How to Turn Your Hobby Into a Business in 4 Steps?

You think that it's not possible to earn money for doing what you're doing for

Nearly everyone has a hobby or a pastime in their life that occupies much of their time. Unfortunately, many hobbyists tend to toil at a job all day and often barely manage to make ends meet.

What If I Told You…

What if you could turn your favorite leisure activity or your hobby into a business that may seem more attractive than a full-time job.

Americans from all walks of life have been doing this for years. Whether they are just making enough to cover their costs, or they are making enough to quit their regular job, thousands of Americans every year are learning how to turn their hobby into a business. And with the Internet so prevalent these days, the money-making opportunities are potentially endless.

How to Turn Your Hobby Into a Business

Transforming a hobby into a business doesn’t require that you reach a certain level of sales or income. All you need is to reach a point where you believe you’ll make a profit from that activity. There is no specific number that changes you from an individual into a business.

That said, the IRS defines an activity as a business if it has made a profit in three of the previous five years. Therefore, the essence of the question of whether something is a hobby or a business question comes down to how you handle your money and if that hobby loses money.

If you actually lose money from your activity, when you factor in all related expenses, the IRS will let you deduct this loss to offset your other income, such as your regular day job. Put simply, regardless of what you call it; the IRS won’t consider it a business until you have five years in.

Treating Your New Business Like a Business

Once you have decided you have a business, not a hobby, you have to move beyond hobby status, which means you need to start managing it like a business.

There are several key steps you must take to launch an official business, including:

1 Step: Choose a Name for Your Business

So your business name isThis is the beginning of your new brand, so you’ll want to choose something easy for everyone to remember and which will reflect what your hobby is about. Before you settle on a name, you should check to see if the website address is available and do a little research to make sure another business isn’t already using the name.

You should perform a free name search to see that the name is available in your state, of course, but you should also continue your search in the free trademark database to see if anyone has trademarked your proposed name.

2 Step: Register Your Business

At the very least, you should register your business name with the state via a Doing Business As (DBA) or Fictitious Business Name filing. The idea is that no one can appropriate your business name. But you should also consider incorporating a Limited Liability Company (LLC), to keep the business separate from you.

This will protect your personal assets from possible creditor claims. It means, if someone files a claim against your business, which can happen, you won’t lose your house or your car.

3 Step: Obtain the Licenses and a Tax ID Number

Whether or not you need a permit or license to operate your business will usually depend on the nature of your business. If you are simply selling things online, you probably don’t need one, but if you open up a shop in town, you will definitely need one.

In order to distinguish your business from yourself, you will also need a Federal Tax Identification Number, also known as an Employer Identification Number.

4 Step: Open a Separate Business Bank Account

Once you have a Tax ID and you have established the business as separate from yourself, it’s time to set up a bank account specifically for the business. It keeps business fund separate from personal funds.

This is an absolute must if you incorporate or establish an LLC. You have no choice.


Transforming the hobby, you are passionate about into a functioning business can become one of the most satisfying things you ever do in your life. Many people have done this and you can, too, if you just follow these basic steps.

Become that person who does what they love for a living. They do exist.

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