It all boils down to how professional you want the game to run. Are you playing with true poker rules, or do you not care if people make mistakes or angle shoot each other? This answer alone will decide where you go from here.
I have ran 2 different home games for people as a hired worker. Both wanted professional rules and dealing At this point I had been dealing for several years and knew a few others i had worked with to bring in as well. The house had chips and cards that were pretty standard for poker.
To entice people to come, we had free food and drinks, including beer and wine and liquor. Food varied from simple chili to lasagna. It was a nice set up. We ran a pro tournament and cash game and our dealers knew multiple games
As most of the big home games in Michigan
do, we took a standard rake of 10% up to $5 for a full table. If you do not know how rake collection works let me know.
We as dealers also accepted tips, and they were good. For the tournament we took out 10% for the house and dealers. This was the only way the dealers made money was from the tips, but it was good we took about $100 each for the night. House would typically make several hundred depending on the run of players. This paid for all food and drinks.
Being a rather old-school guy by heart, and a professional dealer, I do not like dealers playing in the games they deal. Too much opportunity for issues to arise - even if you pass the deal, trust me there will be issues.
You need to appoint a room floor person who will handle the money and the chips. UNDER NO CIRCUMSTANCES should you allow the players open access to chips, you WILL have issues.
If you do not care if they game is well run then forget everything above and just have a entrance fee to the game. Like $20 per person and give out free food and stuff. This way you do not have to worry about rake and tourney fees (but still no player access to chips - EVER)
If you are competing for players, you can lower your rake down a bit to 3 or 4 max per hand. That should still yield enough money to pay for everything.
ALWAYS keep track of the money - make sure it adds up at the end and that you have received all of your chips back. Keep track of tourney numbers in case there is an issue and you need to prove what the prize pool should be (because some players may have left and it will be tough to remember how many entered).
To save yourself from hassels print up a rule list. ROBERTS RULES OF POKER will do just fine, even though some of the rules I think are goofy. You can find it online. TDA rules are good too but only cover tournaments not cash games.
Good luck, dont worry about it being illegal, at those stakes it would be a loss leader for the local police to come knocking, and really wont care unless you have someone complain.
Be careful of people you do not know. It may even be wise to check ID's just to put fear in people who may screw around. If someone shows that NOBODY knows be cautious and maybe not even let them in the house.
Hope this helps, any more questions let me know. There are plenty of tournament clocks online too that are free if you need one.