Is your start-up news website legal?

Is your start-up news website legal?

That might seem like an absurd question, especially for readers in the United States, where the First Amendment protects the freedom of the press. How can a news website be illegal?

Well, while the First Amendment protects freedom of the press, plenty of other federal, state and local legislation regulates the conduct of business. And the First Amendment doesn’t give news publishers a free pass to ignore that. So you’d better be paying taxes on your business income. And abiding by legal hiring and employment practices if you’re bringing on help.

“No sweat,” I can hear some of you saying to yourselves. “I pay my state and federal income taxes and work by myself at home. I don’t need to worry about employment law or all that other stuff.”

Ah, you work at home, you say? Then you might not be running a legal business after all.

Have you checked your local zoning code to see what it says about running a business out of your home? You might surprised by what you learn. Even if all you do in running your business is to type on your home computer, the fact that you’re earning income that’s not coming from an employer is enough in some jurisdictions to cover you under local home-business zoning and tax rules.

Every few years, the City of Pasadena (California) sends me a letter asking me to pay up for a city business license and tax. The same letter goes to everyone with a Pasadena mailing address who reported Schedule C income on his or her federal tax return who hasn’t obtained a license yet. (Schedule C is the form through which you report all 1099 or miscellaneous income. It’s the form that home business owners who do not incorporate use to report their business income.)

Pasadena’s hardly alone. New York City, for example, levies a unincorporated business tax that hits many freelance writers and website publishers. The City of Los Angeles also hits freelancers and writers (among others) with a city business tax, but exempts the first $100,000 in income. Fail to pay these local taxes and license fees, and you’re running an illegal business.

Now, even through the U.S. postal service assigns me a Pasadena mailing address, I actually live in unincorporated Los Angeles County. So whenever I get that letter, I just reply with a written note that I live outside the city limits, and they leave me alone. But I always wonder how many less-informed LA County residents don’t realize that, and send in the money anyway. It must be enough to make it worth the city’s postage costs in sending out those extra letters.

But even in unincorporated LA County, I’m subject to residential zoning code addressing home-based businesses. (Writing and publishing don’t fall on the long list of home businesses required to obtain an LA County business license, so that’s not an issue for me.) Now, before I go any further, let me acknowledge that busting writers making money on work they’re creating at home is pretty far down the priority list for most communities. Getting money from unpaid taxes is one thing, but zoning enforcement’s rarely an issue for home businesses that don’t generate excess noise, garbage or foot or vehicle traffic.

That said, if you’re writing stuff that might, uh, tick off the powers-that-be in your community, it’s just smart business to make sure that you’re not breaking any rules a vindictive local official might use against you.

So take a look at your local residential zoning code. Here are a few interesting things I discovered about unincorporated Los Angeles County:

“Retail sales” are prohibited for a home business. So if you print up website T-shirts, you can’t legally sell them to a reader who comes to your home. (Storing retail stock in your home for mail-order delivery is illegal in some jurisdictions, so be on the lookout for that, too. LA County’s rules say “No stock in trade, inventory or display of goods or materials shall be kept or maintained on the premises, except for incidental storage kept entirely within the dwelling unit.”)

“The home-based occupation shall not be conducted in any attached or unattached structure intended for the parking of automobiles.” So no working out of the garage. Sorry, would-be Hewlitts and Packards.

Prohibited uses in a home business include: “Recording/motion picture/video production studio, except for editing or pre-recorded material”. So much for video blogging for your site from your home-office desk. Or Skyping into a conference or classroom. Perhaps this one made sense in the era of bulky, power-hogging cameras and lighting, but now, here’s a classic example of a law written for pre-Internet technology. But it’s still on the books here.

“There shall be only one home-based occupation per dwelling unit.” Now this is one that got my attention. IANAL, but I’d be interested to learn the prevailing local definition of “occupation.” Is publishing an eBook a different “occupation” that writing for a website, or selling ads for that site? (If so, I am so busted.)

The safest thing to do as a publisher is to rent yourself some office space in a legally-zoned commercial office building. That also can help make your emerging business look more legitimate in the eyes of potential customers and clients. But if the numbers don’t work for you paying that extra rent each month, don’t forget to give your local residential zoning code a look before you get too far down the road with your publishing business.

Because even if all you’re doing is writing, you don’t want a local commissioner you’ve just busted in an exclusive expose using that zoning code to bust you in retaliation.

Cover yourselves.

P.S. And LA County? Please, let’s revisit that whole no “video production” thing soon, please?