7 Ways to Reduce the Risks of a Home-Based Business

But having your home double as your business setting can result in some unpredictable scenarios. You may face everything from an awkward moment—your best client brings her precocious toddler along to a meeting in your "conference room" (i.e., dining room)—to downright risks, like your business equipment being damaged during a storm

Fortunately, with a little planning, you can minimize some common hazards of running your home-based business:

Put safety first. If employees or clients visit your home, be sure to keep walkways clear (and salted if you get ice or snow) during cold weather. Add extra lighting, both inside and outside. Keep stairs in good condition, and add strong railings. Depending on the nature of your work, you may also want to politely establish some businesslike boundaries, such as discouraging family or friends from "dropping in" during business hours, or suggesting visiting clients leave small children at home.

Check zoning and traffic laws. One of the things to consider before you designate your home as your place of business is the parking situation. Does your street offer adequate parking? Do you need to alter your landscaping to create any additional spots? Also note any restrictions your local planning office may have; many limit the number of employees you can have in your home, or how many visitors (and cars) that can frequent your home business. You want to stay on the right side of the law.

Consider a next-generation P.O. box. Security is a very good reason to keep your home-based business address private. And, while a post office box is one solution, it can conjure up a "mom and pop" image you may not necessarily want. A private mailbox, from any one of a growing number of companies offering the service, provides you with a physical street address, not just a box number. And, unlike most postal boxes, these services can also receive packages from shipping carriers on your behalf.

Know your workers. Since employees will be spending time in your personal space, it's important that you feel safe with them around. Consider running background and credit checks on potential workers; and be clear about which parts of your house are off-limits. Also, be sure to stay current on employment laws, and, especially if you don't have a formal personnel policy in place, consider a type of insurance coverage called employment practices liability coverage.

Safeguard your digital life. Consider keeping two computers—one for personal use and one for business—to wall off your personal and professional lives. You'll also want to keep your security programs, browsers and operating system up to date, which the Federal Communications Commission says is the "best defense" against viruses, malware and other online threats. Also set up a secure Wi-Fi network (if you use one) and create a reliable system for securing, backing up and purging business files.

Secure paper files. You'll sleep better knowing that your extra cash, business contract information, external hard drives and other critical files are secure. Keep them in a locked cabinet, a fireproof safe, or, better yet, offsite in a safe deposit box so the documents are protected in the event of a fire or theft.

Don't rely on homeowners insurance. Many small business owners mistakenly assume their homeowners insurance covers their home-based business, too. Not so. For instance, if the delivery guy slips on your front porch while delivering a business package, your homeowners insurance probably won't cover the accident. Similarly, if a natural disaster were to strike your home, you'd need a backup plan for your business as well as your family. Can you easily redirect business phone lines or access data from an alternate computer? How would you restore lost data? A business insurance agent can help make sure you're covered for every possibility.