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The City of Portland calls a business that you operate out of your home a "Home Occupation". While any house in the city can be used as a home occupation, there are a lot of limitations on the business activities that can take place there. View the brochure that goes into detail.
There are two types of Home Occupations, "Type A" and "Type B". A Type A requires no permit, but is very limited. A "Type B" is regulated by the city and so a permit is required.
A Type A home occupation is where the residents of the house use their home as a place of work, but no customers come to the site. AND there is no one who works in the house who does not also live there.
A Type B Home Occupation is where the residents of the house use their home as a place of work, but there is some limited coming and going by other people as a part of the business activity. A Type B Home occupation can have EITHER one employee (or business partner, etc.) who does not live in the home come to work at the house OR up to eight customers per day may come to the house.
The types of businesses allowed under a Type B Home Occupation are those that are by appointment only, or where customers come to the house by making prior arrangements. You can't operate a typical retail store, for example, by home occupation. Zoning doesn't allow Doggie Day Cares or other kennel type businesses to be run as a home occupation.
Life Safety/Building Code
If remodeling would be required to accommodate your home business, you may need to get a residential development permit (building permit). BDS has a lot of information on the residential permit process.
If your business would require a commercial kitchen, that could be difficult-- call a Life Safety Reviewer at (503) 823-1456 to discuss what would be entailed.
Establishing a Type B home occupation involves an application process and a fee. As a part of the process, you will be required to notify nearby neighbors. Your neighbors need not approve of your starting the home business, but are notified as a courtesy.