Many entrepreneurs are seeking new, sustainable ways to increase cash flow, financial security, and long-term savings through a multitude of ventures that require little active participation. These people are in luck because anyone with property, goods, or services representing value to others can establish a successful passive business.
While there is a lot of appeal in making money virtually while you sleep, passive income isn't a means to "get rich quick," and it doesn't mean that zero effort is required. As any passive income earner will tell you, it's a long-term proposition that requires a great deal of upfront planning and effort, as well as updates and enhancements along the way.
What is a passive income business?
A passive income business refers to an endeavor that provides revenue without needing a large amount of active maintenance. Numerous passive income sources can be built up over time to create a steady stream of cash flow that requires minimal effort.
However, minimal effort is not the same as no effort. Typically, there is more involvement required at the onset, with the amount of required work tapering over time.
[Read more: How to Write a Great Business Plan]
10 passive income small business ideas
Looking to launch your next passive income business venture? Here are some ideas to get you started.
Real estate crowdfunding
For those who have always wanted to dabble in the real estate market but have limited finances and time to invest, crowdfunding or crowdsourcing could be your entry in. Crowdsourcing platforms take the investments of many individuals, some as low as $100, and pool them to make commercial or residential real estate purchases like hotels, medical facilities, apartment complexes, or "fix-and-flip houses."
There are also platforms that use investor funds to finance the debts accrued by real estate owners. With the former model, you become an equity holder and get returns on your investment. In the latter scenario, you earn interest from the financing your investment provides.
Beyond strong dividends, the best part for investors is that they don't have to deal with headaches like property maintenance or rent collection. Be advised, however, that there are fees involved. Additionally, some platforms require you to be an accredited investor, which entails meeting certain income or net-worth thresholds before qualifying to participate.
Vending machine sales
The retail vending machine market is projected to grow at a compound annual growth rate (CAGR) of nearly 4% from 2025 to 2030, making this an attractive space for a potential passive income revenue stream. Vending machines — whether they are placed at hospitals, college campuses, retail spaces, or office complexes — offer an opportunity to contactlessly sell anything from fresh food items to nonperishable retail items.
The Internet of Things, or increased connectivity between equipment and devices, allows vendors to be remotely synced to their vending machines to track purchasing behaviors and optimize their inventory. It also gives them access to earnings without having to physically empty bills and coins on-site.
To start, you will need to identify viable locations, obtain appropriate licensing and permits, purchase your machines, and stock them with the products that meet the tastes and expectations of your customers. Profits are highly dependent on your offerings, product margins, and foot traffic, so consider each factor carefully. While daily earnings may seem minimal, sales can add up over time.
Affiliate marketing
Affiliate marketing, which is getting paid for promoting another brand or product within your web content, has become one of the leading drivers of online sales. The power of its influence speaks for itself: Affiliate market spending is projected to increase to roughly $12 billion in 2025.
Anyone with a strong online presence and content that appeals to a particular demographic or target audience — be it a blog, social media account, or email platform — can be a good affiliate or publisher and attract a share of a merchant's advertising dollar.
For every sale driven directly from your uniquely coded link to their site, you earn a commission. You can pursue relationships with individual brands, or several well-known networks can play matchmaker, bringing affiliates and advertisers together based on certain filters and criteria. Keep in mind that commission rates can vary from 1% to 20%, so make sure you review your brand partner options carefully.
Tool rental
If you have a treasure trove of basic tools or larger equipment like lawn mowers, snow blowers, or power washers collecting dust in your garage, you could be sitting on a gold mine. Peer-to-peer tool rental can be highly profitable and a great additional income stream for anyone with a well-stocked toolbox, well-maintained machinery, and the power tools that most homeowners need from time to time but don't want to buy.
You can spread the word to local friends and neighbors on social media and community apps like Nextdoor. There are also dedicated apps like RentMyEquipment that serve as a platform to manage secure communication and payment between renters and providers.
As with any income, you need to report your passive income earnings.
Online course sales
If you have expertise to share with others and an engaging way of imparting your knowledge, there has never been a better time to put your teaching talents to the test. With technological innovations, a pandemic-fueled shift to e-learning, and the need for continuous skill development, the global online learning market is expected to grow by a CAGR of 19% from 2025 to 2030.
Develop a course or series of courses that leverage your professional success or personal passion. Create a course outline that covers every important element that is integral to your target students' mastery of the subject matter.
The top online course marketplaces can help guide you through the entire process as well as provide a built-in base of prospective students, typically for a percentage of course sales. Once your lessons are produced and live on an e-learning platform, all you have to do is enjoy the sales that your course generates.
Due to the necessary maintenance an online course requires, this income stream may not be as passive as others. To ensure your course maintains its value and reaches the right people, keep your content up to date, collect and respond to customer feedback, and maintain ongoing marketing and search engine optimization upkeep.
Car, home, or pool rental
The very things you take for granted may be the things with the greatest potential to amp up your income. Peer-to-peer car, home, and pool rentals are possible revenue streams. They are the assets that many live without and can be of great value to those in need.
