How can you have a fun business?

There is no law against enjoying working in your business!  

In fact, making your hobby into a business is a great idea!

If you turn your hobby into a business, you will love what you do and be diligent about working it. And fortunately, there is absolutely no law that says working for a living cannot be fun. However, you must be careful to operate your business as a business and no longer treat it as just a hobby.

To have a business, you must be on a quest to earn a profit through your efforts. The Internal Revenue Code is very clear about the intent for profit. It lists the following relevant factors to be considered to determine if a profit motive exists for your business:

(1) The manner in which the taxpayer carries on the activity. The fact that the taxpayer carries on the activity in a business manner and maintain complete and accurate books and records may indicate that the activity engaged in for profit.

(2) The expertise of the taxpayer or his advisers.

(3) The time and effort expended by the taxpayer in carrying on the activity.

(4) The expectation that assets used in the activity may appreciate in value.

(5) The success of the taxpayer in carrying on other similar or dissimilar activities.

(6) The taxpayer’s history of income or losses with respect to the activity. A series of losses during the initial or start-up stage of an activity may not necessarily be an indication that the activity engaged in is not for profit when strong business intent has otherwise been proven.

(7) The amount of occasional profits, if any, which are earned.

(8) The financial status of the taxpayer.

(9) Elements of personal pleasure or recreation. The presence of personal motives in carrying on of an activity may indicate that the activity is not engaged in for profit, especially where there are recreational or personal elements involved.

With the Internal Revenue Service, it always amounts to your intent. So make sure all your actions testify to your profit intent when running your business. The more what you do could resemble a hobby, the more important it is to make sure that your business paperwork is in order, and your business intent is obvious should an auditor come by snooping for a close look!

No worries.  You can have fun and make money too – it is possible to create the business of your dreams AND make your life more tax-deductible!