The Australian Bureau of Statistics Media Release shows that 40.6% of employed Australians primarily work from home. With technological advancements providing greater flexibility to workers, traditional workplaces are decreasing in popularity.
And that brings us to the burning question —Is it possible to run a business from your apartment? And if so, is it legit?
It’s one thing to work from home a few days a week, but what if you own your own business? In recent times, a large number of businesses are primarily operating online in an effort to reduce costs. The type of property you live in is an important factor to consider when running your home-based business.
In this article, we explain whether it’s legal to run a business from your apartment and the factors that will determine whether it’s legal or not.
Read along!
Can You Legally Run a Business From Your Apartment?
In general, it is legal for you to run a business from your apartment. However, running a business from your apartment can be illegal in some instances. Several key factors will determine whether the business you run from your apartment is legal.
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6 Key Factors That Will Determine Whether It Is Legal To Run A Business From Your Apartment
Body Corporate & Strata Laws
Although running a business from an apartment is not strictly illegal, you should be aware of strata by-laws. In NSW, by-laws refer to the rules all individuals who live in a strata scheme are required to follow. Strata schemes can include apartment complexes or buildings. In most cases, by-laws will prohibit any business from being conducted on the premises except for the resident manager’s business.
Generally, by-laws are designed to maintain a peaceful living environment and prevent inconvenience to others in the apartment building. However, you should be aware that by-laws can be changed. Furthermore, you can also request a new by-law. To request a by-law to be created or changed, you’ll be required to submit a motion.
For a by-law to be successfully changed, you’ll require a special resolution by the owners corporation, and this can be difficult as 25% of the votes during the special resolution can’t be opposed to the by-law.
However, you can run a business from your apartment if you can establish that your business activities won’t cause inconvenience to other apartment building tenants. You should be aware of the distinction between what’s permitted under by-laws and what will be excused on the basis that it’s just and equitable to allow the conduct to continue.
Ownership versus leasing
Another primary factor that’ll determine whether you can run a business from your apartment is whether you own or rent the apartment you intend to operate your business in. If you own your apartment, you must check whether there are any covenants or restrictions on the use of land in your contract of sale.
Contrastingly, if you’re running your business from a rental property, you should check your lease agreement to see whether there are any contractual restrictions or obligations between you and your landlord.
Type of Business
The nature of business is rapidly changing, and with this change, there’s a demand for different untapped markets and services. In a dynamic professional and consumer landscape, your business may have to evolve. This will affect the extent to which you can conduct business from your apartment.
If your business is primarily online, you’ll have fewer restrictions. However, if your business relies on regular interactions with clients and other business activities which may interfere with the common areas of your apartment building, your business may be negatively impacted.
If you’re yet to create or purchase your own business, you should create a business plan to assess what’ll be required for it to succeed. If you currently own a business and are in a position where property restrictions are limiting your growth, you should consider leasing a commercial space.
Registrations, Permits & Licences
After you have received permission from your body corporate or landlord to run a business from your apartment, you will need to address any restrictions resulting from the registration and licensing of your home-based business.
For some businesses, there are requirements regarding registrations and licences. Some of these registrations and licences will be subject to specific property requirements. It’s important to identify any potential legal breaches.
Your business may need to have certain registrations, permits and licenses by law. The factors that will determine the registrations and license your business needs include the following:
- The business structure you use, for example, partnership, company or sole trader
- The location of your business
- Your business’s sector and industry
- Whether your business has employees
- What type of business you run
You should also be aware that your business may require specific licenses and permits to conduct certain activities legally. If you fail to obtain the correct permits and licenses your business will face penalties and fines.
Tax
There are also certain tax and insurance considerations you will need to make when running a business from your apartment.
The Australian Taxation Office outlines the tax obligations for businesses that are operating from a property, including apartments. They include the following:
- Your tax return needs to include rental income
- Deductions can be claimed on certain property expenses
- In the event you sell the property, any capital gains will be subject to capital gains tax
- GST obligations and entitlements may be applicable
In relation to the tax obligations you have for your business, you could also be required to register for the following:
- Pay as you go (PAYG) withholding
- Australian Business Number (ABN)
- Fringe Benefits Tax (FBT)
- Goods and Services Tax (GST)
- Tax File Number (TFN)
Insurance
Furthermore, you may be required to have an insurance policy for your small business even if it’s being operated from your home. The Australian Government Business states that your business could need insurance because it’s required under law or as a result of your business interacting with others.
The insurance policies your business will most likely require include the following:
- Workers’ compensation insurance if you’re employing individuals
- Public liability insurance if a third party is injured due to your business activities
- Product liability insurance
- Professional indemnity insurance
Conclusion
Ultimately, the extent to which you can conduct business from your apartment will be determined by the factors discussed in this article.
These factors are crucial to consider before you start running your business. Running your business from your apartment will help you minimises expenses and provide you with flexibility in your work schedule.
If you’re still feeling unsure about how to run a business from your apartment, you should hire a lawyer for legal advice to make sure you’re legally compliant.
