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Canadian Home-based Businesses: Legal or Not?

Written by Posted On Tuesday, 12 June 2001 00:00

Canadians operate more than 2.5 million illegal businesses because they operate businesses from their homes without the appropriate zoning for commercial ventures. Most municipalities restrict the operation of businesses from residential dwellings to small transitional zones along major routes.

One of the first national surveys of home-based businesses, Home Enterprise: Canadians and Home-Based Work, prepared by Barbara Orser and Mary Foster -- revealed that almost 1 in 4 Canadian households were involved in work carried out at home and the number keeps growing.

This study also stated that 40 percent of home-based business (HBB) owners overlooked the municipal by-laws that regulate the legality of their selected business location -- their own home.

This trend continues according to municipal officers. HBB owners intent on operating a venture, particularly one that will not have the public knocking at their door, do not normally apply for municipal permits.

"It's my house and since I make the mortgage payments, I can do what I like within these walls," stated one Ontario HBB owner, who on learning how zoning by-laws work, asked to remain anonymous.

The attitude of this HBB owner mirrors that of most home owners, but that does not make them right.

How Zoning Bylaws Work

Zoning by-laws are municipal codes that define the uses of property in detail and divide the municipality into zones: residential, commercial and industrial. These by-laws restrict what can and cannot be done, including the type of activity, size of buildings, distance from the building to the street (setback), parking, the amount of traffic and the size and type of outdoor signage. Most residential zoning does not allow a business to exist in a family dwelling.

Municipalities enforce zoning by-laws on a complaint basis: if a neighbour complains, the by-law will probably be enforced. If no one complains, nothing will be done unless the infringement is blatant. For example, operating an auto repair business from a suburban residential garage may not escape by-law enforcement. Causing serious parking problems for the neighbourhood will probably also bring a HBB into disfavour with by-law enforcers.

To complicate matters further, many HBBs do not "fit" existing zoning by-laws. Medical clinics and daycare services are allowable home activities in many residential areas. However, other compatible businesses, for example lifestyle counselling, may be prohibited merely because they are so new that no specific rulings have been made.

More and more communities, especially those in rural areas across Canada, aggressively work to encourage and retain small business -- that's businesses with less than 50 employees by the federal government's definition. In spite of growing support for small business, zoning by-laws in most Canadian municipalities place restrictions on the running of businesses in residential areas.

Tips for legitimate HBBs

If you are contemplating a HBB, it may be wise to check out zoning restrictions by contacting the local municipal officials before you sink a lot of money into your home office. You may feel more comfortable making an anonymous inquiry first to test the waters without tipping your hand.

Rather than operating a commercial venture with high public traffic, a quieter HBB, which will not unduly upset the neighbours, may be a better choice if working from home is an important part of your plans.

If your business will seriously violate local by-laws and upset neighbours in the process, one option may be to design an incubator phase for your venture that could be run from your home until the business is able to support the higher overheads of an external location.

An executive office centre may offer an alternative solution. You can use their facilities on a fee-for-service basis for client meetings and then get the work done in your home office. This arrangement can also include the use of their business address, thus taking the spotlight off your home and enhancing security.

The Future of HBB

Subdivisions and work/live condominium highrises built to include home offices designed for more than handling the family accounting are setting precedents for home-based business zoning.

The Internet and wireless technology have transformed "home" into the most sought-after business location. Increasing numbers of Canadians will retire from corporate life to begin their new "unretirement" and operate a business from home out of interest or necessity.

As HBB become acknowledged and regulated, they will also be open to taxation. The next step may be municipal taxation of home-based businesses. Or, perhaps properties with a HBB would get a break on residential realty taxes that mirrors the provincial government's treatment of more traditional commercial ventures.

For more articles by P.J. Wade, please press here .

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PJ Wade

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