Setting up a home business can seem like a dream come true – cutting down on commute times, saving on office rent and having more flexibility in the working day. With the government’s manifesto pledges to grow small business by facilitating access to public contracts, there is a renewed focus on SME-led growth.
But before you roll out the welcome mat for clients, there are some important legal considerations you must address. Here’s a guide to getting your home business off the ground legally, so you can avoid any surprises down the line.
Initial considerations
At very early stage, you may want to consider how you want to structure your budding business idea – the type of business you want to run, its needs and scope, and what structure the business should have.
If you plan on starting your business as a company, have a look at our Starting a company toolkit to provide you with a helpful guide through the necessary administrative steps. Our Q&A on starting a company can help you answer any difficult questions. As part of this, you may want to pitch your business to potential investors (or a bank): have a look at our business plan checklist to help you through the steps you might consider for the perfect pitch.
As an alternative to a company structure, and if there is more than one person involved in the business, you might consider a partnership arrangement. Our Q&A on starting a business partnership has further guidance.
If you plan on starting a business with an online presence, our Starting an online business toolkit is a handy resource to help you through this process.
Step 1: Get permission – planning and building regulations
If you plan to run your business from home, the first step is determining whether you need permission. You might not need formal approval if you’re simply using a desk in a quiet corner of your home, but there are exceptions.
For example, if you plan to make structural changes to your home or if your business will significantly alter the way your property is used (say, turning a significant part of your house into an office or having customers regularly coming to your premises), you may need planning permission. See our Q&A here for more on planning permission.
If you live in a rented or mortgaged property, you may also need approval from your landlord or mortgage lender. See our Q&A here for more detail on what type of alterations might require approval.
Step 2: Check your insurance
Insurance is another essential step in setting up a home business. You’ll want to ensure that both your home and business are adequately covered. Standard home insurance typically doesn’t cover business-related losses, so make sure to inform your insurer about your new business activities and adjust your policy if necessary.
If you’re seeing clients or handling products, public liability insurance is a must. You’ll also want to think about professional indemnity insurance, especially if you’re offering services or advice. See our Q&A here for more.
Step 3: Health and safety requirements
Even if you’re running a small home business, you still have health and safety responsibilities. This is true whether you’re working alone or employing staff. You’ll need to carry out risk assessments and make sure your business meets fire safety regulations. If you have five or more staff, it is a legal requirement that you have a risk assessment in writing.
See our Annual action plan (Health and Safety) for an easy-to-use guide to compliance with safety regulations.
Step 4: Special licences for certain activities
Running a business from home isn’t just about the structure of your property – certain types of business may require special licences. If you’re handling food, playing music or selling alcohol, for example, you’ll need the appropriate licences to operate legally. You can check what types of business activity may need the specific requirements in our Q&A here.
Step 6: Keep your neighbours in mind
Lastly, consider how your business might impact your neighbours. Even if you’ve taken all the necessary legal steps, your neighbours may be affected by your business – through noise or deliveries – and may make a complaint. See our Q&A here for more on what to do if you receive a complaint about your home business
Final thoughts
Like any business, running a home business can be personally rewarding and financially lucrative, though is not without its challenges. Our detailed guidance and document service to have all the tools you need to set up a successful home business.
The content in this article is up to date at the date of publishing. The information provided is intended only for information purposes, and is not for the purpose of providing legal advice. Sparqa Legal’s Terms of Use apply.
Rahul joined Sparqa in 2025 from the Commercial Court, where he served as a Judicial Assistant. He has active interests in commercial, corporate and employment developments which he pursues alongside teaching undergraduate law.