Expanding Your Home Based Business

We ran our business out of our home for the first six years. We charged our corporation $200 per month for rent of a room and storage space for products. Initially we had enough room to store our products and supplies, later we converted our garage by adding shelves and parked our cars outside. By the end of the fifth year our garage had pallets on the floor and we had products stacked almost to the ceiling and from wall to wall. We stayed small in the beginning and gained an advantage over the competition by using our home. I would highly recommend starting out this way.

We eventually had to make a choice about buying a warehouse if our business was to grow out of a home based business and to the next level. We initially thought it would be great to have a house with a large outbuilding for storage of our products. We looked at hundreds of homes and also considered building. We weighed the pros and cons and decided that our business would be limited if we continued out of a home based location. If we moved our home and business to a rural area there were weight restrictions imposed on the roads during the winter and spring. This meant that semi-trucks could not deliver products to us during that time. This would not work.

We had paid off our home several years earlier. We paid our 30 year mortgage off in six years. While we ran the business out of the home virtually every penny I made in my "real" job as a federal agent went toward eliminating our debt. Our goal was simple, pay everything off and then quit my real job and enjoy our business together. Since our home was paid for we decided that we did not want to start a new home mortgage so we stayed where we were at.

We started looking for a place to rent locally. We soon found that rent on a building would cost our company well over $25,000 a year. At the same time we found a new development that was selling office warehouse condos. We met with the developer and decided to buy the office warehouse condo through a Limited Liability Corporation (LLC) that we created. The warehouse was 2,550 square feet in size, it had high ceilings to add pallet shelving, and it had a side loading dock, and had a small office in the front of it. We had to invest 20% down into our LLC to finance the purchase through the bank. The key to this warehouse is it had a loading dock to load and unload semi-trucks. You should think about this as you begin to expand. If there is a possibility that you may need a loading dock make sure you buy a place with one. I am glad I did. We could have saved $15,000 on the purchase price by buying an office condo without a loading dock but it would have been a real mistake. Unloading trucks by hand would be a real pain.

Why did we create a LLC to buy the warehouse? The LLC owns the building and in the eyes of the law it creates a "legal person" separate from us as individuals. If there was an accident where someone got injured on the property and the person decided to pursue the owner through a law suit they could only go after the LLC's assets, not ours. Our business corporation rents the warehouse from the LLC. At the end of the year if the LLC has profits or losses we claim the losses on our personal taxes as shareholders of the company.