Category: Internet Business

The Home-Web Business Link

Web-based and home-based businesses share some common features, but also have distinct differences that can impact your decision on which type to pursue. Consider the following breakdown.

The similarities

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  • Flexibility – Both offer flexibility in working hours and location. You’re not tied to a traditional office schedule or commute, allowing you to work when and where you’re most productive.
  • Lower Overhead Costs – Compared to traditional brick-and-mortar businesses, both typically have lower overhead costs in terms of rent, utilities, and equipment. This can be especially helpful for startups and bootstrapping businesses.
  • Global Reach – Both can access a global market through the internet, reaching customers beyond your local area.
  • Potential for Scalability – Both can scale relatively easily depending on the business model. You can adapt and grow your reach without being limited by physical space.

The Differences

  • Physical Workspace – A web-based business doesn’t necessarily require a dedicated physical workspace at home. You can work from cafes, libraries, or even co-working spaces. Home-based businesses, on the other hand, generally have a dedicated workspace within the owner’s residence.
  • Customer Interaction – Web-based businesses often rely on digital channels for customer interaction, such as email, live chat, and social media. Home-based businesses may have more frequent in-person interaction with customers, depending on the business type.
  • Legality and Zoning – Home-based businesses may need to comply with specific zoning regulations and obtain permits depending on the local laws. Web-based businesses generally have fewer location-specific legal restrictions.
  • Professional Image – Depending on the industry and target audience, some customers may perceive a web-based business as less professional than a home-based business with a physical storefront.

Ultimately, the best choice for you depends on your specific needs and business model. Consider factors like your budget, the nature of your work, your comfort level with technology, and your desired level of customer interaction.

Business on the Web

While there’s no single dominant type of web-based business, some categories consistently exhibit high popularity due to their accessibility, scalability, and potential for profit. Here are a few noteworthy examples, excluding programmer and software development-related businesses:

 

  1. E-commerce – Online shopping has exploded in recent years, making e-commerce one of the most popular web-based businesses. You can sell physical products, digital downloads, or subscription boxes, catering to diverse audiences. Platforms like Shopify and WooCommerce make setting up and managing an online store easier than ever.
  2. Content Creation – Whether you’re a blogger, YouTuber, podcaster, or social media influencer, creating engaging content online can be a lucrative web-based business. Building a loyal audience and monetizing through advertising, sponsorships, or paid content can offer significant income potential.
  3. Consulting and Coaching – If you have expertise in a specific field, you can offer online consulting or coaching services. This could involve marketing, finance, personal development, or any other area where you can guide clients remotely. Online platforms and video conferencing tools facilitate easy communication and delivery of services.
  4. Online Education – The e-learning market is booming, offering opportunities for educators and subject matter experts to create and sell online courses, tutorials, or webinars. Sharing your knowledge and skills globally through platforms like Udemy or Skillshare can be a rewarding and profitable web-based business.
  5. Freelancing and Online Services – A vast array of freelance work can be done remotely, from writing and editing to graphic design, translation, virtual assistance, and social media management. Platforms like Upwork and Fiverr connect freelancers with clients, making it easier to find and land projects.
  6. Affiliate Marketing – This involves promoting other businesses’ products or services on your website or social media channels and earning a commission for each sale generated through your unique affiliate link. It requires building traffic and creating compelling content, but can be a good passive income stream.
  7. Online Marketplaces – Creating a platform where buyers and sellers can connect, like an online Etsy shop for handmade goods or a digital marketplace for specific niche products, can be a successful web-based business. It requires curation, marketing, and managing buyer-seller interactions, but can be quite rewarding.

These are just a few examples, but it is important to understand that the success of any web-based business ultimately depends on various factors like your niche, marketing strategy, and dedication. Choose something you’re passionate about and research the market thoroughly before venturing into the exciting world of online business!

Business in the home

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Home-based businesses have existed throughout history, but their popularity has fluctuated depending on various factors like technological advancements, economic conditions, and societal norms. Following are notable periods where home-based businesses were particularly prominent.

Early History

Pre-industrial Societies – Craftsmen, artists, and food producers often worked from their homes, selling their wares directly to customers or at local markets.

