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Business classified as a hobby

unning this business of mine for about 5 years as a hobby. Not caring about turning a profit. The business itself is an actual business (LLC) with a tax ID. For the 5 years, it hasn't made any money. I understand that the IRS will categorize your business as a hobby if you do not turn a profit for how many ever consecutive years. Businesses which has been classified as a hobby will not allow the deduction.

I have some questions that I was wondering if you could help clarify.

  • Is there any way I can find out if my business has been classified as a hobby or not? Is there a website that I can go to to look this information up?

  • Once a business has been classified as a hobby, can it be reclassified into a regular business if it starts to turn a profit? Is this process automated or the business owner has to call the IRS and fill out some form?

  • For my specific condition, if I know that by next year I will turn a profit, is it just faster and easier for me to close down my current business and create a new business?

Thanks.

| 👁 1027 | Posted November 24, 2018 | Share on Facebook | Twitter | Google+

| Modified: November 24, 2018 | Author:

4 Comments

frshtrx 1 year ago

If you've been doing this 5 years in a row, you might be proactively wise to officially close this business and start a new one. If you haven't really gone past hobby efforts, maybe you have website, bank account and a phone number to transfer. If you don't even have all those things set up in a dedicated manner, then you definitely should. Make the move before you get on their radar, because once you are it doesn't go away.

JeF4y 1 year ago

I'm in this same boat. This year 2018 will be year 6 of loss if I don't hide loss & show a gain. I will likely do that just to show a couple hundred bucks in profit if I'm not in the black by EOY. And honestly, if they want to audit me they'll see where I have spent and lost thousands legitimately trying to make this business successful.

JeF4y 1 year ago

Amazon isn't an LLC. COMPLETELY different scenario.

zipadyduda 1 year ago

Amazon is a hobby?


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