House bound
Rather than seek another full-time gig working for someone else, like many people who were laid off during the economy's steep decline in the early part of the decade, Leah Beth Mills decided to start her own business. Small on funds but confident that she'd be able to succeed, she based the business out of her home in Farmingville.

"I love what I do," said the former administrative assistant for a school superintendent and owner of Mills Business Support Services. "I love the variety of not being in one place the whole time." And since she sets her own schedule, Mills has the flexibility to take several two-week vacations a year, tailoring her hours to accommodate additional clients when needed.

She now provides on-site administrative services for two of her clients but conducts the rest of her work from home.

Across the United States, 53 percent of all small businesses are home-based, according to a November study by the U.S. Small Business Administration's Office of Advocacy. That majority may be even bigger on Long Island, said Mark Wan, a business advisor at the New York State Small Business Development Center at Farmingdale State University. He estimates that home businesses on Long Island make up somewhere from 60 to 65 percent of all small businesses based here. That's in line with the percentage of small businesses in service-related industries across the country (60 percent), according to the Advocacy report, "The Small Business Economy 2004."

"It's the wave of the future," said Deborah Capone, who runs As Simple As That, a publishing and media company based in her Montauk home that specializes in adoption, multiracial families and diversity topics. She produces books and calendars for children, and Webcasts that feature well-known adoption experts for adults. Though a part-time assistant works alongside her, the rest of Capone's team is virtual. The featured experts during the live Webcasts, she suspects, are "probably sitting in their home offices too."

"I'm never leaving the home office, at least not on a full-time basis," she said.

With a dearth of data or tracking studies on home-based businesses, it's difficult to gauge their growth, an SBA spokesman said. "Up until 2000, home-based businesses were seen as sources for supplemental rather than primary incomes, according to SBA research," the spokesman said.

But experts say corporate layoffs have played a large role in the growth of home businesses. Armed with severance packages and time, many entrepreneurs start at home to nurture their ventures.

In fact, the 2004 Advocacy study found that home-based businesses serve as incubators that hatch larger companies, such as in the case of Bridgette Nicolini's company, RacoonWeb, which designs Web site and print publications. Nicolini, who started her company after getting laid off in 2001, subcontracts work to other home-based businesses and takes advantage of technology by showing proofs online to clients. Now she's expanding into e-commerce, helping clients start businesses on eBay. Even if she takes on commercial space as she builds her company, she doesn't plan to give up her home office anytime soon. "I've gotten to a point where I have a formula," she said. "I love to have the flexibility."

Like Nicolini, many people who operate home-based businesses start on a part-time basis, Wan said.

"The most cautious, and sometimes most prudent, owners tend to watch for growth signals before leaving their jobs and/or shouldering the added overhead associated with moving into formal office space," Wan noted. Such signals, he added, include signing a major contract, experiencing encouraging sales growth or handling a work volume that "overflows the home office."

Still, there are regulatory barriers to growing home-based businesses, including Internal Revenue Service rules on deductions and local zoning laws, the Advocacy study found.

For instance, zoning laws may prevent home-based businesses from bringing customers and employees to the home, said Frank L. Amoroso, a partner at Nixon Peabody, a law firm with offices in Garden City. "Other homeowners would have concerns such as increased traffic, odd hours of operation, signage and conditions that could detract from the residential character of an area. Additionally, such comings and goings can erode the value of existing private homes. Internet mail-order businesses and other companies that don't have a regular flow of customers or employees are most likely to avoid zoning restrictions, Amoroso said.

Home-based owners have a host of resources to draw from when it comes to regulation compliance, Wan noted. In addition to SBDC, he recommends SCORE, which offers free business advice; the U.S. Census Bureau, which offers valuable data that can be used to assess growth, and the IRS, which offers guidelines for owners.

"Specifically, IRS Publications 334, 535, 544, 587, 926 and 946 are ones that provide the necessary information on proper small business tax reporting, business expenses, reporting assets, business use of the home, household employers and depreciation" respectively, he said. He also recommended Publication 20 from the New York State Department of Taxation and Finance, presenting guidelines for doing business in the state. Still, he recommends seeking the advice of an accountant.

Home-based business owners might plot their course unaware of the guidelines and restrictions, but Capone said she's mindful of the system.

"I have a very good accountant," she said. "I'm conservative with write-offs and follow the rules carefully."

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