Cottage Industry – During the 17th and 18th centuries, textile production was often done in homes, with families working together on spinning, weaving, and other tasks.

19th and Early 20th Centuries

Women’s Work – Home-based activities like sewing, baking, and childcare were common ways for women to generate income, especially during economic hardship or times of limited opportunities outside the home.

Rise of Services – As the service sector grew, more people offered services like tutoring, bookkeeping, and secretarial work from their homes.

Mid-20th Century

Post-War Boom – Many returning veterans and women who had entered the workforce during WWII started home-based businesses due to limited job opportunities or a desire for flexible work arrangements.

Direct Selling – Companies like Avon and Tupperware pioneered home-based direct selling models, empowering women to become entrepreneurs.

Late 20th and Early 21st Centuries

Personal Computers and the Internet – The rise of personal computers and the internet in the late 20th century revolutionized home-based work, enabling businesses in fields like software development, writing, and online retail to flourish.

Gig Economy – The growth of the “gig economy” in the early 21st century further contributed to the popularity of home-based work, with platforms like Uber and Airbnb connecting workers with tasks and opportunities outside traditional employment structures.

Present Day

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COVID-19 Pandemic – The pandemic-induced lockdowns and shift to remote work further fueled the rise of home-based businesses, with many people transitioning from traditional office jobs or starting new ventures from their homes.

It’s important to note that these are just general trends, and the popularity of home-based businesses can vary depending on specific regions, industries, and economic conditions. However, it’s clear that throughout history, people have found ways to be productive and entrepreneurial from their homes, and technological advancements and changing societal norms are likely to continue to shape the future of home-based work.

Local Ordinances and Your Home-based Business

For the HBB aspirant

Every year several thousand people develop an interest in going into business. Many of these people have an idea, a product or a service they hope to promote and grow into an income producing business which they may be able to operate from their homes. If you have such aspirations, there are some practical steps to consider before hanging out your “Open for Business” sign.

Ordinances in some areas may prevent you from operating your business, in the sense that, if you live in an area that is zoned “Residential Only,” your proposed business could be illegal depending on the activity in which you must engage to operate it. In those areas, zoning restrictions rule out home businesses that depend on the coming and going of too many customers, clients and/or employees; and if your business is the type that sells or even store anything for sale on the premises, it will fall into this “restricted” category. So be sure to check with your local zoning office to find out how the ordinances in your particular area may affect your business plans.

Quite possibly, a special permit may be needed to operate a business from your home; but you may find that making small changes to your plan will put you into the position of meeting zoning standards. There are a number of communities that grant home occupation permits for businesses that involve typing, sewing, teaching and/or tutoring, but turn a thumbs down on requests from photography, interior decoration and home improvement businesses to be operated from the same home. The variety of home-based business that does not require special permits or licenses and does not violate any zoning ordinances, is commonly known as network marketing businesses, many of which are done via the Internet or Web; thus, Web-based business.

Get into your zone

Keep in mind that, if you are permitted to use your home to operate a given business, there may be restrictions and requirements that you will need to take into consideration; but by all means get to work with your zoning people and save yourself the time, trouble and dollars by finding out what is permissible and what is not for your area. One of the most obvious requirements you may have to comply with is off-street parking for your customers or patrons; and since signs are generally forbidden in residential communities this will likely have a direct impact on the number of students you could have at any one time if your business is teaching or tutoring, for example.

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Obtaining zoning approval for your business is not something you should worry about too much because the process could be as simple as filling out an application. However, it is important to understand that it could also involve a public hearing. In either case there is no cause for worry; just know that the important points zoning officials will consider often center around how your business will affect the neighborhood. Will it increase the traffic noticeably on your street? Will there be a substantial increase in noise? And how will your neighbors feel about this business in such close proximity to their homes?

So check into the zoning restrictions, and then check again to determine if you will need some kind of license from your local government. For example, if you’re selling something, you may need a vendor’s license and/or be required to collect sales taxes on your transactions. A sales tax requirement would result in the need for careful record keeping.

