by Yael Eylat-Tanaka

Created on: March 04, 2011

For many, a home business is the American dream, second only to owning one's own home.  No more commuting, no more bosses, no more getting up at the crack of dawn to sit in traffic jams.  Bliss.  Nirvana.

It's true enough: having a home-based business is all those things, and more.  As owner, director, manager and producer, you now have the opportunity to make all the decisions, call the shots and do as you please.  You've had great ideas all these years, but were never able to implement them.  Here is your chance.  You feel you are responsible enough to get the job done even outside "normal" business hours?  Go for it.  You dream of spending more time with your family, which, of course, is possible since you are now shaving a couple of hours of commuting time each day. 

But beware: along with the freedom that comes with making your own decisions, calling the shots and having more time to spend with family and friends also come enormous responsibilities.  You no longer have a boss, you now have several - all your customers.  You can make your own decisions, but you also must shoulder all the burdens and all the expense of running a business.  Even if you engage a clever accountant that shows you how to shelter business expenses; and even if your banker can't wait to lend you the upfront finances, you may find that launching your own home-based business is much more complicated and frustrating than you had anticipated.  And there are no fringe benefits: if you don't work, you don't make money, unless you are fortnate enough to have royalties or residuals.  Medical insurance is out of pocket, including the deductible; there is no 401(K), though there is the SEP-IRA into which you can contribute considerably more than a regular IRA (as of 2007, the limit is the lesser of $45,000 or 25% of "eligible compensation."  Problem is, you've got to make that kind of money before you can contribute.  Your FICA expenses are also higher: double what you otherwise would pay as an employee (the total is 12.4% of income, which you pay entirely as a business owner, but only half of which as an employee, with the employer contributing the other half).  Granted that there are different forms of business ownership which can mitigate some costs, but where there are benefits, there are frequently also tradeoffs.

As for the time you thought you'd have to spend with your family? 

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