Running a Successful Home Based Business

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thank you very much ladies and gentlemen I really appreciate the chance to speak here for a score tonight and my bill gave me a very excellent introduction but one thing he didn’t say and I think it’s most relevant for our program this evening is that for the last 20 years I have been working out of my spare bedroom I have been working in my bunny slippers I too am a home office entrepreneur for the last from most of those last 20 years I have been naked I’m only kidding about that part of it of course but I seriously I do tend to work in my pajamas and you know when I’m not all that busy I sometimes don’t shave for like a week you know that kind of thing it’s a you know I teach people actually I get programs for lawyers and I tell them that I I run the first clothing-optional law practice in the New England states and maybe a few of these in California I don’t know but but I actually have the only I have a lock on it I have the only clothing-optional law practice so here in New England and I’m looking for associates now I’m only kidding I’m only kidding about that but seriously home office and home businesses and those are two different things we’re going to talk about the difference between those two things in a few minutes but working out of the home has become the way that most people work here in the United States the US Department of Labor tells us that there are approximately 11 million home offices in the United States today if you think about it that’s pretty profound that’s about one in every 30 Americans works out of their home and those are only the ones that the Department of Labor knows about I got to believe that for every one they know about there’s two or three that they don’t know about so I try this I think I strongly suspect that the number of home offices in this country is is very very large and why is that important well I’ll tell you something that’s very funny there’s about 11 million home offices in the United States and yet technically the vast majority of them are illegal which is a very very interesting development indeed and we’ll explain why that is in a couple of minutes but let’s get started here first of all I expect you all to read that in five seconds or less that’s a lot of fine print I apologize now you know that I am a lawyer okay because I lawyers do always tell you what we’re not going to tell you before we tell you what we’re going to tell you the most important one here is the first one here we are going to get into some legal and tax stuff I’m going to talk about the home office deduction a little bit later on I’m going to be talking about the zoning issues of working out of your home but what I cannot do is I cannot give you one-on-one advice I’m certainly happy to answer any questions that you have at the end of this program but this is general information only I really I don’t know any of you well enough to be able to give you one advice as to how you should handle a specific situation so just keep that in mind this is no substitute a program like this is no substitute for the kind of advice that you would get from a lawyer or an accountant that you have hired and that you are working with one on one so that’s the most important thing sooner or later you will be working from home if you’re not working at home already sooner or later you will be more than ten million home offices in the US business trends favor home office employment with today’s technology you can work anywhere my clients don’t even know where I am all of my work these days is done by phone by fax by email occasionally by text I could be in Missouri I can be in Nevada very frequently I speak around the country and I do work on my laptop from the airport my clients don’t even know that it’s totally transparent you don’t have to be anywhere our technology has untethered us from the physical bounds of time and space we also are entering something which I like to call the virtual economy or the 1099 of America you will not see in five or ten years people working in corporate headquarters working up a hierarchical ladder look what we used to call the corporate pyramid is very rapidly disappearing what we’re seeing now is a flattening or a hollowing out depending on how you want to look at it of the corporate world fewer layers of management people working at all kinds of different locations smaller businesses especially do not want to invest a lot in a brick-and-mortar space it’s very expensive especially here in the Northeast where we’re giving this presentation now commercial space in the town where I am right now is about 7080 dollars a square foot a lot of companies don’t want to pay that so they’re perfectly happy to let worker work out of their home they’re hiring more people on telling remember the lava lamps from the 1970s remember the lava lamp was okay the blobs of liquid you know going that’s what the world of work is going to look like now we’re not going to be seeing big organizations with pyramid structures but we’re going to be seeing now going forward is sort of free forming teams of people that will get together they’ll work on a project or two for a while and then they’ll kind of drift off and this group will go on this way and they’ll mix up with somebody else and that other group will go this way picture the circulation of fluids in a lava lamp and that’s what the world of work is going to be looking like in another five or ten years and that obviously I personally work with several virtual companies where they don’t have any physical space at all it’s five people they’re all working out of their home offices and every once in a while they get together at a diner and compare you know whatever it is that they’re working on this is becoming more and more of a trend also too the blurring of work in private life is no secret now that even if you work for a large company it’s 24/7 now it is the old days of working 9:00 to 5:00 or on a fixed schedule all that has gone the way of the dodo bird people now are working a little bit on Sundays I usually work a couple of hours every Sunday but I can also take some time off on Wednesday afternoon and get my dry cleaning that’s the beautiful part about working out of your home is not that you are working less hours or fewer hours it’s that you have a little bit more control over how you spend your time but every day you’ll be doing some work every day you’ll be doing some play every day you will be doing some study and the desire to reduce overhead to rock bottom overhead has become a four-letter word in corporate America I’ve talked to any company big small in the middle they are all looking to cut their overhead to the rock to rock bottom and anything that saves the money especially on brick-and-mortar space they will take advantage of okay we talked about home-based office as though I think it’s important to stress we’re talking about different kinds of people okay first of all a lot of self-employed people like me I’m a solo I work alone I don’t have staff I don’t have an assistant I don’t have a paralegal I don’t have a dog it’s just me and my PC you know we’re and colic contractors work that way I mean they may be working on your house but all their office as being handled from a home office these people do not rent space in commercial buildings or in strip malls anymore so that’s one category of people the self-employed virtual companies these are entrepreneurial startups with networked homes offices these are people who are working in different locations sometimes they are in different states sometimes they are in different countries I work actually with a lot of foreign students who are over here in this country on temporary visas who have set up companies with friends of theirs back in their home countries and they communicate entirely via Skype or some other you know electronic means of communication they don’t even see each other for years and years and yet they are setting up a company together and working together part-timers these are people who are stay-at-home parents but they have a part-time business a lot of people sell on eBay they sell on Amazon these are I call them part-timers these are people who have a job they have childcare responsibilities but they spend a few hours a day doing something to bring in a little extra income on the side and then last but not least tell them these are Teleca we have telecommuters these are fully employed people these are not entrepreneurs these are not solos these are not self-employed people these are people who do work for a company but for the convenience of their employer they are allowed to work out of a home office one or two days maybe several days a week those are four very different kinds of people and they have different kinds of needs the only they have in common quite frankly that they work from a home office okay so can you work out of your home well there are a number of people who may not let you your local zoning regulations may not let you I said a few minutes ago that virtually all almost all of the home offices in America all of those 11 12 million home offices that we talked about are technically illegal and why because virtually every community in the United States has some kind of a zoning law which basically it’s actually a map it’s not really a law it’s a map it divides your town into different districts and it basically says okay the homes are over here the businesses are over here the factories are over there and the schools over there and the reservoirs over there that’s what zoning law basically does and the cardinal rule of Zoning is and has always been since the 1950s 1960s when zoning laws first became popular you cannot have a business in a residential zone in a zone that is in a district that is zoned residential and there are certain exceptions to that so for example some dentists are allowed to work out of their homes some visiting nurses obviously can work out of their homes there’s always a been a few exceptions like that but the exceptions have been few and far between since the 1970s with the explosion of the home office revolution these a lot of these laws are very antiquated and very few of towns and communities have brought their zoning laws in light in in compliance with modern times okay secondly your nosy neighbors may not let you and this is this sounds funny but it really isn’t we’re going to talk about this a little bit more later on one of the biggest problems you have when you have a home office quite frankly is your neighbors you know they simply remember there was a TV show called bewitched back in the 1960s and one of the characters this is a woman who was technically a witch who married a guy and she was doing all kinds of