COTTAGE INDUSTRY - IS IT FOR YOU?

This information on cottage industry is oriented to a product based business.

Generally speaking, cottage industry is a small-scale business conducted in your home using your own equipment. This information on cottage industry is oriented to a product based business. If you produce a product as a sole proprietor business owner, chances are you have a cottage industry. There are things you need to consider to keep your efforts legal and this information is designed to help you with pre-planning and investigation of cottage industry.

There are several different federal, state, county, and city laws that regulate a cottage industry and they may each have different requirements or restrictions dependant upon where you live and the product that you wish to produce. The following list is not all inclusive. It is meant as a guide to get you started in the right direction.

ZONING REQUIREMENTS

Even a home based cottage industry must think about zoning requirements. The first question is: Is your home zoned for a cottage industry?

Your Tax Assessment Number on your property tax bill will lead you to the first information you will need. Do you meet the legal requirements to have a business in your home?

Call the County Department of Resource Management: Planning Division and ask: What is my “Building Zone?” Then check that Zone’s requirements for cottage industry or a home based business (sometimes people use these terms interchangeably ... even though they aren’t exactly the same). A cottage industry in your zone might have requirements for public assess, amount of public assess, parking space, amount of space in your home that you can dedicate to the business, etc.

Generally, it is with the county that you apply for your “home occupation” permit, which will list your restrictions for the zoning in your area.

Do not despair if you do not meet these requirements. There are alternatives such as renting a spot in someone else’s business as your customer contact point or applying for a zoning change.

COTTAGE INDUSTRY BUSINESS LICENSE

A certified public account can help you determine what your license requirements might be. Don’t be put off by calling a CPA – they are the best friend owners of a cottage industry can have and contrary to some opinions, they are not priced out of our reach.  This person can also help you set up your book keeping system dependant upon whether you wish to claim that you are a ‘hobby business’ or a business. It is to your advantage to apply for a Fictitious Name Statement from the County Clerks Office for your cottage industry. This is inexpensive and you will need this if you open a Business Bank Account or have a business phone. If your product is sold retail, you may also need a “Sellers Permit” from the State Department of Equalization.

COTTAGE INDUSTRY CONSIDERATIONS

There are so many things to take into consideration when setting up your cottage industry. Like I said above, each county/city/state government has there own set of guidelines. Here are some that Humboldt County, California publishes that may give you something to think about before you ask your zoning office for a permit: http://www.co.humboldt.ca.us/planning/forms/pdf/cottage.pdf

WANT TO KNOW MORE?

This is just a brief overview of things to consider when you decide to have a cottage industry in knitting or any hobby where you have a product for sale.  I’ve learned a lot about how to start and operate a cottage industry; and I’ve helped others over some bumpy spots.  If you have a question, maybe I can answer it for you – just email me and I’ll try even though I’m not a cottage industry expert!

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