Is Your Business a Hobby? pt. 3
A.) Manner in which the taxpayer carries on the activity
Are you acting like this is a job? Do you try to analyze the current business situation and improve it from period to period? This shows that you’re running the business as a business–there is an intent to make a profit. Essentially, a business is defined as a venture that is taken on for profit. I have to admit–if you have been “in business” to lose money–the IRS (or any other taxing authority) will not view it as a business.
B.) The expertise of the taxpayer of his or her advisers
Are you a dog-lover? Do you really love old cars? How about starting a business working on old cars or starting a dog-training facility? Unfortunately, unless you have advisers helping you out or know about dogs or cars respectively, then there’s going to be a problem if you go into dog training or auto restoration. What you need to do is find someone who can help you determine what the best actions are to make your business profitable. Those advisers give credibility to the business that you might be lacking at first.