crazy stuff out of her house and the next-door neighbor knew that something weird her name was Gladys Kravitz remember Gladys Kravitz she knew that something weird was going on so she was always poking around sticking her nose in the windows trying to find out what Samantha and her witch buddies were all up to and stuff like that is a very popular show back in the 1960s Elizabeth Montgomery one of my very first crushes as a boy we will not go there however but your nosy neighbors can be a problem any problems that you have with a home office are going to primarily be caused by your neighbors we’re going to talk about later about how you deal with that your spouse or significant other may not let you and it sounds again funny but it’s something we have to face up to not a lot of our spouses like the idea of clients traipsing up on tracing through the house 24/7 they may not like the idea that you are constantly underfoot they may not like the idea that they’ll you’ve been working in a corporate building now for years and years and all of a sudden now you’re in the house you’re underfoot you’re sticking your nose in the refrigerator every 10 minutes they got all these people that she doesn’t even know you know looking at the antiques and sometimes an antique goes missing we’re going to talk about that a little bit about how you manage the home office your spouse may say look I’m not going to let you do this I think you really need to be somewhere else I don’t want you in my hair all day long so that’s the conversation you need to have with your spouse and then last but not least your clients your customers your brand image may not let in certain type certain types of businesses cannot operate from a home office not because there’s a legal issue with it but just because it doesn’t look right I mean let me just ask you this question let’s I’m a lawyer okay let’s say let’s say that I was a lawyer who did wills I don’t do wills mostly but let’s say that I did wills trusts and estate planning so you hire me as your lawyer you want me to put together an estate plan so that your kids you know will not have to pay federal state income taxes I’m putting together a highly sophisticated estate plan I invite you to my office you’re driving through a residential neighborhood you come to my house and there I am in my jeans and my client cutaways and my t-shirt and I’m playing frisbee with my dog on the front lawn is this thing don’t get me wrong there’s nothing wrong with any of that but is that the professional image you want from the attorney who’s going to put together your estate plan and handle your financial future do you really feel comfortable putting your bit your life in the hands of somebody like that the answer is probably not which is one of the reasons I don’t do wills quite frankly because I simply cannot do them from a home office okay so before you consider working out of a big home office there’s a big fundamental question you have to ask this is one of those dividing line questions and to me it’s the biggest question of all and the thing you have to spend most of your time thinking about will you see clients in the home office are you going to allow other people from the outside clients employees whatever to access your home and work on your premises okay that is the big question if you go one way that dictates one set of actions if you go the other way it ticked eighths another set of action here’s my simple answer to the big question I’m going to take what I think makes these big questions I like to make them simple I believe you should not see clients in your home office ninety-five percent of the problems you will ever have with the zoning authorities your neighbors your spouse whoever may want to get in the way of you working out of the house will happen because you’re seeing other people on the premises as long as it’s just you as long as you just you working on your p.c taking a couple of phone calls in the spare bedroom no one will have a problem with that no one will have a with that everybody can do that and no one will care except maybe your spouse because you’re getting underfoot a little bit when you go to the refrigerator too many times but we’ll talk about that later but most it’s a 95% of the problems you will have come about when you let other people access your house that’s where a lot of the legal liability comes about that’s where a lot of your that’s where a lot of your resistance is going to come from the people who really who really care okay so I say when in doubt don’t you know unless there’s a compelling reason to see clients and employees in the office do not do it it will solve 95% of the problems you will ever have running your home office some people just say as I say oh gee why well let’s be out first of all it makes you more visible to your neighbors and community which makes it a Gretsch greater risk that you will have zoning problems okay let me say this upfront this is this is the we’re going to talk about zoning laws a bit beta but let me later but let me tell you about the common sense here there’s the law and there’s common sense we’re going to talk about the law a little bit later but let me just take a minute here and talk about the common sense I said a few minutes ago that virtually all Home Office’s are illegal meaning they technically violate the zoning laws you are operating a business in an area that is zoned residential which is a technical violation of the zoning law so that’s the law but here’s the reality you will never ever have a problem with the zoning laws unless your business activities become so visible that people start to complain that’s the reality of this thing every town has a zoning code but you know what very few towns have zoning cops I mean there’s nobody in this town going door-to-door knocking on doors you’ve got a business here got a business here got a business and that’s very 1984 that’s what they do in you know an authoritarian state stick to dictatorships you have those kind of people you don’t have those here in the United States nobody’s going around doing that nobody’s going around looking to enforce the zoning laws in that way the only time the zoning cops are going to find out about you is if your neighbors turn you in or if somebody rats on you that’s the only way it’s going to happen so if you conduct your business invisibly you will promise certainly never have a problem operating your home office anything that you do that make sure is more visible increases the likelihood that you’re going to have a problem with your local zoning authorities at some point okay that’s one reason that’s the biggest reason frankly why I say don’t see clients in the home second there’s an increased risk of slip and fall and dog bite liability your little Pomeranian you know the most world’s most lovable dog everybody loves them all of a sudden takes decides to take a bite out of your clients ankle that if that happens on your property that is something that you are legally liable for you know and of course the dog you’ll deal with the dog in its own time but you know I’m going to be that dog to either if that ever happens but also true they’re going to slip and fall usually you have a little bit of water on the kitchen floor it’s linoleum still you’re living in the 1970s somebody slips and falls on that you’re going to have a problem number three not all clients and customers are nice people just because they’re your client does not mean they’re trustworthy little things around the house may go missing when you see clients in the home and believe me your spouse is really going to have a problem with that when they see that grandma’s cherished Lladro figure is no longer in evidence okay and it’s very hard to do you cannot you know it sounds funny but it really is true and that’s a hard conversation to have with your client you know mr. client who is paying my my rent this month by paying me this wonderful $10,000 fee did you steal something from me when you were in my house last week that’s a very hard conversation to have with an important client you really can’t you’re accusing that person to theft and of course if you’re wrong there’s going to be there’s going to be consequences there although you’ll probably be right your spouse or significant other will not want people traipsing through the house seriously this is a cut whenever you think about working out of the house the first conversation you have to have is with your spouse first conversation take them go go on a retreat my wife and I did this when I moved into the house in 1994 but when I moved my office into the house in 1996 almost 20 years ago I my wife and I went to meet in a winter a weekend retreat we left the dog we went up to Vermont near Dartmouth where I went to undergrad and we actually took like a four-day weekend and we talked a lot about how our life was going to be different with me working out of the spare bedroom now fortunately my wife was very supportive she knew I would be seeing clients in the house that was the big selling point there but also too we talked about rules and regulations and we know when I could access the later when I couldn’t you know there are there are things that they care about that you probably don’t know so get your spouse on board get them involved early on is my message find out what the rules of the road are from them directly and then let’s just be real do you really want your clients and customers to see how you live do you really want to show the piles of crap lying all over the place you know the underwear lying all over the place which let’s face it you know some of us live like that also do you really want them to know where you live you know I mean as a lawyer I work with people who sometimes are not the most savory of people and I’m not so sure I want them knowing where I live necessarily so these are all things you have to think about but you solve a lot of these problems by simply making the decision that you will not see clients in the home okay the key to home office success I used the word before but I really want to underscore it you got to be invisible you got to be people don’t shouldn’t even know that you work out of the house I’ve been working out of my house now for almost 20 years most of my neighbors don’t know until they listen to this visit until they watch this video they will not know that I have been working out of my house for the last twenty years why I’m quiet I never see clients in the house I’m on my PC most of the time every once in a while I take a phone call I don’t work you know I work late at night but only on the computer I’m not making a lot of noise you know I don’t have real stereo boomboxes going all the hours of the day or night there are no noxious odors coming from my house