Executive business coach Joyce Reynolds told Forbes in 2012 that your hobbies give clues as to what can ultimately become a career you love. Kim Lavine of Grand Rapids, Michigan is a great example of this. She used to make microwaveable pillows for gifts. But when her husband became unemployed, she turned her few-times-a-year hobby into a $1 million business within four years.
Many people who love their hobbies cringe at the prospect of converting those spare-time pursuits into money-making opportunities. Being an entrepreneur might be the subject of dreams, but starting your own business could be a thing of nightmares.
Track your expenses, tally up what you've made; you might be surprised. It's no joke that small businesses in this country are big business.
What to Do About It?
The IRS, that government agency that Americans love to hate, publishes some not-always-so-easy-to-understand guidelines regarding hobbies and sideline businesses. Here's the scoop on it:
When you operate a small business, even under your own name and out of your house, you must play by different rules. Early on, you should begin to account for your time, expenditures, and income in a different way. A business, according to the government, exists to make a profit. But, if it doesn't, as long as the records are legitimate, detailed and supportable, you may be able to claim business losses. You can deduct these from personal income, thereby decreasing potential tax liability, as the IRS outlines.
Hobby losses are limited, and expenses to sustain a hobby are treated differently.
Okay, I Have a Business. What Now?
Keeping good records is the prime directive. Any funds you spend to set up shop, literally or figuratively, should be tabulated. Separating personal expenses from business expenses is paramount. Your lunch at a fast-food outlet is not a business expense under most circumstances. However, picking up the tab for lunch with your banker at a white-tablecloth restaurant might be. Of course, if you're seeking a loan, that might give the wrong impression.
One way to keep track of business expenses is to apply for small business credit cards from American Express. Using the same card for all your business charges not only simplifies record-keeping. It can categorize expenses, detail your cash flow needs, point out spending patterns and enable growth, if that is your goal.
Other Considerations
Certain other expenses which apply to business operation may also impact your personal life. A portion of home expenses such as utilities, insurance and even mortgage payments and taxes, may be deductible. If you use your vehicle for business purposes, you should keep detailed mileage records. If you purchase insurance of any kind, keep every bit of information.
Operating a small business from your home need not be complicated. But, you will at some point probably want to consult with a professional accountant. Likewise, deciding on a business structure may be important. There are numerous resources to assist you such as SBA.gov. Be sure to check local and state requirements for operating as a business.
Finally, remember that there are no rules to prohibit you from making money through your hobby - the limitations are all in your head!
If you found this or any of my other posts helpful, don't forget to share the posts to your favourite networks using the toolbar below or by using the "+1" and "Share" buttons located at the bottom of each post.
As ever, if you want to stay up to date with the latest blog posts, don't forget to follow via Google Friend Connect (button on sidebar), on NetworkedBlogs, via Email (maximum of one email per day), on Facebook and Google+ or by subscribing to our blog feed at:
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http://www.facebook.com/djones1509
https://plus.google.com/104849975941505117776
Until my next post tomorrow on getting the right work-life balance, enjoy the rest of your day! See you back here tomorrow!
© 2013. This article is DMCA protected. Republication is prohibited.
Many people who love their hobbies cringe at the prospect of converting those spare-time pursuits into money-making opportunities. Being an entrepreneur might be the subject of dreams, but starting your own business could be a thing of nightmares.
Track your expenses, tally up what you've made; you might be surprised. It's no joke that small businesses in this country are big business.
What to Do About It?
The IRS, that government agency that Americans love to hate, publishes some not-always-so-easy-to-understand guidelines regarding hobbies and sideline businesses. Here's the scoop on it:
When you operate a small business, even under your own name and out of your house, you must play by different rules. Early on, you should begin to account for your time, expenditures, and income in a different way. A business, according to the government, exists to make a profit. But, if it doesn't, as long as the records are legitimate, detailed and supportable, you may be able to claim business losses. You can deduct these from personal income, thereby decreasing potential tax liability, as the IRS outlines.
Hobby losses are limited, and expenses to sustain a hobby are treated differently.
Okay, I Have a Business. What Now?
Keeping good records is the prime directive. Any funds you spend to set up shop, literally or figuratively, should be tabulated. Separating personal expenses from business expenses is paramount. Your lunch at a fast-food outlet is not a business expense under most circumstances. However, picking up the tab for lunch with your banker at a white-tablecloth restaurant might be. Of course, if you're seeking a loan, that might give the wrong impression.
One way to keep track of business expenses is to apply for small business credit cards from American Express. Using the same card for all your business charges not only simplifies record-keeping. It can categorize expenses, detail your cash flow needs, point out spending patterns and enable growth, if that is your goal.
Other Considerations
Certain other expenses which apply to business operation may also impact your personal life. A portion of home expenses such as utilities, insurance and even mortgage payments and taxes, may be deductible. If you use your vehicle for business purposes, you should keep detailed mileage records. If you purchase insurance of any kind, keep every bit of information.
Operating a small business from your home need not be complicated. But, you will at some point probably want to consult with a professional accountant. Likewise, deciding on a business structure may be important. There are numerous resources to assist you such as SBA.gov. Be sure to check local and state requirements for operating as a business.
Finally, remember that there are no rules to prohibit you from making money through your hobby - the limitations are all in your head!
If you found this or any of my other posts helpful, don't forget to share the posts to your favourite networks using the toolbar below or by using the "+1" and "Share" buttons located at the bottom of each post.
As ever, if you want to stay up to date with the latest blog posts, don't forget to follow via Google Friend Connect (button on sidebar), on NetworkedBlogs, via Email (maximum of one email per day), on Facebook and Google+ or by subscribing to our blog feed at:
http://feeds.feedburner.com/DereksHomeAndBusinessBlog
You can also follow me on Twitter @djones1509, Google+ and on Facebook at:
http://www.facebook.com/djones1509
https://plus.google.com/104849975941505117776
Until my next post tomorrow on getting the right work-life balance, enjoy the rest of your day! See you back here tomorrow!
© 2013. This article is DMCA protected. Republication is prohibited.
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