Iv done it both ways - it depends on how large you are, and if you have a family or not.
As a batchelor, I loved having the shop out my back door. But I also had way less employees. only 1-3 max.
I had a kid, and wife , then we got 6 employees, this started to cause problems. I was "at work" way too much because the shop was right outside the door. We also had problems with the guys not respecting personal space, and time. they would knock on the door at 6 am, and ask to use the bathroom. they would start up the equiptment and trucks at 6 am and wake the kids up (they were told to do it by me, but it still woke the kids up) Wife didnt always know all of them, and so it made her nervious that the guys would show up at home while im not around and she was home alone.
At some point your going to have that rotten egg for an employee. Even if you think everything is all good, at some point hire enough guys and you will come accross a bad one. you will have to fire him/her, and they will be disguntled for one reason or another. I had a guy steal fuel, I caught him. I kept his last paycheck as we reason to belive he had stollen way more than 1 tank. well he was upset that I didnt give him his last check. I explained that I was keeping it as a form of payment, and if he didnt like it we could go to the police. Well that made my wife nervious as hell for 3 weeks while i was gone.
We also had guy knock on my door at 5 pm at night on a sunday asking for random things, use the shop, get their paycheck early, and the list goes on.
As a bachelor the time savings was great, and the security was great being home. Once I had a family that all changed. I now care about whom my family is around, and their saftey as well.
I got a seperate shop, and a new house. I only live 5 mins away from my shop, but only my mechaninc knows where I live, and only he has my personal cell phone number. He has stick instructions not to give out that information and to only use that as he needs to. I go home at 5 pm every day, and have family time. I dont take business calls while im at home unless its an emergancy or a buisiness deal worth $2k plus, besides that the guys contact my mechanic if they need anything.
I personally like haveing the seperate shop better at this point in my life.
If you do have the shop at your house, I would figure out any rules that you need them to follow and make sure they know them so they respect your personal time and property.