How Local Zoning Laws Affect Home-Based Businesses

This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.

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For many business owners, starting the company from a home office is the easiest — if not the only — option. Assuming you already have a place to live, choosing to use a few square feet in your home as an office is rarely a problem. But you should check your local zoning laws before you decide that your spare bedroom is the only home your business will ever need.

Depending on where you live, the city or the county may set zoning laws. Where I live, the town is small enough that it doesn’t have much in the way of zoning laws, but the county I live in has zoning regulations so precise that I know if I can run a Christmas tree sale from my front yard (I can, but only if the proceeds go to a non-profit). Some zoning laws are written to prohibit all businesses from operating in a residential area, but it's more common that zoning prohibits certain aspects of running a business. It's also worthwhile to check the other legally binding agreements that impact your home. For example, a lease can add more limitations, as can a home owner's association.

Customers and Employees

One of the biggest concerns you may face stems from where you ask your customers and employees to meet with you. After all, you and your neighbors probably moved in with the expectation that they'd be living in a primarily residential area and zoning laws are written to make sure those expectations are met.

In order to avoid potential issues with your neighbors, consider these factors:

• How many parking spaces are available? If you have customers or employees in your home, it's likely that they're taking up parking spaces in your neighborhood, parking spaces that your neighbors may rely on. When I lived in an apartment complex, there simply weren’t any spaces available for visitors nearby.
• Will visitors coming and going interfere with the normal traffic in your neighborhood? There’s a reasonable expectation in most residential areas that there will be lower amounts of traffic than in commercial areas, especially in the evenings and on the weekends.
• Your visitors may be adding to the noise level, too, increasing the likelihood that a neighbor will complain about the business operating out of your home.
• What is your neighbors’ tolerance level for strangers in your neighborhood? If you live in a neighborhood with a lot of children who may play outside, you may find that your neighbors have a low tolerance for outsiders, such as your employees and clients, visiting the area.

Many home-based businesses that are able to operate primarily online avoid the problem altogether by arranging client meetings offsite, at local coffee shops, or office centers, or coworking spaces.

Noise and Noxious Chemicals

You may also need to look at if what you’re selling may bother your neighbors. Dangerous chemicals and anything else that may put the people around you at risk are obviously off the table. So are less dangerous but more noxious items, like fertilizer. But there are other processes and products that may lead you into conflict with the zoning regulations, whether or not you're keeping everything entirely indoors and out of view.

• Are you making a racket? If, for instance, you won't have any customers banging on your door, but you will be running a loud piece of equipment (such as a sculptor's power tools), you could wind up in hot water, even if you stick to reasonable hours of operation. Zoning laws usually include noise restrictions, making it important to consider what parts of your business can actually be carried out in your home (or your garage).
• Are you storing anything on your property that might bother your neighbors? A lawn care company can easily operate out of the owner’s home, except for storing fertilizer, gasoline, and the other supplies that are necessary to the job.
• Does your business go beyond your home’s borders? It’s not uncommon for daycares to be based in homes and zoning laws in most areas support such a use. But if the children being cared for seem to have the run of the neighborhood, the owner could still be facing some problems. No matter what sort of business you run, it’s important to keep it within your own property or rental.

The Appearance of Your Home

Many communities also regulate the appearance of residential structures. Certain neighborhoods, such as those that have been listed on historical registers, can have very strict regulations.

• Do you need a sign for your business? Signage restrictions are usually strict. Commercial signage is almost certainly out of the question, but depending on the local zoning laws, you may even be prohibited from posting yard signs and other small notices of your business. Don’t think that because political signs are okay that your business signs will be fine, either — non-profits operate under different rules, as do political campaigns.
• Are you planning a remodel with your business in mind? Often zoning regulations limit the changes you can make to the overall structure of your home to make it more business-friendly. Don't plan on converting your front yard into a parking lot, at the very least. You may even be prevented from adding a separate door to use as a business entrance.
• Do you have business vehicles that you park at your home? In many areas, the number of cars and trucks your business owns and parks at your home are limited. You may have the option of parking one or two commercial vehicles at your home, provided you have parking spaces available. And if your vehicle has a sign on the side, you may find that you can’t park it on the street or anywhere else that signage will be visible.

The Legal Consequences

If you and your business consistently run afoul of the local zoning regulations, expect to pay fines, or worse. While many businesses can operate out of a home without a problem, there can be issues: a friend of mine who ran her accounting business from her business wound up facing a fine from her city’s zoning agency right after she finished up tax season. One of her neighbors had complained about the number of visitors coming and going to her home office as clients dropped off and picked up tax materials.

If your local zoning regulations are unreasonably restrictive — for instance, only permitting home-based businesses that are essentially one person sitting quietly with a computer — don't be afraid to try and get them changed. The process may be as simple as applying for a change of zoning.

As your business grows — and that's probably your goal — make moving out into proper offices a priority. You can't simply keep taking over rooms in your house or your apartment for your expanding business. If more than half of your home is actually used for your business, you will almost certainly be running up against zoning regulations. Worse, you'll be holding back the growth of your business.