Passive Income Business – What it is and Some Examples

A passive income business is one that requires very little involvement but rewards the income earner with an income that does not reflect their effort. Individuals who earn income from a passive business put an initial investment into the income source but do not have an active role when they earn the income.

This investment can be a financial investment or an investment of labor and exerted effort. An example of this is a writer, the writer works for months on their novel and puts their imagination and thoughts onto paper, then they sell the ideas in the form of a novel to a publisher. The publisher pays them an upfront income for the book based on an initial printing of the novel. As the novel sells more copies or is printed in other forms the writer receives income known as a royalty from the sales of the books.

The writer worked hard initially but when they earned the residual income they did not put forth additional effort for this income. Consequently a novelist is a form of a passive income business. Along this same line so is any performer such as an actor or a musician. These positions also earn passive income in the form of royalties.

Another popular type of passive income business is a landlord. The landlord puts forth an initial investment for the investment property; however they do little for the income at the time the rent is paid. The income they earn is the difference between what they receive in rent and the rent they owe on the property in the form of a mortgage.

Almost any investment opportunity can be considered a passive income opportunity but are not considered businesses. If an investor buys a stock and receives a dividend on the stock then they receive a passive income. As do investors in other investments that do not require an effort beyond the initial investment. An example of this would be a non active partner in any business endeavor. This individual puts up an investment for the business but does not contribute to the daily activity of the business. Consequently this business is a passive business for the non-active partner.