Home-Based Business and Government Regulation

Home-Based Business and Government Regulation

downloadBy:Henry B. R. Beale, Microeconomic Applications, Inc.Washington, D.C.
under contract number SBA-HQ-02-M-0464.Release Date: February 2004

INTRODUCTION
Government regulations typically have a disproportionately large impact on very small businesses.Studies using various methodologies have found that unit costs of complying with regulations are consistently higher for businesses with fewer than 20 employees than for businesses with over 500 employees that use similar compliance measures.Very little is known about size differences below 20 employees or other aspects of very small businesses that may influence the size and nature of regulatory impacts.Home-based businesses,which make up roughly half of all U.S. businesses,are of particular interest because of their potential as a wellspring of economic activity. Homes are,in effect,do-it-yourself business incubators,which collectively provide start-ups with an entry point into the business world.Home-based businesses as a group have been characterized,but little more has been done in the way of analysis.A general goal of this study is to advance the understanding of regulatory burdens on home-based businesses,as opposed to non-home-based very small businesses.
CHARACTERISTICS OF HOME-BASED BUSINESSES
Home-based businesses are the predominant form of small business.Over two-thirds of all sole proprietorships, partnerships,and S corporations are home-based.Home-based businesses are concentrated in relatively few industries. Over 60 percent of home-based businesses are in the service and construction sectors;over 80 percent are in fifteen 2-digit SIC industries;and one quarter are in just six 3-digit SIC industries.Over 90 percent of home-based businesses are sole proprietorships.Home-based businesses are also quite small. At the time data were last collected (1992):
In terms of employment:
-Over 90 percent of home-based businesses had no employees
-7.2 percent of all home-based businesses reported fewer than five employees
-Just over 1 percent reported 5 to 19 employees,and
-About 0.2 percent reported 20 or more employees.
In terms of income:
-Over three quarters (77 percent) had gross receipts of less than $25,000
-96 percent had gross receipts of less than $50,000
-3.5 percent had gross receipts of $100,000 or more,and
-Less than 1.0 percent had gross receipts of $500,000 or more.

Home-Based Business and Government Regulation

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