Business Activity in the Home

1. 1

   About one in four (22%) employing businesses is principally located in the home or an associated structure and another 25 percent have a home office in their residence.

2. 2

   Home-based businesses overwhelmingly employ fewer than 10 people. The principal location for 27 percent of businesses employing fewer than 10 is the home compared to 4 percent for those employing 20 or more.

3. 3

   There is no age difference between those located primarily in the home and those located elsewhere. However, home based businesses are more likely to be in construction, agricultural services, transportation and administrative support services. They are less likely to be in retail, hospitality, and personal services.

4. 4

   Home-based businesses appear to blend into their neighborhoods remarkably well. Half (52%) have no employees (other than members of the household) who spend a majority of their time working at the home location of the business and another 30 percent have only one. Three of four do not have customers or vendors routinely visit them. Over the last three years, 96 percent report no complaint from neighbors about problems they think the business caused.

5. 5

   Home-based businesses typically use a limited amount of space, a median of 250 square feet and 80 percent with just one or two rooms constituting the entire business premises.
   

6. 6

   Zoning or other regulations do not appear to be a problem of any consequence for those currently operating their business out of the home. This excludes potential small business owners who may have been impeded from starting by zoning and other regulations.
   

7. 7

   Fewer than half (46%) take the portion of their home used for business purposes as a deduction from their federal income tax, the most frequently cited reason for doing so being that the deduction is too complicated to make it worthwhile.
   

8. 8

   Even though the primary location of their business is outside the home, small business owners with a home office typically use it every day (54%). Another 36 percent use it a few times a week.
   

9. 9

   Home offices are small, usually a single room (92%) with a median of about 175 square feet of space. Ninety-one (91) percent have business equipment, such as a desktop computer, fax, or copier, located there.
   

10. 10

    Home offices are private. Employees, customers or vendors routinely enter them in just 4 percent of cases. In 28 percent of cases, those offices occasionally serve as an extra bedroom, play room or personal activity room of some nature.
    

11. 11

    Just 26 percent deduct their home office from their federal income taxes. The primary reasons that the remainder do not take the deduction are: too complicated to make it worthwhile; never thought about it; tax advisor cautioned against it; and the home office does not legally qualify.

Volume 8, Issue 4, 2008
ISSN 1534-8326

William J. Dennis, Jr.
NFIB Research Foundation

• 1Is this business operated primarily from the home, including any associated structure such as a garage or a barn?
• 1aIs the business in the residence, or in a free-standing structure outside, such as an unattached garage, barn, shed, or guest house?
• 1bApproximately how many square feet of space does the business portion occupy?
• 1cHow many rooms are in the business portion?
• 2Do you deduct the portion of your home used for your business as a business expense for federal income tax purposes?
• 2aWhy don’t you deduct the business portion? Is it because it’s:?
• 3Did you or do you require special zoning or land use permission to operate your business on the premises?
• 4Has operating your business out of your home created severe, moderate, minimal, or no legal and regulatory problems for you?
• 5In the last three years have your neighbors complained to you frequently, occasionally, infrequently or never about problems that they think your business causes them?
• 6Do customers and vendors routinely enter your business?
• 6aHow many employees, not counting yourself or others in your household, routinely spend the majority of their time at this business location?
• 7Do you have a business sign or other identifying business markings on the entryway to, or on the business premises?
• 8About how many years has your residence been the primary location for this business?
• 9Do you have a home office that you use for business located in your primary residence?
• 9aDo you have a home office that you use for business located in a secondary residence?
• 10How often do you use your home office?
• 11Do employees, customers, or vendors enter that office to see you on a routine basis?
• 12Does your home office occasionally double-up as an extra bedroom, play room, hobby room or a personal activity room of some nature?
• 13Approximately how many square feet of space does your home office occupy?
• 13aHow many rooms are in your home office?
• 14Do you have business equipment such as a land-line telephone, desktop computer, fax, or copier located there?
• 15Do you deduct your home office as a business expense for federal income tax purposes?
• 15aWhy don’t you deduct the business portion? Is it because it’s:?