Active Income – Income for which services have been performed. This includes wages, tips, salaries, commissions and income from businesses in which there is material participation. Active income is income from any of the following:

– Wages, salary, commissions, bonuses, or other payments for services rendered;
– Profit from a trade or business in which you are a material participant;
– Gain on the sale or other disposition of assets used in an active trade or business;
– Income from intangible property, if your personal efforts significantly contributed to the creation of the property.

Passive income is income from either of the following:

– Any trade or business or income-producing activity in which you did not materially participate; or
– Subject to certain exceptions, all rental activities, whether you materially participate or not.

In general, if you receive income (or losses) from a business but are not an active participant in the business, it is passive income. So why do I need both? Well, to get a good passive income online, it is going to take some time and energy and some cash. Keep the active income flowing while working on the passive income. You ask, if I have active income, why do I need passive income?

“I would rather earn 1% off a 100 people’s efforts than 100% of my own efforts.” – Rockefeller, John D. (America’s first Billionaire).

If you have a physical store, there are only so many hours you can have your store open without hiring someone,100% of your own efforts. However, your online store can be open continuously; your online store is your 1% of 100 people efforts. You cannot be everywhere, every time someone needs what you are marketing. Even when you are at your active employer or at your children’s game or play, your store is working for you.

Ready for the bad news about passive income? The “passive” part is deceptive. To create a business that will continue to spin off money for you when you are doing very little in the “business” takes time and effort to create. A lot of focused work will be necessary at the beginning. If you are new to your choosen niche or the internet there will be a LOT you have to learn. But just like a garden it’s well worth the effort to plant extra, because once you’ve set up your passive income plants, with just a little watering now and then, you really can make steady autopilot profit.