Home Based Business and Small Business: Different?

by J.Crawford on October 21, 2008

All over the Internet you likely see the term “home based business”… So what is a home based business and what makes it any different than any other small business venture?

Home Based Business.

A home based business has some obvious characteristics…Like it’s home based…. No, seriously, when you see the term home based business advertised via the Internet or print it many means a turnkey business system.

While many small businesses are operated from a home office, a turnkey home business opportunity, definitely has some differences. A turnkey home business will usually require the entrepreneur to play the role of marketer.  Most home based business concepts use individuals like yourself to market there products.  Most home business ideas are in one way or another an affiliate program.

A corporate company make the products and warehouses them. Many times they will also handle shiping and customer service as well. Many of these things can be done systematically.  Home based business concepts allow the corporate owners to keep overhead and payroll and the marketing budget low or even non existent in some cases.

A turnkey home based business has similarities to a small business you might start from home. You will still need to register a DBA or Incorporate. Information about registering an assume name by the state you live in can be found here.  Information on Incorporating can be found here.

Most small businesses you operate from home still require you to go outside of the home. For instance a window cleaning business. You could set up an office in your basement and do the paper work and billing for the business. But when it came to the actual service, you kinda need to take a drive, unless you have a lot of windows.

Many home based business concepts do not require you to leave your home office to conduct any part of the business.  You will usually find the a home business also leaves many technical aspect up to you. Quality training is imperative and you should look into that before you start a home based business.

Home Based Business Taxes.

Keep in mind that when you own a home based business you will be in charge of your own book keeping. Your accountant can help you with this. It is a good idea to get started right from the beginning, so get with a CPA and figure out a simple system that will keep your business records organized. You will self-employed and you can find tax information here.

Many home business models don’t handle your money, you may get paid at the point of sale. In this case you won’t be receiving a 1099 so don’t count on that record to bail you out at the end of the year. When you talk to your accountant ask them about sending others 1099’s and if it will be necessary. Remember it is against the law to avoid taxes but your right and responsibility to pay as little as legally possible.

Did you know when your an employee and you pay a car payment of say $7,000 in a year your payment is made from money you get from a pay check after taxes. When you own a business this car payment will be a deduction. Lets say you are in the 34% tax bracket. A $7,000 car payment made as a self employed person could save you over $2100 dollars.

Marketing expenses are a great deduction especially if your travel, buy a camera, nice clothing, attend certain events…. and on and on.

I hope this sheds a little light on the differences and similarities of small business models and home based business models. Many people are looking to start small businesses and home businesses right now. And it is becoming more and more popular for career professionals to also have a home based business on the side.

What are some experiences you’ve had with a home based business, a small business or a side business?

{ 1 comment }

Mohan October 24, 2008 at 12:37 pm

You are right most so-called ‘home businesses’ are just affiliate programs neither knowing the owner nor the customer. The problem with most home based businesses is lack of any business model. Most end up worse than when they had started.

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