Your fourth option, I think, is the most important one to understand here. Just about any business, assuming you have a competent employee or two, can kick along without your input for a while. But without you, the owner, actively putting in work? it's going to do worse this year than it did last year. It's gonna fade pretty fast. And yes, if you do need to ignore it for a while, selling it to someone who won't ignore it is a good option, too.

But it's just plain wrong to think that you can look at the current numbers and assume they will go forward without more input from the owner.

I would argue that the whole idea of 'passive income' when combined with the idea of a 'small business' is a little flawed, or really, a lot flawed. Owning a small business is not like owning stock in google. You are an active participant in the business. A small business owner is fundamentally different from someone who owns shares in a large corporation.

I kind of like using marxist terminology for it. We are bourgeois[1]. We are not full members of the capitalist class; we still need to combine our labor with that capital, or else it's all gonna go to shit pretty fast.

But the real takaway you need to understand is that owning a small business is not at all like owning stock in a large business. It's a completely different thing, and your return on investment capital should be very different (and in my opinion, much higher.)

[1]no, not necessarily in the 'poor taste in lawn furniture' sense. I don't even have a lawn.