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

Generic filters

Buzz Your
Insurance Agent

Search for a local agent with our agent finder map.

Agent Finder

Want to learn more about our blog writer?

Read more about KayLynn's background.

Click Here

Search All Blogs

Generic filters

Read More Blogs

Six Men Who Captured Hearts: Universally Loved Figures in American Culture

Explore six beloved men in American popular culture.

The Uninsured Gap: Why Small Businesses Are Missing Crucial Protection

Why small businesses need more insurance.

Beyond “How Was Your Day?”: Engaging Your Kids with Deeper Questions

Get your kids talking with these open-ended questions.

The Rise and Fall (and Possible Return?) of the American Minivan

The minivan’s journey: from family icon to potential comeback.

Out with the Old: 7 Home Upgrades That Pay You Back

Upgrade these 7 outdated home features now.

America’s Linked Cities: Six Communities Forever Entwined

Discover America’s famously linked cities.

Navigating Price Increases: How to Retain Customers During Inflationary Times

Retain customers during price increases with these tips.

Beyond the List: What Your Bucket List Really Says About You

The hidden meaning and power of your bucket list.

Taking the Wheel: How You Control Your Car Insurance Costs

Control your car insurance costs with these tips.

Beyond the Walls: Maximizing Your Home’s Outdoor Living Potential

Unlock your home’s outdoor living potential.