there’s no the kids in the street they don’t have to dodge all the cars in front of the house to play stickball or basketball or whatever they play I’m not changing the character of my neighborhood my neighbors don’t even know you know and the other seven neighbors that of my neighbors that are working out of their homes I don’t know that they are either that’s the beauty of this invisibility is the key to success that’s in a home office and here are some tips for you how do you achieve invisibility well first of all don’t use your home address for business purposes get a Pio box if your business can handle that get a UPS I love the UPS stores just so you know I think every home-based business should have a UPS store private mail box now a lot of you know the UPS stores that’s where you go to ship things by UPS but they also provide what they call private mailbox service you can rent a mailbox at your UPS store just like you could rent a post office box from your local post office the difference is that when you rent a post office box from the post office it has to be p.o box one two three when you rent the box from a UPS store though it’s the street it’s an actual street address it becomes one two three main street suite number four five six and that’s a big difference a lot of people who deal with you will not know that you have a pave private mailbox I’m a big believer in the UPS stores that is one of the key things also to the UPS store is located in a commercial zone so you don’t have to worry about their zoning right you know you’ll be doing business there you know and also – I will talk about this a little bit more but it gives you a place to go at least twice a day you know because when you work out of the house especially it can get a little lonely sometimes and we’ll talk about that at least when you have a UPS store private mailbox you get to go to the UPS Store twice a day in the morning when you drop your stuff off and then in the afternoon when you you pick up the incoming mail get you out of the house and get you some fresh air every once in a while okay use this address when registering your trade name or DBA when you have a business of your own and you’re using a DBA or a trade name you usually are required to register that name with the local authorities in most states it’s the County Clerk’s office here in Connecticut it’s the town clerk’s office or the city clerk’s office but you have to register that name somewhere when you register your DBA with the local authorities make sure you use your private mailbox address do not use your home address your home address should not appear anywhere on your business cards your stationery your website anywhere all that should appear there is your private mailbox address or your peel or your peel box if you are using APO Box mail address rent conference room space from local professional firms believe it or not a lot of professional firms in the area are looking for business and they will actually let you use their conference rooms whenever I have a big closing with more than two people involved I mean there are three law firms here in town that will actually let me use their conference rooms as long as I book them far enough in advance that’s a big help to me makes me look a little bit more professional but also to it means that it’s not happening at the house it’s very hard to have a closing of a business transaction in a diner trust me I have found this out the hard way you know whenever you see people at a diner and they’re passing documents or just it’s not the professional appearance that a lawyer what especially wants to have you know there’s only so much dokey bro diners are wonderful we’ll talk about diners in a minute but they’re not a great place to close business deals you need a conference room or something like that rent them talk to some local professional firms and basically could it deal with them say look I’ll I’ll send you some of my overspill business if you let me have access to my your conference room every once in a while you know three or four times a year I might need it for a closing or something or an important meeting see clients in their offices were ever possible or in a neutral location for the first ten years that I was working out of the house I was actually known as the diner lawyer of Fairfield County that was my nickname you’ve heard the Lincoln lawyer right well I was the diner lawyer because I knew every diner in Fairfield and New Haven counties I knew the owners on a personal level you know I that is where I met with it but if my clients did not have an office where we could meet this is where I met my clients why diners well there’s two reasons for that number one if you’re been to a diner they got everything they serve any kind of food in the world you can never you will never you will always find something on a diner menu that you like always because they do everything and if you don’t see anything on the menu that you like you ask them they’ll make it free anyway because they got the ingredients and I don’t know how they do this but they got the ingredients for every dish known to mankind that’s all in the back I don’t know how I do not know how diners do this but the second reason about diners they usually don’t rush you if as long as you don’t go there at a peak hour of the day you can sit and schmooze with your client for three hours and they don’t really care you know just make sure when the waitress you know or the waiter you know it’s at the end of his shift to give them his tip but except for that they will not have salut if you try to have a meeting at a more upscale restaurant they want to turn the table over quickly they do not do that at diners as long as you’re not hitting them during peak hours I would not schedule a meeting for example for Saturday you know right after all the kids are finished with their sports events and stuff and everybody’s at the diner having breakfast and stuff like that do not schedule meetings for that time but as long as not doing that the diner people are pretty good they will not hassle you I’m a big diners avoid noise especially at night lots of cars in your driveway or street or noxious odors that will give you away exterior signage is an absolute no-no when you do a home office you should have any signage on the outside that’s of your house that says you have a business there at all that’s one of the surest ways to tip off your neighbors that something something weird is going on in air place okay try to believe it or not want to be very earliest cases on home offices that kid you know to actually read this case when I was in law school back in the 1970s it involved a guy in Indiana who was operating a rendering plant out of his basement do you know what a rendering plant is that’s where you take animal Carson carcasses and strip the meat off them for things like ribs and other you know exactly the looks on your faces tells it all he was doing this business out of his home he had a truck a panel truck he would go to local butcher shops get their leftovers bring them to the house and he was like boiling fat off of these bones in his basement and the amazing thing was he did it for about eight or nine years before his neighbors turned him in I can’t imagine what those people went through living next to an operating where their nose smells how did they kind of how do you how do you get away with that for eight or nine years before his neighbor’s caught on to him I really don’t know that see people it’s amazing to me to me it’s a lesson in human human nature even though people suspect that something weird is going on at your house they tend to sort of shovel it under the carpet for a long time before they really get angry enough that they start to do something about it is one of the great forces in human nature I actually had a chance to visit the house or the neighborhood I shouldn’t say that I didn’t go into the house but I was in Indiana on a business tour about ten years ago and I was in the same neighborhood with his coaches for fun I drove my rental car into this neighborhood I figured well maybe this guy had like a big farm house it was on a big track I five acre piece of land no it was a residential called a sack and this guy was operating a rendering plant with neighbors like within ten feet of him I just don’t know how he got away with that for eight or nine years it says a lot about who we are as people okay home watt home-based businesses aren’t for sissies okay okay takes a certain amount of discipline to run a home office okay here are the seven enemies of the home-based business owner whatever you are whatever whichever one of the cars loneliness by far and away the biggest problem of the home-based entrepreneur if you have a spouse who works during the day things are going to be very quiet during the day if you if you are single you may go several days in a row without seeing carbon-based life-forms this is one of the big reasons why I believe in the UPS stores because if nothing else that gets you out of the house twice a day you got to go to the mailbox twice a day to pick up your mail that will at least get you out of the house a little bit but loneliness is a big is a big enemy I write books when I’m on deadline I sometimes go for like a week or two without seeing another human being that can get real lonely after a while I mean your that alone for that long you start thinking crazy things okay so seriously you know lonely if I you have to find a way to combat loneliness your spouse or family members if they are around one of the foot of the rules of running a home office is you’ve got to manage your family members expectations when you are working out of the house you are not always present even though you are physically there your body is there your mind is focused on your work and getting your job done and they have to respect that and also you have to respect their separate existence so when the kids come home from school you got to tell them don’t bang the door and start yelling and screaming because I may be on a conference call with an important client I don’t want them hearing yelling and screaming in the back in the background if you have an infant that infant should be in a separate room where their crying will not be overheard by your clients or customers on the phone forgive me that may sound a little harsh at first but I strongly believe in that you must put a firm barrier between your work life and your and your home look is the physical barrier that used to exist doesn’t exist anymore see when I first started working I was in New York I had a two hour commute into New York City every day that created a barrier between my work life in my private life by the time I got home from my two-hour commute work was a million miles