Many people find joy and fulfillment in working on hobbies. Whether it is crafting, photography or baking, these pursuits often serve as a creative outlet or a way to relax. However, if you sell any goods or services related to your pastime, the relation between hobby and business becomes blurred.
Watching for telltale signs and establishing a business entity helps ensure compliance with relevant regulations and responsibilities.
Frequency of transactions
Selling crocheted baby blankets to friends or photographing relatives’ weddings for a fee typically does not constitute business activity. While there is no strict definition of how many annual transactions make the difference between hobby and business, if you find yourself consistently selling products or services, you may have an obligation to report these sales. To avoid muddying your personal finances, establishing a business entity is advisable.
Business-like behavior
Engaging in business-like behavior is a clear sign that your hobby has evolved. This includes advertising, creating a business website or actively seeking customers. When you start treating your hobby with the same dedication and structure as a business, legal obligations come into play.
Registration and licensing
In Pennsylvania, certain activities require registration with the state and may involve licensing. For instance, preparing foods for sale in your own home entails Limited Food Establishment licensing, while making stuffed toys or bedding has its own provisions. If your activity necessitates registration and/or regulation, that is a sign you are operating a business.
It is important to recognize when you are no longer just a hobbyist but an entrepreneur. Becoming one of the over 1.1 million small business owners in Pennsylvania allows you to continue your pursuit without running afoul of legal and fiscal obligations.