There exits three main types of income classification: passive income, active income, and portfolio income. Portfolio income is the income an individual that an individual gains or receives from dividends, stocks, interests, capital gains, royalties, and bonds. Active income sometimes called earned income, is the income one gains or receives through the active participation of the recipient. They include wages and other earnings that require one active participation in the income-earning event. Passive income is that income where once set up, it requires no material participation or input from the recipient. Thus passive income opportunities can be defined as those income earned from undertakings that run through indirect participation.
They can be classified into two broad categories:
– Those that require capital to start, grow, and maintain
– Those that do not require capital to start, grow, and maintain.
The passive income sources that do not require capital to start, maintain and grow are the best choices for those who want to start on their own and start from nothing. They range from those assets that one can make such as books, Internet websites, songs, onpassive company trademarks, etc. Those passive income opportunities that do require capital to start and maintain are those that require large investments per capita such as building properties and then renting. They require the individual to invest a lot of money in the project to start, grow, and also to maintain.
Examples of passive income opportunities include:
a) Rent from the property: These are the monthly earnings from rented properties such as those received from tenants.
b) Online income opportunities such as those earnings from Internet advertisements on websites.
c) Interest and dividends: These are the profits from earlier investments and account savings.
e) Royalties: These are earnings generated from intellectual properties such as books, music, plays, movies e.t.c
f) Franchising: This involves creating business models which u then franchise and in return earn income by exploiting the talent of the franchisees.
g) Profits from businesses in which one has very minimal or no active role in running.
Reasons for no shortage of passive income opportunities.
1) Taxes and passive income sources
These opportunities are taxed with much favor compared to the active income opportunities. This gives people an incentive to invest in assets aimed at creating jobs and growing the economy. One that works in his company, for example, pays an extra tax as a self-employment payroll tax that which is not paid by one that plays a passive role in his company and pays only income taxes.
2) Paths are most often taken to passive earning opportunities.
Most people use their actively earned income to generate or fund their passive projects e.g a doctor or nurse could use his/her actively earned income to start up passive businesses. This overtime starts to generate passive income for him/her.
3) Other forms of these sources require little or completely no finance/ capital to start, maintain or grow.
Although they may require time and effort to create, these income opportunities require less or no capital to start and run. Such that fall into this category can include advertisements through Internet websites.