away when you’re working out of the spare bedroom in your bunny slippers that does not happen there’s no physical barrier between your work life and your private life and that creates problems in a number of ways but specifically with family members they’re going to want to get underfoot hey honey I’m going to the groceries you want something you’re in the middle of a conference call you’re working on an important document or something like that that has to be discouraged you have to let people know when I’m in the office one of my favorite people who works out of her home my accountant works out of her home I won’t mention her name but she’s a lovely human being but she has five kids and she works out of a home office during tax time that can be very stressful for her but she has a rule whenever she hears the kids making noise in the background she kicks the door open and screamed at the top of her lungs is there blood and if the answer is no she goes on working if the answer is yes she stops and she deals with the situation that’s her that’s her clothes her that is her three word place is there blood if there’s no blood it’s not important we’ll deal with it later keep on working get the returns done I love I love to tell that story because she’s she’s a real human being about that she’s been practicing out of her house 20 years or so as I have as well temptations the biggest one the refrigerator let me tell you folks this is a biggie it shouldn’t surprise you to know if you if you go on my You Tube channel by the way and look at my youtube channel for cliff Rennick oh I got some old TV shows up from that I did like back in the 90s and stuff like that and when you take a look at those videos and you look at me now the first month occurs you man this guy’s this dude has gained a lot of weight in those 20 years I will tell you something the first year that I worked out of my home office I gained 25 pounds I will share that with you I had always worked in office buildings that were kind of remote from civilization you know if you wanted to get lunch you had to take the elevator go down to the lobby walk half a mile to the place wait on line get your sandwich go back to the building go back up the elevator now working out of the house I got the world’s greatest cafeteria and it’s only steps away from my workstation trust me weight management and weight control becomes an issue my advice to you would be if you’re going to have a gourmet refrigerator in the house have a gym set up right next to the refrigerator seriously don’t put it in the basement don’t put it in the family room put it right next to that refrigerator so every time you see the refrigerator you see the treadmill this is important seriously or else this is what will happen my video team is using wide-angle lenses you should not have to do that okay when you have a home office okay household Shores the honeydew’s when I started working out of the house we had a B handle in the system my wife and I I put a check I put a little you know a clipboard up you know near the refrigerator she could put whatever chores she wanted to and every day I would do two of them and she would pick the two so the list would have like 26 things on it but every day she would put down these are the two I want you to do today and I told her you get two a day that’s what you get no more than that you know unless it’s an emergency you know 200 days all you get you can pick them you know but no more than two a day I don’t want a situation where I have to go to the bank then the dry cleaner then the post office to get mail out the packages then my UPS store and I meet somebody there and I talk and before you know it I spent three to four hours on the local commercial strip when I should be at my desk working honeydew’s can be a terrible distraction contractors okay when I announced that my I was going to work out of my house my wife jumped for joy and the reason she jumped for joy was because when before I started working out of the house I was working in New York City she was working in a city that was maybe about a half an hour’s drive away and the wig the only time we ever fought we have a very good marriage my wife and I but the only time we ever fought is when something happened around the house and we had to call in a contractor because the big fight was of all about who’s going to stay home and babysit the contractor while they’re working on our toilets or our attic or whatever it was they were working on right so my wife when I announced that I was going to go out of work out of a home office she jumped for joy because she realized now we’re not going to fight about that anymore we know who’s going to be home to deal with the contractors you know when they’re working but I’ll tell you it’s an issue because when you’re working out of your house especially I work at a very cerebral job when I’m working on a 50-page contract you know I cannot be disturbed I mean I’m taking things I’m moving them around I’m eliminating duplicate things I mean it’s it drafting legal documents is a very tedious very cerebral task it takes up every inch of your brain space it does I can’t do that with people on bang bang bang hey Joey I say what you’re doing that oh again you don’t have that are you good to that okay bye I can’t I can’t work like that okay you know times when I said shut that up that’s I’ve had to do that with these people you know contractors can be a pain in the ass also too when they’re too quiet that’s what I really worry that’s when I know the basement that bottles of wine in the basement are going to start disappearing I know that I don’t trust my contractors I don’t first thing I do when the contractors over to the house I go down I count the bottles of wine in the basement I think member James Bond used to do this you know he whenever he was in a hotel room he would take us a piece of hair and like he would lick it and put it over the door so that if he woke up and that piece of hair was missing he knew someone to come in maybe that I do stuff like that I do stuff like that in my home office now in a mission huh you said you didn’t go down the basement huh that please let that kinda trip wire is not there anymore ah I got you let’s see what’s missing you got to do stuff like that because if you’re so involved in walk away with the damn house you gotta be unaware about that okay habit ritual routine I used to call this the iron triangle iron triangle for several years after I first started working out of my house things got a little boring for a while I wasn’t doing a lot of traveling when I first started doing it and I found that my routine was getting a little a little dull I would I would begin my day with the home office and then at lunchtime I would go to the gym work out for an hour I guess I did work out for a while you know and then I gave up because it was too much hassle then I would go to the UPS Store and do all my mailing and then they’d go back to the home office I used to call that the Iron Triangle house gym UPS store house house gym UPS house every once in a while to break the monotony I would go house UPS store gym house okay I do it backwards just for the sake I wore a groove in Black Rock Turnpike if you look very carefully as you drive down the local commercial strip you’ll see a groove that is the groove that I wore going house Jim UPS store house how that is you get like that and you got to do something to break that rooty otherwise it becomes it becomes really monotonous you got to watch out for that letting yourself go okay we talked about weight but there’s a lot more than that okay especially if you’re a guy okay women I think have an easier time with this okay but if you have a y-chromosome okay one of the most exhilarating moments that you have when you work out of a home office is when you realize I don’t have to shave every day I don’t have to necessarily comb my hair or put guca dick I don’t have to put glop in my hair every day Noah’s going to see me I don’t I’m not seeing clients today so maybe I just saw I’ll go without shaving I kind of Knick myself yesterday this hole this hole in oh and then the next event of the trouble though is when you start going down that road okay you don’t know when to stop you begin with little things like not shaving you know and then eventually you get to the point where you haven’t taken a bath in a week okay you got to watch out for stuff like especially guys I mean men you know you kind of know what I’m talking about here I mean you know you’re going to start looking like Grizzly Adams after a while if you’re not careful with this and don’t and don’t get me wrong I mean you know I’m not saying that you should I mean the first month that I worked out in my house I actually wore a jacket and tie believe it or not because I didn’t know I didn’t know what working was about unless I had a jacket and tie on now that’s kind of silly you know but you got to watch out for yourself don’t let yourself go don’t worry a little bit about your personal hygiene I’ll tell you one of my little secrets is the minute I get up out of bed in the morning the very first thing I do I make my bed that’s the first thing I do I make my bed why because it gives me something it’s a discipline I don’t have to do it right then of course not but I doing it when I first get up it’s made I’ve accomplished something with my day already a minute or two after I wake up in the morning and that’s a very good thing a little discipline because that gets you into the mode of I’ve got to do things here around the house you know I will never let dishes pile up in the sink I will never let an unmade bed go unmade for several days in a row you’ve got to watch out for stuff like that especially if you’re a guy bad habits can form this way if you’re not careful consider setting office hours okay your clients and customers okay don’t get me wrong your clients and customers are important without them you don’t have a business but once they know you work out of your home be very careful who you tell that to you’re in for me obviously you don’t want your neighbors knowing we talked about that but I wouldn’t let my clients in customer I don’t unless a client knows me for a very long time I usually don’t volunteer that I work out of the house why because when they know you work out of your home they expect that you will be available 24/7 365 they assume well he works out of his house I can call him at 10 o’clock on a Saturday night he’ll be there and if he doesn’t pick up he’s ignoring me now you you don’t think about that right you would never think of calling somebody he works out of a real office you wouldn’t calm Saturday night would you expect him to be at his office well Christopher may be an accountant at tax time or something