Residual Income - Work Once, Get Paid Forever

The Internal Revenue Service defines residual income

, also known as passive income, as a passive activity "in which you do not materially participate." In short, it means income derived without doing additional work or performing additional revenue-generating activities. There are numerous types of passive income, residuals from sales, royalties from, or continued sale of copyrighted material, investment dividends, and many others. Each type of residual or passive income results from doing work or performing an activity once and continuing to gain a profit from that activity without requiring additional input or activity.

In terms of distributorships, multi-level marketing relationships, and some sales positions, residual income is based on adding members, distributors, or customers. Participants can continue to receive money, based on the performance of these individuals, without doing any more work than they have already done to bring those people into the organization. The attraction of many such organizations and business opportunities is the ability to work once, and get paid continuously for that work. When combined with direct sales profits, commissions, and other incentives, passive income creates additional opportunities to increase a participants' income potential without adding to their workload.

For example, a person contracts for a distributorship of a particular brand of products. The person receives direct income from the sale of those products. However, in addition to profits from direct sales, that individual also shares information about their distributorship with others. As people sign up under them, the individual receives commissions, bonuses, or other compensation based on the sales of those they sign up. This residual income continues, even if the individual no longer participates in direct sales themselves. Rather, they can turn their attention to helping more new distributors and building their passive income through residuals, commissions, or other passive activities. In some cases, individuals can grow their passive income through compensation for second and third generation distributors added by the distributors they signed up.

The beauty of residual income, passive income, or whatever terminology you care to use, is the ability to continuing earning, even after work is completed. Once a distributor is signed up, the individual's work is complete, save coaching and encouragement of their new protegee. Eventually, the new distributor has enough knowledge and experience to no longer require coaching, training, or other assistance. However, income continues to grow for the person who brought them into the organization, with no additional work required or time invested.

by: Paul Carlotta

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