by Tony Balthazar

Created on: September 07, 2010

There seems to be a common misconception that working at home and owning a small home based business are the same things.  These two types of employment vary greatly and there is no mistaken the differences in them if you understand what they are.  Here are some of the ways that work at home jobs differ from home based business:

1.  Tax status changes - those who are fortunate enough to have a work at home job are paid by an employer based on their regular pay scale. Taxes are withheld from their earnings and they are paid on the schedule that their co-workers are paid on. There may be some tax benefits for those who work at home, including a home-office deduction. However, most of the time employers take care of equipment and supply need for those who work at home.

For those who have a home based business, they also have 100% of the risk that is associated with that business. This includes cost and upkeep of equipment, office supplies and taxes.  Taxes must be paid on all income that is considered self employed income.

2. Insurance issues - most people who work at home are covered under a company medical policy as well as a company life insurance policy (if one is available). Plans are generally the same for those employees who work at home as they are for those who work for the same company but go to an office every day.

Those who run a home based business will have to have their own policies that they pay for in full.  This means that any premiums that must be paid are paid from self employed income.  In general, these policies tend to be far more expensive than those that are offered through employers as well.

3. Direction of work - when a person is working at home for a company, they are considered an employee. By definition, an employee is someone who is told what work to do, when to do that work, and how that work is to be done.  Chances are that those who work at home also have a scheduled work day, much like their non work at home counterparts.

For those who are running a home based business, they are directing their own work, they must market themselves to get additional work and they decide when work is to be done. There is no set work schedule for those who run a home based business, work is done as it is needed to satisfy clients.

4. Paycheck regularity - people who work at home for an employer can count on their employer to pay them on the same pay schedule as their co-workers.  This may mean a weekly paycheck, a bi-weekly paycheck or may mean a monthly paycheck.  In effect, the worker knows that they are going to be paid for a specific number of hours of work, just as they would if they were going to an office every day.

Those who are running a home based business seldom know exactly when they are going to be paid for work, and often they do not know how much they are going to be paid either.  Home based business owners are dependent on their clients to pay them (hopefully on time) for their paycheck and if they have a bad month with no new contracts, then there is not going to be a paycheck coming.

Summary

While some people may confuse a home based business with a work at home job, these two things differ greatly. Home based business owners are self employed and typically referred to as contractors or freelancers. Those who work at home are generally known as employees, with all of the benefits that working in an office would bring and none of the risk of being self employed.

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