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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.

| 👁 718 | Posted November 24, 2018 | Share on Facebook | Twitter | Google+

| Modified: November 24, 2018 | Author:

4 Comments

frshtrx 11 months 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 11 months 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 11 months ago

Amazon isn't an LLC. COMPLETELY different scenario.

zipadyduda 11 months ago

Amazon is a hobby?


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