Do you have a business or a hobby?

As we “celebrate” Labor Day this year, I feel super-grateful that we have something meaningful to Labor for! It’s a good time to reflect on how we treat our business – do we treat it like a business or a hobby?

Please don’t wait until tax-time to figure out if you have a business or a hobby! The IRS has on the difference between the two and I’ve included some questions to ask yourself as you get your business off the ground:

Hobby: An activity done mainly for recreation or pleasure.

• Your livelihood is not dependent on the income provided from a hobby.
• Little attempts are made at increasing profitability

Business: An activity with the purpose of making you a profit.

1. Are activities carried on in a businesslike manner?
2. Are complete and accurate books/records maintained?
3. Are time and effort spent with the intention to make a profit?
4. Are losses part of the normal startup phase or due to unforeseen circumstances?
5. Are methods changed/improved with the goal of increasing profitability?
6. Can you pass on the information needed to others in order to carry on the activity as a successful business? (ie. Is it duplicatable?)
7. Have you been successful making a profit from a similar business in the past?
8. Are you generally tracking with the industry averages on generating a profit?

At the end of your first year, envision this:

• You are a successful business owner
• Your livelihood is taken care of from the business and you have excess to re-invest
• You keep track of your expenses
• You are profitable

Push the hobby mentality aside and see your business thrive!

All the best,