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Definition of Home Based Business

Updated on November 8, 2015

American society has changed greatly over the past thirty to forty years. In years gone by, most people could expect to get a job out of high school and then stay with one, or maybe two, companies throughout their working lives. After working 35 to 40 years, they would then retire to enjoy their golden years on a lake, in the woods, or on a golf course. Those days are quickly becoming a thing of the past.

Definition of a Home Based Business

As its definition might indicate, a home based business is an entrepreneurial venture that is carried out of a person's home. These businesses can take a various forms. Many people subcontract for other businesses or corporations. Others have sole proprietorships for which they alone are responsible. These small businesses have much to commend them, but there are some negatives that need to be kept in mind.


Positives of Home Based Business

As mentioned above, there are a few things that are perks of working from home. These can be negatives, as well, for those who may not be as able to manage themselves. Here are some of the leading pros of working for yourself from home:

  1. There is no boss hovering over your shoulder micromanaging your every move. This perk does not require much in the way of explanation.
  2. There is no set schedule. You can work at the time of day that best fits your other commitments and your personality. If you are a morning person, you can get much of your work done before most people even get to the office. Night owls can frequently work as late as they care to work.
  3. Working from home is a good money saver. There is no need to commute to the office for many home based businesses. This saves gas, and with current gas prices, this positive can result in quite a bit of savings.
  4. Working from home can also keep costs down because there is no need for renting office space. Commercial real estate can be quite expensive, and a home based business can take this option out of the picture completely.
  5. You can be more creative and take more risks. Most corporations have a set culture, and many of these cultures are quite rigid and can at times resist innovations. If you are the boss, you call the shots.

Negatives of Home Based Business

While there are many positives to working from home, there are also some problems that some people can run into that result from home based businesses.

  1. There is no boss. This is not a problem for those who are self-motivated, but those who need a bit of a kick in the pants to get to work may benefit from having a boss.
  2. There is flexibility when it comes to working hours. While entrepreneurs who have a home based business can set their own hours, there can also be the temptation to put off work.
  3. There are tax ramifications for working at home. Those who work for another person or company get the benefit of having their income and payroll taxes withheld automatically. Those who work from home need to be sure to hold back enough for taxes. Also, employees are only liable for one-half of the Social Security and Medicare payroll taxes. Those who are self-employed are liable for both halves, so this is an additional expense that adds up to over 7.5% in most years.
  4. It is difficult to separate home and work. If you work from your living space, the line between home life and work becomes very, very blurry.

What Do You Need for a Home Based Business?

While there is generally no need to have major machinery for operating a home based business, there are a few items that are necessary to be successful in this line of work.

  1. A computer is necessary in just about any endeavor--especially in the information age. Many home based businesses are completely carried out nearly entirely online, which makes some sort of computer an absolute necessity.
  2. This next item is not an absolute necessity, but it is a good idea. A separate office space can help to keep work and fun divided. It is also possible to deduct office space from your tax bill as a business expense in some circumstances.
  3. Communications equipment is an absolute must. A laptop, desktop, or tablet can work for most communication, especially for those customers who are comfortable using e-mail. A dedicated cell phone or land line might also be in order for communicating with customers. In addition to these common tools, most people will want to buy a printer that also serves as a copier, fax, and scanner. These are relatively inexpensive today, and will pay for themselves after just a few jobs.
  4. Most people will want to buy a computer program that handles a few accounting processes. These programs can be quite beneficial when it comes to tax time.

Is a Home Based Business Right for Me?

When it comes to deciding whether to embark on a home based business, many factors come into play. Those who have a good job that they really love should probably think twice about quitting because the vast majority of businesses ultimately fail.

Those who are out of work or who really hate their job may want to look into working for themselves. People with an entrepreneurial spirit can be much more successful working from home than in working for someone else.


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    • cprice75 profile image

      cprice75 5 years ago from USA

      I would not mind making a home based business my main source of income at some point. Much more flexibility than a 9-5. The problem is finding a niche that can make enough money.

    • teaches12345 profile image

      Dianna Mendez 5 years ago

      Thanks for posting this helpful information. The cons here are ones that we do have to keep in mind, but the pros outweigh them by far. I enjoy working from home, just have to keep focused on the goal to make it a full-time enjoyment.