There will always be a neighbor who has a kid home from college for the summer and wants a car to drive without purchasing one. Or travelers who don't want to pay car rental prices or prefer the comfort and space of a home in their destination. Your pool could be just the thing that local certified swim instructors need to hold private classes or clinics.
In addition to word of mouth and local advertising, there are apps to help you promote your assets. You can make money with Getaround by renting your car while you're not using it. You can list your home or investment property on Airbnb when you know you won't be there. You can use Swimply to let others pay for pool access when you are busy doing something else. Many of these opportunities are as easy as taking great photos, creating a detail-filled listing, booking reservations, and then reaping the rewards.
When renting your car, home, or pool, keep in mind that renters may not treat your property with the same level of care as you do. Additionally, you could be held liable for damage, tickets, or violations that occur on your property, so proper insurance coverage is key.
[Read more: 10 Travel and Hospitality Small Business Ideas]
Dropshipping
Dropshipping is when online retailers rely on third-party suppliers to ship their products directly to the customers post-purchase, which saves the retailer from investing in inventory management or stock upfront. It's become an increasingly popular option over the years, with the market expected to reach a value of $143 trillion by 2030.
The allure of dropshipping is that you can set up an online store curated with a niche selection of products without the hassle of stocking inventory, packing, or shipping to customers. In this e-commerce model, you merchandise and market an assortment of items in an online storefront, and your suppliers handle the backend and fulfillment.
To start, research what's trending in the e-commerce dropshipping landscape. Once you've identified where the greatest opportunity lies, much of your success is in the hands of your partner suppliers, so be selective and fully informed about each operational element that will impact your business and reputation, from quality control to communication and consistency.
Downloadable digital art
With a predicted CAGR of 14%, it's clear there is a huge market for printable art — whether it be for home and office decor, party supplies, or graphics for online or social media aesthetics. And art on demand can be a great passive pursuit for digital artists.
Whether your art form is photography or typography, you can use your original designs to create and sell art prints, stickers, party invitations, patterns, journal pages, and more, all without having to print, stock, or ship your goods. Your art exists as a digital file that others can purchase, download, and print based on their needs. Create it once and it can sell forever within a marketplace like Etsy, where many flock for unique art downloads.
Those with the greatest success in this space create their niche, like boho wedding invitations and signage or interesting photos of coffee culture. Google Trends is a good place to identify genres or categories that are generating buzz in real time.
Be sure to research the platforms' policies and requirements where you choose to sell your artwork, as different platforms take different percentages — and some may even claim ownership of your art. You'll need to understand copyright and intellectual property rights, avoid using the trademarked work of others, and familiarize yourself with the concept of fair use. In addition, ensure any details and disclosures are clearly outlined, along with permitted usage of your artwork.
[Read more: 7 Fully Remote Business Ideas You Can Start]
Storing others' stuff
If you have unused space in your home, garage, attic, shed, or business, why not rent it out to others in your area who need clean, safe, and accessible storage nearby? Approximately 18% of U.S. households rent self-storage units, which cost an average of $105 per month, an expensive proposition for many. In the peer-to-peer model, charging 30% to 50% less than what a traditional storage unit would cost someone could significantly boost your income if you have ample unused space others could use.
Sites like Neighbor and Stache are dedicated to connecting neighborhood renters and rentees and manage everything from payments to communication, and even insurance protection, for a fee. Beyond indoor space, your driveway can be a moneymaker, too, when you allow others to park a car, RV, or boat at a fraction of what they would pay through more traditional options.
App development
App revenue is expected to increase by nearly 8% annually, resulting in a projected revenue of $782 billion by 2029. As such, app development is a hot and highly competitive category, but despite the popular assumption, there isn't always "an app for that."
If you can offer something innovative and trust-building, you can attain success in the app world. While the majority of effort is spent upfront conceiving, designing, and building the app, you will have to make improvements over time to keep your audience engaged.
Passive "appreneurs" take note: The overwhelming majority of apps and app-related revenue come from free versus paid downloads, with monetization primarily tied to ads and in-app purchases. One major growth area to consider: on-demand apps, where instant service and immediate gratification are always on tap.
Legal and tax considerations for passive income businesses
Before launching any passive income business, take these crucial legal and tax considerations into account.
Licensing your intellectual property
When licensing your intellectual property (IP), ensure you define your license's scope and outline how your IP can be used. Specify ownership, usage, and any limitations, as well as how violations of terms will be addressed. Having an IP attorney review any contracts and licensing agreements before signing is strongly recommended to ensure everything is done properly.
Reporting income
As with any income, you need to report your passive income earnings. Losses, along with revenue, should be reported using the appropriate tax reporting forms. The losses can help offset the owed taxes on the revenue.
Income streams can fall into various categories and must meet certain requirements to be considered passive. For example, if you have a rental property and are not a real estate professional, then the rental income is considered passive income. When in doubt, you can use a list of "no material participation" requirements for other income to determine if the income is passive so that you report it appropriately.
Avoiding tax pitfalls
The largest tax pitfall to avoid with passive income is failing to report all income. Improper recordkeeping can lead to misreported income, which can result in audits of your business and other costly errors. Using accounting tools, as well as consulting with a tax professional, can help you keep your records accurate and in compliance.
Andrea Forstadt contributed to this article.
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