New Light on Home Businesses
We all know people who work out of their homes, and these businesses are far more diversified and sophisticated than the old “earn at home” schemes. But data on home-based businesses had been minimal until the federal government ordered its first study on the size and range of the sector. The surprisingly large numbers should cause policymakers to look for better ways to support these operations.
Five years ago, home-based outfits accounted for about half the country’s 17 million small businesses, according to a Census Bureau analysis of the 1992 numbers. The total today is believed to have grown far beyond that. The majority of the 1992 home businesses started with less than $5,000 in capital, and nearly three-fourths rang up annual receipts of less than $25,000. Men were most likely to do clerical work or to telecommute. Women, in contrast, tended to turn out salable products.
The study was based on a sample survey of business owners who filed federal income taxes as self-employed, a partnership or a legally incorporated business with 35 or fewer shareholders. However, now as in 1992, a large number of home businesses operate in the underground economy of large urban areas like Los Angeles and are not reflected in census data.
For businesses struggling to get some attention, the census data will help. For instance, the Small Business Administration and the Minority Business Development Agency will use the information to establish programs and policies for the sector. Home business operators, for instance, want to deduct health insurance premiums on their federal income tax returns, which they cannot do now. Many neighborhoods and city governments are working on zoning laws, taxes and business regulations for home operations.
Home-based business defies easy categorization. Los Angeles City Hall found that out the hard way last March. The city wisely legalized home-based businesses but tripped up on regulation. Business operators were required to pay a $25 annual registration fee and city business taxes. Confusion arose, two lawsuits were filed and the ordinance is now being redrafted, a lesson in what government does and doesn’t know about this expanding business sector.
Who Owns Home-Based Businesses?
Within each group. percentage of reported small businesses that are home-based.