like that but you wouldn’t expect that would you right but when they know you’ll work out of your house that starts happening cliff I sent you an email loving the clock Saturday yeah I know I went somewhere on Sunday dude you didn’t get back to me yeah well do this you know it’s only Monday morning man I’m looking at it now let’s talk about it now no I want to hear this is what starts to happen it becomes a creeping thing it becomes a 24/7 creeping thing they expect their real time expense consider setting office hours or otherwise limiting your accessibility this is what I did when I first got started hi I’m cliff inacol offices of Clifford our renico our office hours of our 8:00 a.m. to 4:00 p.m. Monday through Friday just put that on your voicemail and put it on your email signature line that’s it that’s all you have to do yes I work out in my house that doesn’t mean I’m available 24/7 this is what I expect you to call me I’ve since changed that because I’ve learned that when you do that what happens is you get half your calls for the entire week between 3:00 and 4:00 on Friday afternoon that’s what happens they all put it at the very end of the week mixing air you got 50 phone calls you got to deal with in 10 100 emails if anybody’s cleaning off their desk for the weekend so you got to be a bit more flexible than that lack of physical time barriers between work and private life when I first went off on my own my accountant put it well my first thought was you know this is going to save me so much time because I’m not going to be commuting anymore I’m not going to be wasting any time in the car on the train she and her response to me was cliff no you don’t get it when you’re going to work harder than you’ve ever worked before because there’s no barriers now between your work in your personal life the office is always there the office is always beckoning like a siren you’re constantly walking past it and whenever you walk past it you think wait a minute at one email you know have a few minutes now let me see if I can return it next thing you know there’s three other emails and there’s a phone call maybe you want to return this thing you know you’re starting to become a workaholic this can happen you know when there’s no barriers between your work in your private life workaholism is a real risk poor time management is a real problem because you can only say that it’s very tempting to say well you know what I can’t get to that contract this afternoon first I want to get to the UPS Store and maybe I’ll go to the grocery store I’ll do a couple of errands before you know it at seven o’clock at night you haven’t done the contract that you promised the client you’d have done for that day so so workaholism and pour and time management are a challenge you have to be a little disciplined when you’re running a home office okay let’s talk about resources what are some of the things you need to work from home privacy your home office should be ideally be a dedicated workspace preferably a separate room you should have a room of your own that is just your office and nothing else that’ll become important we talked about the home office deduction by the way because one of the things the IRS looks for we’ll talk about that in a little bit preferably a separate room not part of a room used for other things I know a lot of eBay people who like to work out of their kitchens or you know their basements and stuff like that because that’s where they have their inventory you got to be careful make sure that when you are using part of a room as your home office that you somehow separate that from the rest of the room so use dividers if you ever had a little kid for example you have those those portable things that you used to put to make sure they didn’t go through the doors and stuff like that keep that around don’t throw that away when your kid when your kid out gross is toddler years keep that around use that as a barrier so you can always sell your home offices I know people who use duct tape quite frankly they mark the space off on the floor with duct tape well if you have a linoleum floor be very careful you will never get that crap off it will never happen but I know people who do that they say this is the Home Office you know that side of the that side of the duct tape is the Home Office that’s the best the private living area technology the remember I said one of the main one of the main reasons we can work out of our homes today is because our technology allows us to do that but it won’t unless you use that technology you definitely need at least one desktop computer or laptop smartphone lots and lots back up when you worked for a big company there were people who used to worry about things like back up when you were out of a home office that becomes your worry and backing up you cannot back up enough the stuff that you do your physical by Feder what’s the biggest mistake that people make when they back things up do you back up your your word files and stuff and your Excel spreadsheets and all that right what do you back it on to a CD right or a DVD if it’s video right but then what do you do with the CD after it’s all done you put it right next to your computer right so that way if the house burns down you not only lose the data on your computer and your hard drive but you also lose the backup disk your backup disk should always be in a remote location I use a safe-deposit box I actually have two safe-deposit boxes at a local bank because I’ve been doing this for so long I’ve got literally hundreds and hundreds of backup CDs that I use for my stuff so make sure your backups are all at an off-site location preferably you should have two locations one of the beautiful things about office 365 everybody here use office 365 seriously consider upgrading to office 365 because what it does is whenever you create a document it saves it in two places it saves it in a My Documents folder but it also saves it in the cloud office 365 is microsoft’s cloud-based application and it’s marvelous because what they do is what’s called redundancy when that document is saved in the cloud it saved on at least two different servers in different parts of the United States so whenever you create a document with office 365 using their version of word you not only have your hard copy on the hard disk but you also got two other locations in the cloud back it up to a CD you now have it in four different locations the odds that you will lose that document become almost zero when you use that service seriously it’s a little bit more expensive than the regular office but take a look a good look at it I mean Microsoft I mean they’re as safe as anybody is there’s no such thing as 100% security on the internet we all know that but I mean you know but if they’re hacking into Microsoft we got a lot more serious problems than you losing a document okay space for files library I still have a lot of paper dead trees records unfortunately being a lawyer I cannot throw anything away when they we did our basement they had this little area left over which they were going to wall off and I said no no I’m paying you I will put a wall put a door in there and they said oh you want a wine cellar no I want a storage room for my files okay because that can be added to your home office deduction by the way we’ll talk about that if you have a separate dedicated area for files or a library or books or some like that for that you use in your work you can actually add that to your home office as part of the home office deduction professional telephone coverage this is very important okay if my my ISP the guy that handles my web stuff he’s a great guy I’ve known him for 20 years he’s a personal friend he lives in the suburbs of Los Angeles you know and I love this guy he’s a home-based entrepreneur he’s actually has about 3,000 people whose websites he hosts my only problem with him whenever I have a problem when I call tech support I always hear a baby crying in the background always when I figure I mean again I works out of his house I get that but here’s what I don’t get I’ve been working with this guy for 20 years and every time I call tech support I hear a baby crying in the background is this the same baby how many kids does this guy have I’m kind of wondering about this guy’s he’s running a daycare center or something out of his house too because everything to go it’s been 20 years it’s like 20 years jack you know I’m not his real name you know you’re still having babies man or what’s the story here you’re like 58 years old you know what’s the story with this I just don’t get it it’s always a baby in the back but I don’t man mine because I know mine oh he’s good he’s always very responsive but it just is not a professional image having said that though don’t overdo it I work with a financial consultant I won’t mention locations or names or anything like that I love her to death she’s very good she does a lot of work with some of my clients who are facing bankruptcy issues she’s almost like a debt counselor she helps them work through those kinds of issues my problem with her is exactly the opposite she’s a one-person show she works out of her home but when you call her phone hi you have reached the offices of Jane Doe & Associates for service press 1 for the opfer for firfer marketing press 2 to hire us press 3 and she’s got like 7 things damn it it’s only huh there’s only one person and when what’s worse you can’t just hit the operator and at the very end of the whole thing though she says if you if you if you have for our general mail Brock’s press zero you press zero as she picks up the phone hi it’s Jane what’s wrong with that picture it’s too complicated it’s just her okay I understand she’s got big plans she wants to add people whatever if you got like five or six people if you’re doing a virtual company for example that’s a great way to set up your phone your phone service but if it’s just you you shouldn’t have more than one mailbox I’m sorry you know why should I have to figure out which one is it’s like the lydian that decides like it’s like that what’s that old TV show with money hall the one is at curtain number one door number two door number three which one is he hiding behind I don’t know I don’t have to figure that out to get ahold of you you know if it’s just you you should have one mailbox don’t don’t make your you can by trying to appear bigger than you are you sometimes can have a problem sometimes that’s a good example of that okay marketing materials one of the paper handouts by the way I have a bunch of handouts for those of you who came a little bit late you can grab it on your way out but I gave you a very nice little checklist of some marketing things that you can do for a solo consulting or service business that are very