Hobby or Business? LLC or Not?
Do hobbyists really need to form LLC ‘s or Corporations? That’s a great question and the answer to that question is always a resounding maybe! It really depends on the goals of the one who is doing the hobby. Are they currently making money? Do they want to eventually make money? Could their hobby cause financial or other types of losses to spectators, customers, etc? All of these questions will give answers that point you (the hobbyist) to an LLC, a Corporation or neither.
Let’s take some examples of hobby’s that might require an entity, or rather I should say, that might benefit from having and LLC or corporation setup.
- 1. Bloggers. This group is growing like crazy every day and although there are a lot of them that just want to “express” themselves online, there are handful of them that would actually like to make money. Those who have a goal to make money should form and LLC and create an LLC operating agreement to govern their business because at this point it clearly is a business and not just a hobby.
- 2. Real Estate Investor. TO ALL REAL ESTATE GURUS: you should really learn how to incorporate yourself. Either inc. yourself or create an LLC. Either way is relatively easy and can be done by either filing articles of incorporation or articles of organization with your state. Most states will provide a template version on the LLC form that you can download from the web. If you can’t find one, just Google it.
- 3. Tax Preparers. Every neighborhood has the tax expert that preps taxes for everyone each January through April. He starts doing it when he returns from his 8-5 job and works all evening. Why does he do it? Because he loves it. Really? I think he does it to make some extra money and whether he admits it or not, he is a business owner (a part-time business owner) but a business owner in every sense of the word. Does he need an entity? Absolutely.
I know that there are literally hundreds of different groups of hobbyist that could benefit from setting up a legal entity that separates them from their business (hobby). In regards to bloggers, I don’t think that it would take much effort to find cases where slander has taken place on someone’s blog and legal action has been the end result. No one wants to be caught in the middle of a legal battle but if you do end up there, it would be nice to have the liability protection that an LLC or Corp offers.
