Business vs Hobby – Be Honest, Are You Really “In Business”

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More than a few people try to take what they do as a hobby and turn it into a business. One example of this is someone who writes computer programs for friends and gets rave reviews from everyone, suggesting that they start a business. Obviously there a many factors that enter into making such a decision, but the real question is whether what essentially is a hobby can turn into a viable, long term business.

The issue here is what separates a hobby from a business. Luckily for us, the IRS has a list of 21 considerations they check to determine whether an enterprise is merely a hobby or an actual business. While you technically can have a business without meeting the IRS guidelines, not being able to deduct expenses or having all your income taxed as ordinary income are definite barriers to growth and profit. Setting aside the tax issues, a business demands that you focus more on the customer than the product. Conventional wisdom says that the product quality is essential to business success, but making a product customers do not like or evolve into something customers do not buy has less to do with quality than consumer interests.

More than a few people try to take what they do as a hobby and turn it into a business. One example of this is someone who writes computer programs for friends and gets rave reviews from everyone, suggesting that they start a business. Obviously there a many factors that enter into making such a decision, but the real question is whether what essentially is a hobby can turn into a viable, long term business.

The issue here is what separates a hobby from a business. Luckily for us, the IRS has a list of 21 considerations they check to determine whether an enterprise is merely a hobby or an actual business. While you technically can have a business without meeting the IRS guidelines, not being able to deduct expenses or having all your income taxed as ordinary income are definite barriers to growth and profit. Setting aside the tax issues, a business demands that you focus more on the customer than the product. Conventional wisdom says that the product quality is essential to business success, but making a product customers do not like or evolve into something customers do not buy has less to do with quality than consumer interests.