Hobby or Home Business? How to Tell the Difference
Hobby or Home Business? How to Tell the Difference
Many people start out with a hobby that they eventually turn into a business. But how do you know when your hobby has crossed the line into business territory? Here are a few factors to consider:
- Motivation: If you’re creating and selling items because you enjoy it, it’s probably still a hobby. But if your primary motivation is to make money, you’re more likely in a home business frame of mind.
- Inventory: If you have a lot of inventory, especially if you’ve invested a lot of money in it, that’s another sign that you’re running a business.
- Marketing: If you’ve created a logo, labeling, and marketing materials, you’re clearly taking your business seriously.
- Sales tracking: If you’re carefully tracking your sales and inventory, that’s a good sign that you’re running a business.
- Business structure: If you’ve set up a business structure, such as a sole proprietorship, partnership, or LLC, that’s a clear indication that you’re running a business.
- Space: If you have a dedicated workspace in your home and you’re using it for business purposes, that’s another sign that you’re running a business.
- Customer base: If you’re selling to mostly strangers, that’s a sign that you’re running a business. If you’re mostly selling to family and friends, it’s probably still a hobby.
If you’re developing a home-based business that is bringing in increasingly significant amounts of income, or if you have invested heavily in equipment or inventory, you should be aware that your personal homeowners’ insurance policy will not provide coverage should a loss occur due to fire or theft. You should reach out to an independent insurance agent to get a quote on protecting your home-based business.
If you’re still not sure whether your hobby is a business, it’s always best to err on the side of caution and treat it as a business. This will help you to stay organized and compliant with all applicable laws and regulations.
Do you have questions about your insurance? Find an insurance agent near you with our Agent Finder
Search All Blogs
Search All Blogs
Read More Blogs
Your Perfect Beach Day: Tips for Effortless Fun in the Sun
Easy tips for a perfect, stress-free beach day.
Peace of Mind for Your Business: Key Moments When Insurance Pays Off
Business insurance: essential protection for common challenges.
Navigating Life Insurance: 5 Common Mistakes to Avoid for Your Financial Future
Avoid these 5 common mistakes when buying life insurance.
Your Car’s Health Check: A DIY Guide to Safety and Maintenance
Simple DIY car checks for safety and maintenance.
Budget-Friendly Home Upgrades: 4 Ways to Boost Your Home’s Value and Appeal
Boost home value on a budget with these 4 DIY upgrades.
From Cutting-Edge to Clutter: Modern Antiques Hiding in Your Home
Uncover the surprising “antiques” in your tech drawer.
Unlocking Customer Loyalty with Smart Data
Turn customer data into your business superpower.
Is There an Age Limit for Life Insurance? Understanding Your Options
The truth about age and life insurance eligibility.
5 Automotive Icons That Sounded Destined for Greatness
Uncover the powerful names behind legendary cars.
7 Surprising Facts You Didn’t Know About Home Insurance
Unexpected insights into the world of home and renters insurance.