What Is The Difference Between a Passive Income Business And a Lifestyle Business?

People often get the two mixed up or make them interchangeable but they are not.

Let's look at some of the differences and similarities between the two.

First, we need to start out with a definition of passive income.

Passive income is income generated from work that is previously performed.

This can be income you earn from investments, real estate holdings, royalties from books or songs and such.

This is basically using money you have or money from work previously acquired or performed to make more money without you having to continue working.

Examples of Passive Income

So, for instance let's say you saved 10 thousand dollars from your employment earnings and want to get that money to work for you.

You could invest that money in stocks or bonds and the money you make from that income would be passive income if you didn't actively manage those accounts such as being a stockbroker.

If you are typical investor this would qualify as passive income.

Another example would be royalties where, say you wrote a book and it keeps selling for years after it is written.

The income produced would be passive at that point because you only performed the task of writing it once and the income keeps coming in.

Real estate could also qualify if you didn't actively manage properties as your job.

If you invested in rental properties and had a management company perform all the daily or monthly tasks involved in managing it, then the income would also be considered passive.

What Does This Amount To?

Now you can use income generated from passive income investments such as these and grow your income in this way.

If this was the case and you had enough passive income to live off and even grow your income from these avenues then you are essentially retired and can do whatever you can afford to do without having to be employed ever again.

If your yearly passive income exceeds your yearly living expenses, then you are essentially able to retire.

This is a great place to be and one that many people dream about achieving.

So, What Then Is a Lifestyle Business?

A lifestyle business is often confused with having effective "retirement" from passive income.

Many people want to work to earn additional money or as their sole income but do not want to be tied down to being an employee of someone else.

Also, they want the freedom to perform their work whenever they choose and to the amount of time they choose to work on it.

They also may want to be able to perform their work wherever they want and not be tied to a particular geographic location.

This is more of a lifestyle business.

It is one that internet entrepreneurs often can accomplish because as long as they have an internet connection, they are able to work.

Some Examples of Lifestyle Businesses

Some examples of this might be where you have a business that is solely online where you sell only digital products or get commissions from sales of other products, whether physical or digital, though affiliate marketing commissions.

In other words, you earn income entirely from a website and all tasks can be performed for your business online.

Other examples of lifestyle businesses are real physical businesses where you might need more active participation but are not required to be present to perform those tasks.

Often these can be where you own a physical business but have set up people and automation in place which handles nearly all day to day operations of the business without you having to physically be there daily or even weekly or monthly.

This could be a franchise that you own and operate but have great managers who take care of essentially all day to day tasks of operating the establishment.

This could also be work that you can perform anywhere such as an accounting practice where all the needed information is transferred electronically, or work as a coder or software developer who can work from just a computer and internet connection.

Very Key Differences

The key difference is that a passive income business does not require work on your part to generate income, while a lifestyle business requires work to continue to produce money but it is not tied to an office or really a set schedule.

A lifestyle business does still provide freedoms a traditional "job" does not.

You don't have set hours so you have more flexibility with your time.

You can essentially create your own system and change that system of work as often as you like if the tasks you are being paid to perform are getting done.

Often you are your own boss and your income is reflected in the amount of time you spend on generating your income.

You can work as little or as much as you like, but often your income is still based on how much you produce so little production often equals less income.

Lifestyle Business Does Not Mean Working Less

A lifestyle business does not mean you necessarily work less, it just means you are not constrained and have more freedom with how, where, and when you work.

Many people with lifestyle business incomes work significantly more hours a week than people with traditional employment.

And some will have a mix of passive and their lifestyle business income so they do not have to work as much to maintain the standard of living they want to have.

Passive Income Business Vs Lifestyle Business