If you’re starting an LLC, the business entity formation process is one of the first and most important hurdles. This step can be terribly complex ...
Pros and Cons to Running an LLC from Home
Written by: Carolyn Young
Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on December 7, 2021
Updated on April 29, 2023
In the early stages, many companies run their operations from home to keep costs low. Running your LLC out of your home can be a good alternative for the business start-up.
If you’re wondering whether you can you use your home address to your LLC, the short answer to this question is “maybe.” You might be able to use your home address for your limited liability company (LLC), but whether you should may be the better question.
Here are the pros and cons to running an LLC from home.
Benefits of Running an LLC from Home
1. Low Costs
The number one reason business owners choose to run their business from home is to keep costs low. A monthly lease payment for an office or other commercial space can really eat into revenue and reduce your profit margin.
2. Tax Deductions
You may be able to claim a home office tax deduction, which means deducting part of the expenses of running your home as a business expense. This can include part of your rent or mortgage interest, utilities, and other home expenses. This applies if you use a portion of your home exclusively and regularly for business purposes. It also only applies if your home is your principal place of business. That means that you don’t have any other business location, such a shop or office where you also do business.
Many people enjoy the flexibility of working from home. You don’t have to travel anywhere, you have the ability to set your own schedule, and you can work in your jammies if you want!
Disadvantages of Running an LLC from Home
1. Some Areas/Laws May Prohibit Running a Business From Home
Many business owners run their business from home at first, but you need to make sure you’re allowed to do so. Zoning laws in your area may bar you from running a business, or certain types of businesses, from your home. You need to check with your local government to find out.
Some apartment and condo associations, as well as gated communities, also prohibit certain types of businesses from being run from home. Check your lease, association documents, or community bylaws to find out.
2. Difficult to Keep Personal and Business Finance Separate
You need to maintain separation between your personal and business finances to keep your personal liability protection intact. Using your home address in some situations could be considered what’s sometimes called “piercing the corporate veil” – a reference to the commingling of business and personal activities that could put your personal assets at risk.
3. Less Credibility
Having an office address for your business can lend greater credibility and professionalism. Using your home address might make your business seem like a one-person operation, rather than a legitimate company.
4. Lack of Privacy
Your privacy will not be protected if you use your home address for billing, vendors, and suppliers. You probably do not want these folks to turn up at your home.
5. Lack of Professional Meeting Space
If you work at home and need to meet with clients, your home may not be the ideal place to do so. Clients may prefer the credibility and professionalism of an office.
Registered Agent Address
A registered agent is a person or business authorized to accept legal, tax, or financial documents on behalf of your business. You can check your state’s website to see if you are required to have a registered agent for your LLC. Your registered agent must be available at their registered address to receive correspondence during normal business hours.
If you are your own registered agent and use your home address, you must be available to receive correspondence at your home address during normal business hours.
If you want to use your home address as your business address, you should be aware of the potential issues. It’s important to make sure you’re allowed to run your business from home, as per local zoning restrictions and your building or community bylaws. Many new entrepreneurs run their business from home and use their personal address, but this could put your personal assets at risk.
When you’re forming your LLC, it’s best to consult with your attorney on the best option for you in terms of address. It’s better to get professional advice to avoid future issues that could damage your business and limit your success.
Pros and Cons to Running an LLC from Home
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