How to turn your hobby into a
small business
Hosted by: Brian Cook & The Office of Financial Advising
Objectives
• What kind of hobbies are marketable?
• Taking the “step” from hobby to business.
• Valuating yourself
• Formulating a goal
• Developing a business model/strategy
• How to become “legit” checklist.
• Q&A
Marketable Hobbies
• Skill
• Artistic, Musical, or Anything that requires training
• Craft
• Sewing, Building, Cooking
• Expensive
• Horseback riding or Golf
• Time Sensitive
• Collecting or Gardening
How do you know when
it’s time to take
“the step”
from hobby to business?
Taking “The Step” Pt. 1
Develop A Goal
•What do you want this “business” to become
▫Some extra cash
▫A good side business
▫Potentially something bigger if it works out
▫Your career
Taking “The Step” Pt. 2
Valuate yourself/product/service
•What do similar people charge (market value)
•How would you rate or compare your ability?
•Consider “selling” to friends and family first to
get a baseline
**Tip: Establish if and what your friends
and family “discount” will be upfront**
Taking “The Step” Pt. 3
Develop A Strategy To Reach Your Goal
(This is also known as your Business Plan)
•Start ANSWERING these questions:
▫What do you already have vs what do you need?
▫Does a market already exist vs creating your own?
▫Ecommerce vs traditional business?
▫Do you need funding?
▫Debt vs Equity?
Now that you’re taking
“The Step”
Keep from falling on you @$$ by…
BECOMING…
Becoming Legit Checklist
• Step 1:
• Check with Secretary of State to determine if
selected name is available
• Optional: Get a DBA (Doing Business As)
• Step 2:
• File Articles of Association for LLC (Limited
Liability Company) with Secretary of State
• $350.00 Fee
Becoming Legit Checklist
• Step 3:
• Adopt a company agreement
• Serves as By-Laws
• Governs how the entity will be
managed
• Conditions for transfer of ownership
• Directions for how the entity will be
dissolved if needed
Becoming Legit Checklist
• Step 4:
• Apply for Employer Identification Number
(EIN) with the IRS
THIS WILL DETERMINE HOW THE ENTITY
IS TAXED
Type of Entity
How it’s Taxed
Sole Proprietorship
LLC is “disregarded entity” and files
no return. All income reported on
single owner’s tax return.
Partnership
LLP files a partnership return and all
income/losses will be reported on a
separate schedule of each
individual owner’s return.
S Corp
Pays taxes just like a partnership.
C Corp
Separate entity for tax purposes.
Files and pays its own tax return.
Becoming Legit Checklist
• Step 5:
• Open a new, separate business bank account
• This cannot be done until you have an EIN
The account should only be used for business purposes
• Step 6:
• Transfer assets to your newly formed LLC
• Cash for operating capital
• Assets through a bill of sale
BIG
Little Things that will
MAKE or BREAK you
Insurance
Protect yourself and your assets
If you are using any personal assets for a
commercial purpose then you will not be
covered under your homeowners
insurance
You need to purchase a Commercial P & C
(Property and Casualty, better known as
liability) Insurance Policy. Your business
will be the policy holder.
Employees and Workers Comp
If you “hire” help then it is important to distinguish them
between an employee vs and independent contractor
Employee
•
•
•
•
Management has lots of control
over daily routines and tasks
Paid on employer’s terms
May receive benefits
Stated as employee in contract
Independent Contractor
•
•
•
•
Management has very little control
over daily routines and task
Paid on contractor’s terms
Is not a spokesperson for the firm
Contracted as an independent
Contractor
**You can hire independent contractors as needed very easily**
If you hire someone who falls under the “employee”
category, then you must register for workers compensation
and begin paying workers compensation and social security
tax for each employee you hire.
Taxes
**There is no minimum amount you have to make
before paying taxes. Every dollar of income you
make should be reflected on your tax return**
•
Keep accurate records, both income and expenses
▫ Use book keeping software such as Quickbooks
▫ Keep your receipts for purchases
▫ Create a receipts for your customers (1 copy for them
and 1 for you)
• If you have kept accurate records, filing your own taxes
shouldn’t be too hard!!!
▫ You can use TurboTax to file yourself
▫ Or you can go to a professional CPA for a fee
Resources
• SFA Student Financial Advisors
▫ Individual 1-on-1 counseling
⚫Budgets
⚫Financial Advising, etc.
▫ Groups/ Organizations
⚫Workshops
⚫Presentations
⚫Budgeting and Financial Counseling
Questions?
Concerns?
Comments?
Contact Information
*www.sfastudentfinancialadvisors.wordpress.com*
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Twitter - @StudentFinAdv
OR VISIT OUR OFFICE IN BUSI 162