Home Business vs. Commercial Location: Pros & Cons

In this post, you’ll find a collection of tips, insights, and resources on the topic of running a business from home as opposed to locating your business in a commercial location. Before you get to the resource section, here are a few considerations we’d like to share.

More than 60% of small businesses in the U.S. are run from home, according to 2024 Small Business Administration Office of Advocacy data — so if you’re weighing this decision, you’re in the majority, not the exception.

Naturally, there are pros and cons to running a business from home versus a commercial location. Let’s have a look at a few of them.

Pros

Savings:

When you have a commercial location, there are many expenses associated with running a business that you avoid when you run your business from home. You can also take tax deductions — such as a share of your utility bills, mortgage interest, rent, insurance, and repairs — for the part of the house used for your business. This deduction applies to self-employed business owners, not to employees who simply work remotely for a company.

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Commute Time:

When you run your business from home, you save on commute time, and you can work on your business whenever you have a spare moment. If you have to finish a project late, you don’t have to worry about getting home on time — you’re already there.

Family:

If you’re caring for family members, running a home business keeps you nearby. You can still operate your business, especially when you have small kids or an elderly family member who needs attention during the day.

Part-Time Operation:

Depending on the type of business, you can run it part-time, and you can even keep a job while running your business after work.

Perfect Setup For An Online Operation:

A home-based business is a natural fit for anything that’s 100% online. Whether you’re running an e-commerce site, a web design business, or a blog supported by ad revenue, a home setup works well if you don’t need to see customers in person. Consulting, freelancing, and many other service-based businesses are also a good fit.

Plenty of businesses start at home. Once they grow and become successful, the owner can then decide whether to move into a commercial location.

Cons

Zoning Restrictions:

There are restrictions on the types of products and services you can offer as a home-based business, and every city or county has its own rules. Most municipalities require a home occupation permit before you can legally run a business from your house, and the requirements shift depending on whether customers come to your home. Portland, for example, doesn’t require a permit if customers never visit, but does require one — with limits on employees and daily customer visits — if they do. Check with your local municipality for the specific requirements in your area.

Food businesses face an added layer of rules. For example, opening a bakery from home is possible in every state under some form of cottage food law, but the rules vary widely. Some states — including Wyoming, Utah, Montana, and North Dakota — allow home bakers to sell with very little regulation. Most others require a permit or registration, a food handler’s certificate, specific labeling, and a cap on how much you can sell each year. A fully separate kitchen usually isn’t required to get started — most states let you produce cottage food in your existing home kitchen under the permit or registration process.

Walk-in Traffic:

If your business depends on walk-in traffic — a retail shop, for example — you’ll get far less foot traffic at a home address than you would in a mall or shopping district. Location and walk-in traffic are worth weighing carefully before you set up shop at home.

Perception:

Some customers may see a business in a commercial location as more professional than one run out of a home. This depends heavily on your type of business and what you’re selling, but it’s worth considering.

Space Restrictions:

Think about how much space your business actually needs. If you don’t have the room, you’ll either need to make room or look at a commercial location instead.

Expansion:

If your business grows enough, you may outgrow your home and need to move to a commercial location.

Always Around Work:

It can be harder to separate your work life from your personal life when your office is also your living room. You may find yourself working more than you planned to.

Work Style:

Working from home can test your discipline — it’s easy to lose focus to the TV, a nap, or other distractions that have nothing to do with your business. Setting clear boundaries that work for you makes a real difference.

Key Points and Facts About Running a Business From Home

More than 60% of small businesses in the U.S. are home-based, according to 2024 SBA Office of Advocacy data.
Home businesses can deduct a portion of mortgage interest, rent, utilities, insurance, and repairs — but only if you’re self-employed, not a remote employee.
Most cities require a home occupation permit, and the rules differ depending on whether customers visit your home.
Every state now has a cottage food law for home bakers and food makers, but sales caps and requirements vary widely by state.
A home business is often the lower-cost, lower-risk way to start, with the option to move to a commercial location later if you grow.

Action Steps for Deciding Between a Home Business and a Commercial Location

Check Your Local Rules First

Contact your local zoning or planning department to find out if a home occupation permit is required for your type of business.
If you’re selling food, look up your state’s cottage food law to see the sales cap, labeling rules, and permit requirements.

Weigh the Financial Trade-offs

Talk to a tax professional about the home office deduction and whether the simplified or actual-expense method makes more sense for your situation.
Compare your estimated savings from skipping rent and commuting against the potential downside of lower walk-in traffic or a less “professional” appearance.

Set Boundaries Before You Start

Decide on set business hours and a dedicated workspace, even if it’s just a corner of a room, so work doesn’t bleed into every hour of the day.
Revisit the decision every year or two — many businesses that start at home move to a commercial space once they outgrow it.

Checklist for Starting a Home-Based Business

Confirm zoning and permits
- Check whether a home occupation permit is required.
- Ask about limits on customer visits, employees, and signage.
Check food-specific rules (if applicable)
- Look up your state’s cottage food law.
- Note any sales cap and labeling requirements.
Set up your tax deductions
- Measure the square footage of your dedicated business space.
- Decide between the simplified and actual-expense deduction methods.
Plan for space and boundaries
- Set up a space used only for business.
- Set working hours and stick to them.
Revisit the decision periodically
- Reassess once a year whether a commercial location makes more sense.

FAQ: Running a Business From Home

Can I really deduct my mortgage interest and utilities for a home business?

Yes, if you’re self-employed and use part of your home regularly and exclusively for business, you can deduct a portion of mortgage interest, rent, utilities, insurance, and repairs. This deduction isn’t available to W-2 employees, even if they work from home full-time.

Do I need a permit to run a business from my house?

Most cities require some form of home occupation permit, though the exact rules depend on whether customers or employees come to your home. Check with your local zoning or planning department for the specifics in your area.

Can I sell baked goods from my home kitchen?

In most states, yes — every state now has a cottage food law that allows home food sales under a permit or registration system with a sales cap. A handful of states have very light rules, while most others require a permit, labeling, and a cap on annual sales.

What kind of business is the best fit for working from home?

Businesses that don’t rely on walk-in customers tend to work best — think e-commerce, consulting, freelancing, and other online or service-based work.

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