Jacci Howard Bear About.com's guide to austin texas shared the city's zoning laws to help ensure that those who are planning to put up a home based business in Austin would avoid legal problems:

The home occupation must be conducted entirely within a dwelling unit which is the bona fide residence of the practitioners, or entirely within only one accessory garage building (not to include a carport).

No person other than a family member who resides in the dwelling unit should participate in the home occupation on the premises.

The residential character of the lot and the dwelling unit must be maintained. Neither the interior nor the exterior of the dwelling should be structurally altered so as to require compliance with nonresidential construction codes to accommodate the home occupation.

No additional buildings shall be added on the property to accommodate the home occupation.

The home occupation should not generate customer related vehicular traffic in excess of three vehicles per 24 hour day in the residential neighborhood.

No direct selling of merchandise is allowed to occur on the premises.

No equipment or materials associated with the home occupation can be displayed or stored where visible from anywhere outside the premises.

The occupation must not produce external noise, vibration, smoke, dust, odor, heat, glare, fumes, electrical interference or waste run-off outside the dwelling unit or in the property surrounding the dwelling unit.

No vehicle used in connection with the home occupation which requires a commercial driver's license to operate is allowed to be parked on the premises or on any street adjacent to the residentially zoned property.

The home occupation is not permitted to be advertised by any signs on the premises, nor shall the street address of the home occupation be advertised through signs, billboards, television, radio or newspapers.

No animal hospitals, animal breeding, clinics, hospitals, contractors' yards, dancing schools, junk yards, lodginghouse residential uses, massage parlors, restaurants, rental outlets or vehicle repair shops are permitted as home occupations.

Check with your own municipality if you are outside the City of Austin. Zoning varies from place to place and certain neighborhoods within your town may have restrictive covenants that are stricter than what the city allows.

via About.com