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When Does a Hobby Become a Business?

Here’s New Hampshire Business Resource Center Seacoast Business Services Specialist Christine Davis’ newest Portsmouth Herald column that answers the often tricky question: When does a hobby become a business?

I received several questions this past week on a variety of topics related to owning a business.  It amazes me how much there is to know about business ownership and how little I actually know.  I guess we all feel that way some days and can be thankful for having the Internet and colleagues to go to for help.

New Hampshire Business Resource Center Seacoast Business Services Specialist Christine Davis

New Hampshire Business Resource Center Seacoast Business Services Specialist Christine Davis

Does a business need to make certain minimum revenue in order to be considered a business?  I am just doing this on the side and don’t expect to earn much the first year in operation.


The simple answer is no.  I went to www.irs.gov to get a more complete response for you and here is what they say:  Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit.  It gets a bit more complicated when you drill down to try and separate a hobby from a business as I learned from the site that you can actually deduct expenses from having a hobby.  Really.  I love this country.

NH is pretty easy as far as starting a business (assuming a permit isn’t required).  You can register through the State by visiting www.sos.nh.gov/corporate and downloading the appropriate forms.  The good thing about registering as a business, besides being a law-abiding citizen, is that you can deduct the expenses you incur that relate to your business.

I heard from another start-up this week:

Do I need to get a permit in order to start a photography business?  Also, do I file for a business name the same time that I file as an LLC?

I smiled when I heard this question as I had just returned from the Business & Industry Association’s “Small Business Day at the State House” and had learned that NH requires permits from over 90 different business industries.  I went to the following site, www.nh.gov/nhes/elmi/licertreg, to learn that while a Shampoo Assistant Apprentice does need to file for a license, a photographer does not. 

As far as reserving a business name and filing to become an LLC, you need to first file for the name to ensure the name is available.  This avoids needing to rewrite the articles of incorporation in the event that the name is not available.  If the name is available, it can be held for 120 days to allow time to prepare the necessary documents needed for incorporation.  More specific information can be found through the corporate division of the Secretary of State’s office website, www.sos.nh.gov.

I also wanted to thank those who wrote to me in response to the last article about health care costs and small businesses.  I heard from a reader who suggested businesses also look into wellness programs to reduce costs.  A healthier workforce will also be a more productive workforce.  You should talk to your provider about these options.  More information about the health care tax credit was requested and that can be found at the IRS website, www.irs.gov.  Just type, health care tax credit for small employers, to be directed to the appropriate page.

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