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

InsuranceProtect 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 CompIf you “hire” help then it is important to distinguish

them between an employee vs and independent contractor

Employee Independent Contractor

• Management has lots of control over daily routines and tasks

• Paid on employer’s terms• May receive benefits• Stated as employee in contract

• 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

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OR VISIT OUR OFFICE IN BUSI 162