Password-protect your Wi-Fi network and invest in firewall and antivirus software that you update regularly.
Keep your receipts
That’s a lot of infrastructure for a small home office!
Luckily, renters can take their home office improvements with them wherever they go. You can also deduct home office expenses from your small business taxes, so be sure to keep records and receipts of everything you buy.
You don’t need to own your home to start a successful home-based business.
However, renters do have extra hoops to jump through when launching a business from home. Use these tips to
start your home business the right way and create a renter-friendly workspace where your company can thrive!