helpful just keep in mind that your website and your LinkedIn profile are paramount importance here that’s the image that you’re presenting to the world don’t scrimp on those things don’t do a template website that looks like everybody else’s website spend some money get it designed properly when you work out at your home you got to really work to convey a professional brand image and your web image becomes a lot more important when you work out of your house maybe a virtual assistant I’m wrestling with this right now I’m thinking seriously of hiring a virtual assistant that’s somebody who works at a remote location who handles my phone coverage and a lot of my admin I’m of two minds about it for a lot of people I think it makes sense but there are two things that concern me a lot of these people are part-timers these are usually women who women I hate to say it but women who have small children living at home and they’re doing this because they can do it in their spare time you know when they’re working around the house make sure they are in it for the long haul and that’s not a problem but make sure that they’re in it for the long haul I don’t want to have to replace this person three times a year I want some stability here I mean I’m going to ask I mean my when I interview a virtual assistant my first question is no health permitting are you going to be around for the next five years are you even still be in this business I want continuity I want people to get to know you I want them to know that you’re the voice of the Law Offices of Clifford RN echo and if I’m not comfortable with that I don’t hire them and so far I haven’t found anybody which is a big issue for me and also make sure that they run their home offices as professionally as you do yours if every time they call they there’s a baby crying in the background that’s good that’s effects that doesn’t affect their professional image it affects yours okay protecting your home office okay this is about insurance there are three kinds of insurance that you should have for your home commercial liability if you are seeing clients in the home you need what we call commercial liability coverage this is slip and fall insurance you know this is what happens when somebody you know comes into your house they slip and fall on the ice okay you are as a homeowner liable for that and there are some homeowners policies that will not cover that on a home office under their umbrella liability policy be careful about that if you have an umbrella policy ask your insurance agent or broker if that covers your home office as well because some policies do not you but if you’re not seeing clients in the home you can probably go a little light on the commercial liability but you do need property casualty insurance law people don’t know this your homeowners policy does not cover a home office if a tree falls and knocks in your roof your homeowners policy will pay for the new roof but all of your lost data your business records and all of that will not be covered the good news is that most homeowners policies have what they call a home office writer it’s an additional 10 20 bucks a year in premiums I always tell people that that’s probably the cheapest home office coverage you can get if you already have a homeowner’s policy and of course you do if you have a mortgage you have a homeowner’s policy because the banks insist on that spend the extra 10 20 bucks get a home office writer to cover your business data your computer any of your business assets that you use in the home errors and omissions that’s malpractice insurance if you if you make a mistake if you foul up and the reason for that is I can something I can tell you as a lawyer believe it or not lawyers hate having to put liens on real estate you know with some of those things we all worry about as home-based entrepreneurs you know I’m going to make a mistake I’m going to get sued they’re going to put a lien in the house but believe it or not it very rarely happens and the reason it very rarely has is because because plaintiffs attorneys would much rather go after a bank account or an insurance policy trying to get a lien on real property is very difficult in most states they’d much rather have an insurance policy so if you have an errors and omissions policy you can rest assured that if you ever do get sued they’re going to go after the insurance policy and fight with your insurance company then I try to put a lien in your house you know a week before you try to sell your house that kind of thing consider maybe maybe and I’m not saying you should do this consider putting your house and your spouse’s name but there are some rules here okay it’s not for everybody if you are if you decide to do this always remember number one you are making a legal transfer this is a legal transaction that you are doing you are putting your house into your spouse’s name and the courts will enforce that so if you ever get divorced at some point you are not only going to be without a spouse you are going to be homeless you’re going to be you know what sitting on an exit of i-95 with a sign saying will do whatever for food okay I don’t want to see any of my clients in a position like that if you are at all doubtful about the strength of your marriage do not do this do not put title to your spread to assets in your spouse’s name and even if you are securing your marriage think twice about it anyway because you never know I could tell your stories about people who come home from work in the middle of the day and they find things that they did they didn’t know what’s going on just let’s not be specific about it but things can happen like that always remember and be careful and the other thing you got to be careful about here if you are putting if you say you’re not married okay if you’re going to put title to your house in somebody else’s name other than your spouse this is very important make sure that that person changes their will so that the asset comes back to you if they died a lot of people forget to do this I had the situation where my very first clients actually was a gentleman he was a single man he lived alone and he had a beautiful house in Westport off of compo beach that was worth about a million and a half dollars and he owned it outright he had the mortgage was paid off it was his house he owned it outright he decided to buy a franchise and he was worried about getting sued and getting the house attached so what if he do know he wasn’t married he was a single man but he had a mother who absolutely adored him so what he did and mom knew about it he put the house into her name they did it hold they did a transfer they deeded the house into her name everything 100% legal 100% buttoned up mom loved it she knew exactly what he was doing she wanted to help him right so there’s only one problem mom was 88 years old what happened a couple of years later she died and the house did not go back to him the house went to him and his five brothers and sisters as joint tenants so he went from owning a hundred percent of the house to only only owning one-sixth of the house and the brothers and sisters did not get along they hated each other that was when he called me and asked me to be his attorney okay I always get the calls after the you know what has hit the fan and we finally got the house back into his name again but it took four years and over two million dollars of his money to do it very simple it whenever you’re transferring title into into something to a house or other property into the name of someone who is not your spouse get them to change their will to put in a specific bequest clause that’s a very simple thing an attorney will no lis charge you maybe a half an hour it’s time to do it it’s a simple clause that says in the event of my untimely death this asset goes back to cliff that’s called a specific bequest the house located whatever one two three main street goes back to cliff that’s all you have with that if he had had that clause and his mother’s will the house would have gone back to him it wouldn’t have gone as part of the general estate to him and his brothers and sisters in equal portions be very very careful about that okay now let’s talk about Zoning about the Zoning cops okay if you are truly invisible you what you won’t have any problems that’s that’s my message if you are truly invisible there’s no way that even your neighbors your next-door neighbor knows that you’re working out of your house you will not have a problem with the zoning cops even if they find out about it you’re probably not going to have a problem because nobody cares you know the kids can play basketball on the street you know you know they don’t have to dodge cars you don’t have eight million cars in your parking lot every day you know you haven’t changed a character of the neighborhood so no one will care and you will not have a problem when you registering a DBA or trade name be careful about using a residential address because what you’re doing there is you’re tipping your hand okay most of us use a trade name you know so for example you know Clifford our Eneco doing business as cliffs antiques that’s a DBA that’s a trade name under the law of Connecticut I have to register that with my town clerk’s office and when I open my bank account by the way in order to take checks that are made out to cliffs antiques I have to show the bank that DBA registration they will not open the account they will open the account for Clifford Aaronic oh because that’s my name I can show them my driver’s license but they will not open the account for cliffs antiques unless I show them that DBA registration if that DBA registration has a home address the town clerk’s office will send you down the corridor to the zoning office to have a chat that’s what’s going to happen make sure you use your UPS private mailbox address whenever you do a DBA or the registration use that business but peal box do not use you’re ready cuz then you’re tipping to the government off to the government authorities the fact that you have a home office that may be illegal all right that’s why you do that for larger businesses some towns offer a home occupation permit some of you may want to by the way from you want to take a picture of this by the way this is one slide I would if you’re going to take pictures of any of my slides this is what I would suggest the Wilton Chamber of Commerce has a Milton Connecticut has a home occupation permit that you can get that’s actually very easy just go to town hall in Wilton I did look at the other towns in Fairfield County and very few towns have this Milton was the only one that I could find that has one but that’s where you can learn you know what their rules are Bridgeport actually has done something very interesting I like