License to operate

Licensing can be an involved process and, depending upon the type of business, it could even involve the inspection of your home to determine if it meets with local health, building and fire codes. Should this be the case, you will need to bring your home business facility up to the local standards. Usually this will involve some simple repairs or modifications that you can either do personally, or hire out to a handyman to do at a nominal cost. Still more items to consider: Will your homeowner’s insurance cover the property and liability in your new business? This must definitely be resolved; so be sure to talk it over with your insurance agent.

Tax deductions, which were once one of the beauties of engaging in a home business, are not what they once were. To be eligible for business related deductions today, you must use that part of your home designated EXCLUSIVELY AND REGULARLY as either the principal location of your business, or a place reserved to meet patients, clients and/or customers.

An interesting case in point: if you use your den or a spare bedroom as the principal place of business, working there from 8:00 to 5:00 every day, but permit your children to watch TV in that room during evening hours, the IRS dictates that you cannot claim a deduction for that room as your office or place of business. There are, however, a couple of exceptions to the “exclusive use” rule. One is the storage of inventory in your home, where your home is the location of your trade or business, and your trade or business is the sale of products at retail or wholesale prices. According to the IRS, such storage space must be used on a REGULAR Basis, and be a separately identifiable space.

Exceptions and expenses

Another exception applies to daycare services that are provided for children, the elderly, or physically/mentally handicapped. This exception applies only if the owner of the facility complies with the state laws for licensing. To be eligible for business deductions, your business must be an activity undertaken with the intent of making profit. It is presumed you meet this requirement if your business makes a profit in any two years of a five-year period.

Once you have started and are reasonably far along in your business operation, you can deduct business expenses such as supplies, subscriptions to professional journals, and an allowance for the business use of your car or truck. You can also claim deductions for home related business expenses such as utilities, and in some cases, even a new paint job for your home, depending on the necessity for such improvement as it relates to operation of your business.

IRS is going to treat the part of your home used for business in the same manner as it will treat a separate piece of property. This means that you will have to keep good records and take care not to mix business and personal matters. No specific method of record keeping is required, but your records must clearly indicate and justify the deductions you claim.

You can begin by calculating what percentage of the house is used for business, either by number of rooms or by area in square footage. Thus, if you use one of the five rooms in your home for your business, the business portion equates to 20 percent; and if you run your business out of a room that is 10 by 12 feet out of a total area of your home measuring 1,200 square feet, the business space factor equates to 10 percent.

An extra computation is required if your business is a home day care center. This is one of the exempted activities in which the exclusive use rule does not apply; but you can certainly check with your tax preparer and/or the IRS for an exact determination. Also keep in mind that if you are a renter, you can deduct the part of your rent which is attributable to the business share of your house or apartment. Homeowners can take a deduction based on the depreciation of the business portion of their home.

There are limitations to the amount you can deduct which equates to an amount equal to the gross income generated by your business, minus those home expenses you would deduct even if you were not operating a business from your home. The best examples would be real estate taxes and mortgage interest that are deductible regardless of any business activity in your home; so you must subtract from your business gross income the percentage that is allocable to the business portion of your home. You should then arrive at the maximum amount for home-related business deductions.

Reporting income

Your self-employment business deductions are claimed on form SCHEDULE C (Profit or Loss from Business). The IRS emphasizes that claiming business-at-home deductions does not automatically trigger an audit on your tax return; but even so, it is always wise to meticulously adhere to proper guidelines and, of course, keep detailed records if you claim business related expenses when you are working out of your home. it is a good idea to discuss this aspect of your operation with your tax preparer or a person qualified in the field of small business tax requirements.

If your business earnings aren’t subject to withholding tax, and your estimated federal taxes are $100 or more, you’ll probably be filing a Declaration of Estimated Tax on Form 1040 ES. To complete this form you will have to estimate your income for the coming year based upon projections and also make a computation of the income tax and self-employed tax you will owe.

The self-employment tax pays for Social Security coverage; but if you have a salaried job covered by Social Security, the self-employment tax applies only to that amount of your home business income that, when added to your salary, reaches the then current ceiling. When you file your Form 1040-ES, which is due April 15 (unless April 15th falls on a holiday or weekend day during normal times), you must make the first of four equal installment payments on your estimated tax bill.