When Does a Hobby Become a Business? Part Two

After I wrote my first post on this top,  When Does a Hobby Become a Business, I was sharing insights received from a LinkedIn Group called Arts and Crafts Community.  Since my last post, more great ideas have been shared that I would like to add.

The discussion started by this question posed by Ellen:

When do/did you start seeing a (your) hobby business as a ‘real’ business, and is that different from us shop-owners and the rest of the world?

I could hardly believe the responses Ellen received! So many ideas and insights by so many different professional crafters and artisans! Fabunmi’s post got quite a few responses:

It’s a business when it becomes your only means of supporting yourself financially. When all of your attention is focused on beading flowers instead of “toggling” between them and a job, it’s a business. When what you do gets you into a relationship with the IRS, it’s a business. When you start hiring employees, a lawyer, an ad agency, a financial adviser, and an accountant, you’re in a full on business. True, you need the business attitude to begin that process.When Does a Hobby Become a Business?

I do believe Fabunmi brings out a point that all hobbyist turn business need to think about:  Commitment to what you are doing!!  And commitment will cause the need to quit your day job, file a Schedule C tax form, look into have legal business documents set up, hiring an accountant/bookkeeper …. all this so you can commit your time to your craft!

Kylie followed up his comments with the following:

For me, I am a woodturner, it started as a business as soon as I could set up a workshop after leaving University. Because I can’t do it at home I have to rent a workshop so I have relatively high over heads and keep books and am registered with HMRC (IRS) as is required, but as yet I do not generate a net income and so owe no tax on my woodturning business and can carry over remaining costs to the next tax year.

A big plus side to treating it as a business and keeping books is that I am realistic about my progress and I am motivated to have a business plan which I hope will eventually lead to me making it a successful business. This also helps you to price properly, under valuing your time and therefore not charging proper prices for your work devalues every craftsman’s hard spent time and effort and makes it increasingly difficult for anyone to make a proper living out of a craft business.

Good for Kylie, as forming the structure for her business also helped her value herself, her time and her products.  Isn’t that giving action to her attitude … or is it giving attitude to her actions?

I love Melissa thoughtful comments — reflecting back on the theme of my first post, When Does a Hobby Become a Business:

Once you decide you are moving from a hobby to a business, you will change, and your energy will change. There will always be those that are ignorant, and will still say things like.. “oh, that’s a nice hobby”… just remember.. it is those people that are sadly punching the clock, answering to others, and not doing what they love, and are secretly bitter that you are doing what you love, but they aren’t going to say that. (By the way, that is not a knock on those who are trying to build their business, and still need to punch a clock). But I know from years of punching a clock and answering to idiots who knew less, but were in charge, that I am much happier running my own schedule, making my own hours, and doing what I love. And I know when I was doing all that, that the entire time I was wishing i was in control of my own destiny. …. So remember artists… it is not that they look down at you.. it is that they envy you.

Melisa goes on to tell a story about a friend that was taking advantage of her time and skills as a professional craftsman (or women!):

….The last time she brought the pieces to me herself, and after asking me to fix (for free), she followed up with this statement.. “it’s nice you have a hobby to keep you busy” …..So I smiled and replied “Well, it’s not exactly a hobby” and handed her my business card. Her attitude changed dramatically just at the site of the card. I also stopped the “freebies” and started charging her an hourly rate, plus the cost of materials to fix her pieces. Needless to say, she stopped taking advantage.

My point….business cards are a very inexpensive way to let people know you are a business. And also, set boundaries. If you don’t present like a business, even to friends, they will never treat you like a business.

Attitude about yourself and your business is an important part of become a ‘real business’ …. but, in the process, there are many legal items that need to take place as well.

Of course, from my perspective, the ultimate goal of a hobbyist turned business is the able to sell wholesale.  I understand — not every professional crafter or artisan can wholesale.  But it still should be on the list of goals after ‘quit your day job, file a Schedule C tax form, look into have legal business documents set up, hiring an accountant/bookkeeper’ (not necessarily in that order!).

So, where are you heading with your business?

If you are interested in pursuing wholesaling, let me suggest you order a copy of my EGuide:  Selling to Gift Shops.

Source:  Arts & Craft Community on LinkedIn

If you are on LinkedIn, join my group:  Selling Wholesale to Gift Shops

2 comments for “When Does a Hobby Become a Business? Part Two

  1. Dan
    May 8, 2012 at 9:55 am

    My wife and I recently started making candles as a way to spend the free time we have away from our jobs and also possibly make a little extra money on the side. We are wondering if there is a threshold of profit that you need to cross before you have to start filing for permits or tax type stuff?

    Currently we have made $100 from our “hobby”/”business” but have spent $350 to create the inventory that we use.

    We were thinking about attending some craft fairs/farmers markets as a means of selling some of the candles that we have created, but do not know if we should be applying for permits or what paperwork we may need in order to legally sell our candles.

    Also, does donating a portion of profit to charity have any affect on permits?


  2. May 8, 2012 at 10:40 am

    Hi Dan,

    Every city/county/state has different regulations for permits etc. I would suggest that you talk to you to the City Clerks office first. They will be able to tell you about the local regulations. Also the Small Business Development Center, which are often on college campuses, would be a good resource for you. You might want to look up the Secretary of State (in the state you live) for future information.

    Unfortunately, there is not one place to go to for all the info you will need.

    I hope this helps!


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