Is Your Hobby Really A Business?
When you have a pastime that you do for enjoyment, it can quickly turn into a little business without you having to do anything. When you start to charge for your products or services and hopefully make a profit, you’ve crossed the line from ‘fun’ to ‘serious,’ and things must change. If you’re unsure if your hobby qualifies as a business or if you want to know what to watch out for so you know when it does, here are some guidelines.
You’re Making Money
If you’re not sure whether you have a business or not, ask yourself if it’s bringing in any money. If it is, you have a business. A business is defined as something which generates an income. Any business, large or small, that generates revenue for you must be reported on your tax return. As a precaution, you should look into registering your business so that you don’t have to worry about things like this in the future.
You Pay Taxes
If you pay taxes on your earnings (which you must do if you make money), you operate a company. Taxes are complex, and doing them wrong can cost you a lot of money, time, and credibility. As a result, if you do need to file taxes, it’s preferable to outsource the process to a business that will handle all of the legwork for you.
You Employ People
If your hobby needs you to hire employees in order to keep up with demand and handle all of the orders that come in, you are operating a business. Make sure that anybody you hire is paid in line with the law and that their rights are respected. This means they’ll need sick leave, vacation time, and maternity or paternity leave. The amount you must pay them during these periods is determined by state legislation and the contract they sign (which they will need to do if you employ them).
It’s Taking All Your Time
Although a hobby might take up a lot of your time and does not have to be a business to do so, if you’re also making money, the time your ‘hobby’ is eating up is really your work since it has evolved into a business. It might happen gradually, so you could be excused for not seeing the changes; maybe it started by bringing you a little money, and then you needed to rent a self storage unit for the stock, and then you had to bring someone on board to help you, and so on, but there will come a time when you must pick which path you want to take and what you really want to accomplish with your life.
It Has Taken The Place Of Your Day Job
If you used to have a hobby that you did besides your regular job, but you had to leave that job to focus more on the hobby since it was developing into something much more significant, and it is now giving you a paycheck, this is a business. As long as you are registered and legitimate, owning a company is something you can enjoy and really personalize. If your business has snuck up on you, make sure you take the time to pause and think about what you’re doing so that you can choose where you want it to go next.