Running a home based business can be such a great thing, but there are too many people who have this misconception that it is all candy and roses without any real pitfalls. The truth is that there are pitfalls and those pitfalls can make or break you if you’re not aware of what they are and how to stop them when they occur.

So here are some pitfalls that you may run into and the ways in which you can avoid them:

• Many individuals working at home find that the world believes they have it made. This means friends and family may not respect work time. It seems as if all of a sudden the world demands your attention even more because you work at home. So lay down the law to begin with. Tell them who the boss is (because you are) and explain that you cannot make a living if they don’t respect the times you have set aside.

• Battling distractions is like literally fighting a war. Actually, it is a war within yourself. This means not putting a stereo system or a TV in your office. You might think you have enough time to watch that movie and get your work done, but you might be quite surprised that these little things can really eat into your day. The next thing you know, you’ve been sitting in your office for 12 hours, feeling like you’ve accomplished very little.

• When you are working, it can be hard to know when to stop. Many individuals keep going and going so that they can get their work done. But what this does is take away that family time, causes you to become overworked, and may even make you lose your mind a little.

Don’t get too confident about what you are doing. Being self-employed means a lot of uncertainty. Don’t think you have the perfect business formula that is going to keep the revenue coming in consistently. You must strive to keep growing your business so that you can keep that income coming in. Some months are more profitable than others, so be careful with your money.

So take these things into consideration so that you don’t tank your business as soon as you get it started. Make sure you evaluate all the distractions a home business faces and proceed with caution, after all, you livelihood depends on it!

When you start a business, it is very important that you set up the proper legal structure for what you are doing. If you don’t, then you might find yourself sailing in the wrong boat. When you are sailing in the wrong boat, it is somewhat of a challenge to make your way to the right one.

So let us look at the different types of business legal structures that exist and what they are:

• Sole proprietorship – This is the simplest and most common of all of the legal structures. This is because this is a business that is owned by a single person and that person has unlimited liability. A person who provides services to another is a sole proprietor unless they decide to set it up as something else. So if you’re a contract sign dancer for restaurants and retail stores, you’re a sole proprietor.

• Partnerships – This is when two people decide to go into business together to make a profit. Each person owns a portion of the business and they also own whatever profit or loss that is made. So make sure you are going into business with someone who is in agreement or else you could see some trouble looming ahead. Some husbands and wives go into business in this way.

• Corporations – A corporation is set up through your state and your liabilities are limited. This means you are not personally liable for everything if trouble occurs. You do not become individually responsible for damages like you would through a sole proprietorship or a partnership. LLCs and S Corps are a part of this category. A corporation is considered a separate entity.

But wait. We need to look at this LLC and S Corp thing a little bit better. First of all, LLC stands for Limited Liability Corporation. The above definition more or less covers that. Your liabilities are limited. But what is an S Corp? Well, an S Corp is a corporation that is taxed under Subchapter S of the IRS’s Chapter 1. In other words, they do not pay income tax. Instead, they take income or losses and divide it amongst their shareholders. The shareholders then report the income or loss when it is time for them to file their taxes. So yes, the shareholders are fitting the bill.

So whichever one of these categories you fit in, it is important that you set yourself up accordingly. That way you can be taxed correctly, you will be held liable in the correct situations, and you are legally set up to do business the way you need to.

What exactly is a Seller’s Permit? Sometimes referred to as a Sales Tax License or Resale License this is simply a legal permit to sell taxable merchandise. As a seller’s permit holder, you agree to collect and remit sales tax to the Franchise Tax Board in your specific state. You will need to obtain a sellers permit if you plan on purchasing merchandise on a wholesale level, as most suppliers will require that your license be on file. The license tells the wholesale supplier that you are engaged in reselling merchandise and collecting the appropriate amount of sales tax as required by the Franchise Tax board for your state.

Anyone engaged in retailing merchandise must apply for a state resale license with the State board of Equalization. The process consist of filling out an application offering information about your business. The issuance of your license can take up to two weeks after you application has been submitted.

An application for a resale license will contain all the information you will need to comply with collecting and distributing sales tax for the items you retail in your state. You must collect sales tax for those items which are purchased in the same state your business resides in. For example, an apparel retailer who operates in California must charge sales tax for any purchases or shipment of merchandise (on a retail level) in the state of California. Please consult the Franchise Tax Board or your accountant for retail sales across state lines.

Most wholesale suppliers will offer the opportunity to open a credit account, which will give you the option to order merchandise and pay with flexible terms. Unlike using a credit card, the supplier extends the credit to your business.

Many wholesale suppliers will extend credit offering, “Net 30”, which simply means payment in full is expected 30 days after merchandise is delivered. Often, a wholesale supplier will reward the buyer with additional terms if an invoice is paid in full within a shorter time frame. For example, 2% 10, net 30 would give you, the buyer, a 2% discount if if your payment is received within 10 days of the delivery of your purchase. Each wholesale supplier who extends in-house credit offers different terms, so make sure you understand the terms under your account before buying.

You must apply for a supplier credit accounts often by faxing in a credit application. Your wholesale supplier will offer an application asking some basic information including, but not limited to:

1. Business Name/Address/Phone
2. EIN (Employer Identification Number) or Social Security Number (Sole Proprietors)
3. Expected purchasing volume monthly/annually
4. References from other wholesale suppliers – Who have you purchased from?
5. Signature authorizing the supplier to run your credit report

Once you have faxed in your application expect up to seven to ten days for approval and account set up. You will be given an account spending limit, which will be reviewed periodically by your supplier and possibly increased based upon your historical ability to meet account terms. Once your credit accounts are set up make sure to protect the power of business credit by paying your invoices on time and early if possible.