Hobby vs Business
This post is the second in a series of posts on the topic of Starting and Running your own business.
Are you thinking of turning your favourite pastime into a business?
If so, then you need to be aware that there are different taxation and reporting obligations, insurance and legal requirements depending on whether you are a hobby or a business.
What is a hobby?
A hobby is a pastime or leisure activity conducted in your spare time for recreation or pleasure. For example, your passion may be cooking. Your friends love what you provide and have on an ad hoc basis asked you to do the catering for their family get togethers.
What is a business?
There is no single factor that determines if you are in business. Some key questions to determine if you are running a business include:
Overtime, your hobby may evolve into a business. Hence, it is important to monitor changes in your activities.
Whether or not you are running a business will depend on your individual circumstances.
Many government agencies including the ATO provide further information to help you understand the differences between a hobby and a business.
It may also be useful to obtain professional advice as to whether you are a hobby or a business from a solicitor, an accountant or a business advisor.
Why not make a complementary consultation with me today to go through your business ideas.
If you have determined you are running a business. The next step in setting up your business is deciding on your business structure, such as, a sole trader (individual), partnership, company, or trust in order to operate your business.
My next post will look at the different business structures to operate your business.