Is It Legal to Start a Business Out of My Apartment?

Home-based businesses are on the rise, and if you want to start one out of your apartment, learn the legalities.

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The apartment entrepreneur: If you aren’t one, you probably know one. But is it legal to start a business out of an apartment?

Everybody has a friend writing a screenplay or music, consulting, or trying to turn a hobby into a moneymaker…all from the comfort of residential rental property.  This is not to mention the boom of tech start-ups begun out of living rooms and garages not only in Silicon Valley, but all across the United States.

Operating your home-based business under the thumb of a landlord is not always a good thing, however. And on top of possible restrictions in the lease, there may be actual zoning laws that forbid your endeavor.

The first thing you should do is take a look at the situation. If you haven’t started your business yet, there are some resources you can tap to see if your business will be on the up and up before you spend a lot of time and effort just to see it go to waste.

First, check your lease.

Every lease sets out the do’s and don’ts for the lessee. That’s you. Sometimes these restrictions are set out in general rules that pertain to the building (often called “Rules and Regulations”). If your lease is silent, that doesn’t mean you’re in the clear. If your business has the potential to be disturbing to other tenants (teaching drum lessons comes to mind…), it may violate other aspects of the lease.

Another thing: If you’re renting a condo unit from the owner, condominium CCRs (Covenants Codes and Restrictions) are often more restrictive on home-based businesses than apartments.

To be safe, talk to your landlord or the building owner and see if you can get them to be reasonable. Provide assurances that once it gets to a certain size or profitability, you will rent separate space. Note that if the property is managed by a conglomerate — which is often the case in larger properties — it will be difficult to get them to waive this restriction.

Next, check all the codes.

Your business plans might get into trouble in three areas: zoning laws, home-based business ordinances, and licensing.

The stated purpose of zoning is to separate incompatible land uses like commercial, residential, agricultural, and industrial. In reality, zoning is a permitting system designed to prevent new development from causing harm to existing adjacent land use. You can check with your local land use department or county clerk to see what your property is zoned as and what that means for you.

Residential, commercial, and mixed-uses are common and can take many forms.  If you have the time and want to put in the effort, you can request a waiver — often called a “variance” — to allow for an exception to a zoning restriction. Dealing with local government can often be time-consuming and difficult. Many find that it’s easier to move to an area that has pre-approval for mixed or commercial uses.

If your local area has an ordinance that covers home-based businesses, take a look at it to make sure that your plans are acceptable. These ordinances can vary widely, but most are logical and prevent you from running a commercial enterprise that would be damaging to the area where you live. Also, these ordinances often limit the number of employees a home-based business can have.

You should take a trip to your city hall and check out what business licenses you need, if any. Our business license report can help with this. Failing to get a license can result in fines and penalties. Even if you aren’t required to get a license, many municipalities require registration, This is less of a difficult process, but equally advised.

Do you need to move?

The last thing you want is to get your business shut down over a technicality like a home-based business license, but sometimes you can’t find an acceptable legal solution. But breaking or violating your lease can result in serious legal and financial consequences. If you’ve reached a dead-end in your search for answers, seek the counsel of an experienced property or contracts lawyer.

Of course, if you haven’t taken the step of starting your apartment-based business yet, then you are in a much better position.

Taking the steps above can go a long way to ensure that once you start your company, you won’t be interrupted with distractions that could shut down your dream.

Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional in your state.

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