Bridgeport zoning regulations for Home Office it’s very rare that you’ll hear an attorney say that but I like what the city of Bridgeport Connecticut has done with Home Office’s what they have done is they’ve recognized that there are different kinds of home offices they actually have two permits they have an administrative review permit for a home office that’s just somebody who’s working out of their house who’s not necessarily running a business there but it’s just working out of their home say as a telecommuter you know for the convenience of their employer they must do business via mail or electronic medium only they cannot do business any other way you can’t see people in the house you can’t use a truck you can’t do anything like that if you think about it that’s make sense right the second type of permit is the special use permit for a home business and there are all kinds of restrictions on ours numbers of visitors numbers of employees I like what Bridgeport has done so much that I basically made it a separate slide take a picture of this one this is what I would suggest you take a picture on this is the spawn the city of Bridgeport Connecticut this is their their rules for a special use permit for a home-based business somebody is actually conducting an entrepreneurial business out of their home and I like the rules because even if you don’t live in the city of Bridgeport Connecticut which most people listening to this video or not they’re good excellent best practices if you follow these best practices you should never have a problem with your local zoning Authority it shouldn’t happen I’ll go down the list very quickly you must not change the residential appearance of your premises or the residential character of your neighborhood no external signage of any kind no neon lights no you know no strobe lights nothing like that but no exterior signage of any kind customers only visit the premises from 7:00 a.m. to 6:00 p.m. no more than eight customers or clients may visit each day no more than two employees other than resident family members okay you want that you want the parking lot covered with cars home office may not occupy more than 50% of the gross floor space you know if your whole home is a business I think you have other issues going on here other than a home office issue retail sale of goods must be entirely ANSYS ancillary to on-site services in Bridgeport there are some people who have like beauty salons out of their home and they can sell like hair supplies and things like that as part of that but they can’t have a separate business selling hair supplies less of course they’re selling on eBay or something like that nobody cares all parking must be on site no street parking has to be on site no exterior storage of goods supplies or materials that can be an issue actually when I back in the early 90s I had a desktop publishing business and I actually used my basement as my warehouse storage space and every once in a while as much as I begged them not to the publishers would send me the books to my home address so they would they would they would drop this pallet of a thousand books in my driveway where it would stay all day my neighbors had a problem with that as you can well tell also true by the way taking 50 heavy boxes of books each one’s weighing about 3040 pounds and bringing them one by one from your driveway down to your basement is a task that none of you should ever have to do at any time in your life so be careful about that if you’re I actually have a client who’s a self-published author who tells me he always wants to make sure the deliveries happen when he’s home because otherwise those books are going to be sitting in his driveway for you know a day or two if he’s traveling and the neighbors will complain if they see that they’ll also steal a lot of your books too you can tell you have a very good view of neighbors in general they really neighbors are 90% of your problem when you have a home-based business no hazardous materials other than the kind you normally have around your house so for example if you have a grill you can have a propane tank I mean no one’s going to care about that no more than one whole business on the premises that that should be common sense but the minute you’re thinking about going public it’s time to get out of the house I think at that point I would start thinking about writing some commercial space if you’re if you’re if you’re gonna be a publicly owned company okay let’s talk about the home office deduction should you take it absolutely there was a time when the home office deduction was an auto trigger that is not the case anymore in the early 2000s the IRS came past some very detailed rules and regulations for home offices but you know so we know what those rules are now we don’t have to worry about the IRS coming down you definitely should the form that you file is form eighty eight twenty nine if you go to irs.gov and go to forms and publications you’ll download the form the instructions of the form are actually very good they’re very clear this is one of the better IRS forms or read the instructions to form eighty eight twenty nine and you’ll know as much as lawyers and accountants know about the home office deduction the IRS did a very good job with that form unlike some of the other things that they’ve done here are the tips okay first of all the first thing I have to do measure your home office accurately I tell people have a contractor do it for you have a contract don’t do it yours because when you do it yourself what do you do you take the yardstick and you kind of go end over end over it you end up with a very imprecise measurement and you always end up cheating yourself you always end up with a home office that’s too small have a contractor they have very specialized measuring tools and the beautiful part is they’ll give you a letter they’ll say I have measured the upstairs right hand spare bedroom at once with three main street and it is exactly one two three point four five six square feet that is when the IRS guy shows up the first thing he does to Autotune home office the first thing he does he pulls out a tape measure being able to hand him that letter saying spare you save yourself mister mister agent this is I have the space professionally measured this is the exact square footage they will accept that okay secondly keep personal stuff out of your office a home office must in order to qualify for the home office deduction the home office has to be used exclusively for business purposes my test for this is very simple if you wouldn’t have it in a corporate office or cubicle do not have it in your home office it’s that simple if you’re thinking about having something in your in your home office and you wouldn’t put it in a real office take it out so a picture of your wife and kids are your spouse and kids absolutely right because you’d have that in office wouldn’t you a little boombox so you listen to music after hours yeah you would have that in the home office a doggie bed no you would have a doggie bed in a real unless of course it is a companion animal we used to call a seeing-eye dog that’s always permitted okay you can have the doggie bed there a crib no okay the kids got to be elsewhere he’d be right outside the door but he cannot be in the office himself okay no inappropriate the first thing the IRS audits looks at is mixed use space they want to be able to prove that you’re not using the space exclusively because then what they do is they disallow the whole deduction so it’s a very simple thing to be to be clear just make sure just ask yourself the question would this be in a real office if the answer is no take it out of your home office don’t leave it there it’s okay to add storage warehouse file and library space so for example I used my basement as file storage that portion of the basement that I use for my files I can add to my home office to make it bigger but I can’t take the whole basement okay so how you solve that problem duct tape very simple your basement nobody cares what it looks like right take some duct tape measure out the space that you’re using for your files your inventory whatever it is you got in your basement and then put the duct tape down and measure off and then have the contractor measure that space as part of their measurement and that’s fine you’re okay because what the I what happens is the IRS audits you they go down the basin they see a pool table they automatically write-off your basement space where if you can say wait a minute that’s a duct but see that duct tape that’s just that area that I’m claiming measure that space now now you’ve got them now you’ve got them at that point you’re not claiming the whole basement when you’re only using a part of the base everybody with me on that it’s a very simple point can you deduct your rented apartment you can you absolutely can although keep in mind the city of Bridgeport does not allow you to use a home office out of a rental location that’s something where I’m not sure that that’s constitutional quite frankly that’s something I would like to see challenged quite frankly but you should be aware that that some municipalities their zoning codes will prohibit you from working out of a rented space but the IRS does not care you can can you deduct somebody else’s home that sounds funny but you’d be surprised in a lot of rural locations you have people who sell on eBay and they don’t really have a big enough basement but their neighbor has a barn so what they do is the neighbors are nice they let them basically they let their neighbor use a part of their barn space to store their inventory but you cannot take a home office deduction for space that is outside of the home what you have to do there is you have to treat it as if it were a storage unit what but if you’re in a situation like that where a neighbor is letting you use part of their property what you do is you have your lawyer draw up a little one-page lease agreement and you pay rent to your neighbor for the use of the space because you can deduct the lease payments it’s just like leasing a storage unit if you have like a Westie storage or something like that you can deduct the rental for that space it’s the same if you’re renting space from a neighbor but you cannot take that space as part of your home office deduction it has to be a lease a lease of a deduction for rent can you deduct out of home expenses such as lawn care believe it or not you cannot there are two things you cannot deduct okay when you’re when you’re checking the home office deduction basically what you’re doing is the way the home office deduction works is you it’s a fraction the numerator the top number of the fraction is the number of square footage of your home office the denominator the bottom number