I want to start up a kennel (dog house) or start a business of dogs. If i raise and buy/sell dogs and keep them away from my house is that allowed in Islam or not? Is this business allowed?
Such a business would be haram. It is Haram to sell dogs/taking the price of dogs, even if they are for example farm or guard dogs, is haram.
The Prophet (peace and blessings be upon him) Said:
نَهَى النَّبِيُّ صلى الله عليه وسلم عَنْ ثَمَنِ الْكَلْبِ...
The Prophet () prohibited taking the price of a dog...
Now, if one needs a dog, and the only place to get it is to buy it, then it is ok for that person to buy it and the sin is on the one who sold it, but one cannot sell a dog.
With regards to buying and selling dogs (even cats), there are many authentic ahaadeeth that prohibit this.
But there's no problem in keeping cats or dogs. However, you are allowed to keep dogs away from your house but keep in mind the following:
The dog is considered an unclean creature. Even if it strikes your dress, you're supposed to wash it 7 times, once with soil.
Angels of blessings do not enter a house in which there's a dog or picture of living things. So you cannot and should not keep them in your homes.
If you do have a dog, keep it in its place. Do not hug it or kiss it like many people in the west do.
A dog can be used for hunting your food. You can pronounce Allaah's name and send it to fetch a hunt for you. The exact method of doing this, I don't know, but I've seen this ruling in either Bukhaari or Muslim.
Here is a very descriptive explanation with many sources: http://bakkah.net/articles/buying-selling-cats-dogs.htm