Home-Based Business

Home Business Advantages and Disadvantages

Female architect reading book at table in home office
A home-based business owner. Maskot / Getty Images

Definition:

A home-based business is any business where the primary office is located in the owner's home. They don't have to own the property, but they do need to be running a business out of the same premises they live in for the business to be considered a home business.

While we think of home-based business owners as working at home, that's not necessarily the case. Software trainers, truckers, and interior decorators are just three examples of people who may run home-based businesses but have to travel to provide their services.

More people are choosing to run home-based business than ever before. (If you're someone who's just getting started, read How to Start a Home-Based Business That Will Succeed.)

Many online businesses are ideally suited to be home-based businesses, but it's also increasing common to see professionals from travel agents through Notary Publics operating home-based businesses.

The Advantages of Home Businesses

1) A super short commute? The most obvious home business advantage is the lack of commuting necessary. No more minutes or hours spent each working day sitting in a car, on a bus or subway fighting your way to work. For many home-based business owners, their commute consists of just walking down a flight of stairs. (Of course, this advantage is wiped off the board if you don't actually work at home but have to travel to customers and clients.)

2) Lower overhead. All home businesses, however, share the advantage of not having the expense of buying or renting business premises elsewhere which cuts down their overhead considerably.

Because there is no separate office to rent or maintain, they may also save money on expenses such as utilities, and, depending upon local regulations, the cost of business licenses and taxes.

3) Income tax advantages. Running a home-based business can be a great way to recoup your business expenses and in some cases, reduce the amount of income tax you have to pay.

If your home business is in the U.S. see 5 Common Tax Questions About Home Business Deductions and Calculate Your Home Business Space Deduction for information about the home business tax advantage. 

If your home business is in Canada see  6 Home Based Business Tax Deductions You Don't Want to Miss  and How to Calculate the Home Business Tax Deduction in Canada for information about such deductions in Canada.

4) Family time. If you have children, operating a home business can give you more flexibility with child care and more time to spend with your family. Once they're old enough, you might even employ your children in your business - it's perfectly legal as long as you follow the rules.

The Disadvantages of Home Businesses

A home-based business is not for everyone, however.

1) You can't have one just anywhere. Most municipalities regulate home-based businesses, and particular neighborhoods may have covenants against them. Landlords tend not to be home-based business friendly, if you're renting.

2) It might not work for your particular business. Even if running a home-based business is allowable where you live, you may not want to. Issues such as signage, parking and the need for home-based insurance may not make running a home-based business your best choice.

3) Isolation and other issues. And many people who run home-based businesses suffer from feelings of isolation and feel "out-of-the-loop". Others find that running a home-based business means that their business interferes too much with their family life.

For more on these issues and others that need to be considered before you start a home-based business, see Is Starting a Home-Based Business Right for You?

Also Known As: Home business.

Examples: Darla loved running a home-based business because she found that she was able to spend much more time with her children.