is the total square footage of your home measured from interior wall to interior wall so if your if you have a hundred square feet of home office space and a thousand square feet in your home one hundred divided by a thousand is one tenth or ten percent you can take 10 percent deduct ten percent or if your taxes on just about every household expense that’s why the home office deduction for many home-based entrepreneurs the home office deduction may be the biggest deduction that you take okay that’s why you’re crazy not to take it but there’s some exceptions there are some things you cannot deduct you cannot deduct lawn care or landscaping because that takes place outside the home if you have someone come in and clean your house vas deductible if you have all your utilities you know all of that you can definitely deduct ten percent or whatever your percentage is of that but you cannot deduct lawn or land keeping service landscaping services the other thing you can’t deduct are what is what the IRS calls personal deductions and these can get a little little sloppy so let’s say for example you have someone come in to your house every day to give you a personal massage now if you’re a Hollywood actor or actress you might be able to claim that as a deduction because it relates to your home based business if you’re a Hollywood actor or actress your appearance is everything so I can imagine that name your favorite time Hollywood actor or actress can probably deduct the cost of a personal massage every day you know because it relates to what they do for a living but if you’re a lawyer a personal massage every day is not considered necessary to being a lawyer unlike I certainly use one every day but so that’s something so you will not be able to deduct those kinds of things ask your lawyer ask your accountant for advice and the other thing you want to keep in mind about home office deduction whether if you take the home office deduction you also have the option of depreciating your house for tax purposes taking a depreciation deduction every year I tell my clients not to do it and I would advise you not to do it as well because if you take the depreciation deduction and then you subsequently sell your house to somebody else you have to recap that depreciation deduction you have to pay the IRS a lump sum for it to reimburse them for all the depreciation deductions that you took during the the time that you owned the house that is not true of the other home office deductions but it is true of depreciation so you know if you’re if you’re looking at taking the home office deduction by all means do it but don’t take the depreciation part because that can create problems for you down the road especially if you’re thinking of selling the house in the next year or two you might want to consider not doing that and then just get form eighty eight twenty nine read that is time we didn’t read the instructions and you’ll know more about the home office deduction when you want to know okay where do you need a real office okay how do you know that your home office is getting too big well you won’t have too much of a time worrying about that quite frankly it’s usually pretty obvious when a home office deduction has has kind of reached its limits when you have more than one employee working on-site the more people you have working on-site the harder it is to maintain that invisibility that you want to take if you’ve got ten employees sooner or later your impure neighbors are going to complain and moan about what it is you’re doing when you have to see more than a couple of clients a day if people are sitting on the lawn you know with numbers waiting to see you that is probably a sign that it’s time to get a real office I mean then people going to start complaining all these people sitting on your lawn all day long and let their customers their clients you know when your brand image requires a physical location I mean we all know about a lot of big companies to start out in garages but they didn’t stay there you know when it becomes clear that your brand image depends on having a real location that’s the time to get out of the The Home Office and then last but not least when your spouse or significant other insists that you get out either as part of a divorce or not sooner sooner or later there comes a time where your spouse’s patience will be challenged so that will be so that way you will definitely know when that happens okay all right sooner or later you’ll be working out of a home office unless it’s absolutely necessary to the key points unless it’s absolutely necessary don’t see clients or customers in your home office unless it’s absolutely necessary ninety-five percent of your your legal problems with a home office will disappear one you decide not to see clients in the home whether or not your home office is zoning compliant it probably will not matter as long as you are invisible the key is invisibility that’s the key to success when you have a home office if you qualify for the home office deduction you are crazy not to take it but I would recommend you not to you do not depreciate your home for tax purposes because that creates problems down the road when you sell the house get a really insurance good insurance person to help you get the right coverage by the way not all insurance agents and brokers know about all the various types of home office policies you want somebody who definitely gets that speaks that language and knows the difference between a home office writer which is property casualty and a slip and commercial liability which is slip and fall or umbrella liability you want somebody who knows the difference and then I always like to throw this in this is a question I know you’re dying to ask but none of you will have the courage to ask it so I’m going to answer it for you anyway cliff if I have a home office and especially if I’ve got inventory in the house I’m an eBay seller or an Amazon third-party seller can I deduct my dog as a guard dog I’m sure that question has occurred to you at some point I’m happy to say that I’ve been doing score presentations since 1979 and this was the very first question that I was asked at a the very first score presentation that I did back in 1979 was it was a guy who had a junkyard in upstate New York and he wanted to know he can deduct this dog as a guard dog okay I have done extensive research on this and here are the rules believe it or not there’s a whole set of IRS rules on this believe it or not okay first of all not every dog qualifies certain breeds qualify and certain do not the IRS says that to qualify as a guard dog the breed or mix must have a natural propensity to violence I cannot make this up a natural propensity pitbull yes Pomeranian no size does matter when it comes to dogs if your dog is smaller than your inventory it probably will not call her if your dog is so cute that he’s the first thing that the crooks would take if they broke into your hot premises that probably is not a suitable guard dog cats of any kind do not qualify although I will say that I think you ought to make an exception by this but anybody here have a Yorkie Yorkshire Terrier you know that they are these little rat dogs are about this big you know they’re covered in fur these are mean little SOPs seriously if you have three or four your keys and your basement that is like having a spool of school of piranhas in your swimming pool you know if the IRS agent goes down there you close the door behind them he’ll be stripped to a skeleton in 30 seconds your keys are vicious little dogs I will share with you that I had when I was on high school I had a paper route for seven years 90 private homes they all had dogs six days a week I’ll never got bit only once did I get bit in all those seven years by a Yorkshire Terrier lean little bastards they ought to have a Yorkie exception to that but I don’t think that they do I think size does matter you know but I think but seriously I packing your keys I think will be very convincing to an IRS agent not just one you got have a couple but but that’s okay all right Cass do not qualify under any circumstances now assuming you have a qualifying guard dog okay can you deduct it well you can deduct the expenses related to the dog oh by the way also to the dog has to be with your inventory it has to be in the same physical space so if your inventoried in the basement the dog is chained up in the backyard that does not qualify the dog must be guarding the inventory that makes claddings common sense look he’s got to be in the basement with a chain okay or something like that you know or maybe not a chain you’ll have to work out something there can you deduct the dog the answer is no you can deduct the expenses you can deduct the food the vet bills all of that but you cannot deduct the dog yourself yet you can’t deduct the dog itself what you have to do wait for it you’re not going to believe it what you have to do you have to depreciate the dog over its useful life now what is the useful life of a guard dog you may ask well the IRS has an answer for that as well the answer is it is the average life expectancy of that breed or mix as determined in writing by a local breeder you basically have to go to a local breeder and get them to write a letter saying on my experience this this my is 39% yorky 42% pomeranian 50% people and in my experience this this breed has a life expectancy of 7 to 8 years and you deduct your Dupree take your depreciation deduction over that period of time so that leaves you with one last question which is if the dog dies before its useful life for whatever reason must you recapture the depreciation deduction I actually wrote the IRS a letter years ago asking for an explanation they did not respond but just shows you that even cliff an echo can sometimes be push the IRS to its absolute limit of Tolerance but those are the rules regarding deducting a dog as a guard here’s a pretty good useful rule of thumb if you are slightly afraid of the dog yourself that’s probably a good sign that you got a guard dog okay if a dog is so cute that he’s the first thing that the crooks would steal I pass on taking that deduction I don’t think that that would survive scrutiny on audit and that’s it folks those are the secrets of a successful home office I’ve got more information here in two of my books small business survival guide in the eBay sellers tax and legal answer book I actually have a whole chapter on the home office deduction because virtually all eBay and Amazon sellers take the home office deduction they all work out of their houses so I got I got a lot more detailed information in that book for those of you who are interested and with that I will take questions and answers now know that your dog is clearly qualified as a bird