Hobby vs. Business - Which Are You? - RD215

<h2>Is your side gig a hobby or a business</h2> <p>I had a conversation with a fellow designer recently who works full-time for an ad agency and periodically takes on small design projects on the side. He called it a hobby. That got me thinking, what is a hobby and does what he’s doing qualify?</p> <h2 class="p1">Hobby vs. Business</h2> <p class="p1">Standard disclaimer: I’m not a lawyer, accountant, tax expert or business advisor. The following is solely my opinion.</p> <p class="p1"><strong>Hobby:</strong> A hobby is an activity done for enjoyment, typically during one’s leisure time. A hobby encourages the acquisition of skills and knowledge in that area.</p> <p class="p1"><strong>Business:</strong> Business is the activity of making money by producing or selling products such as goods and services. Simply put, business is any activity or enterprise entered into for profit.</p> <p class="p1">By those definitions, any design work you do where you get paid should be considered a business venture. At least you would think.</p> <h2 class="p1">When does a hobby become a business?</h2> <p class="p1">According to the IRS, a hobby is an activity that an individual pursues without the intent of generating a profit. “Intent” is the keyword here. Meaning it’s ok to make money pursuing your creative hobbies as long as it wasn’t your intent, to begin.</p> <p class="p1">For example, let’s say you have a screen printing machine and print yourself graphic T-Shirts. If someone sees one of your shirts and offers you money to make one for them, it’s still considered a hobby, because it wasn’t your intent to sell the design or shirt when you created it. However, if you designed and printed the shirt with the hopes of selling more like it, then it’s a business.</p> <p class="p1">An artist who paints for the joy of it, and sells the odd painting to cover the cost of supplies is considered a hobbyist. But as soon as that artist decides to showcase their paintings, in the hopes of selling them for a profit, it becomes a business.</p>