Here’s a scenario.
Jane has been working her corporate job for some time now. She would love to start something on the side, something that would give her a break from the demands of the corporate world.
Candle-making has always been a passion of Jane’s, so she starts making candles on the weekends as a way of giving herself some “me time”.
Does Jane have a business? This one is cut and dried. No, Jane is not in business as she is only looking for a reprieve from her demanding job.
Let’s take it a step further.
Jane continues to make candles and her friends and family are now buying them.
A couple of times, she even went along with her friend Suzie, who regularly has a stand at the local markets and sold some of her candles there. At the markets she used the name “Jane's Candles”.
Although initially she was only covering her costs, after a few months Jane has made a profit.
Jane still has her full-time job and makes her candles in her spare time.
So is Jane in business yet? Nope. At this stage it’s still a hobby.
Jane has no intention of making money from the activity. She has not taken any active steps to set up the candle-making as a business. She really just fell into it.
As a result, Jane does not include the sales in her income and she is not able to claim for any of the expenses associated with making the candles.
Jane has been doing this for some time now and absolutely loves what’s she’s doing. In fact, she would love to ditch her corporate J-O-B and concentrate on candle-making.
Jane takes the following steps:-
Sets aside some space in her home to keep the candles.
Gets an ABN.
Registers a business name.
Opens a bank account to keep her candle making money and personal money separate.
Creates an online presence.
Intends to uses cloud accounting software to handle her bookkeeping.
Jane now has the intention of making money from her endeavours.
Finally, Jane is running a business.
Business versus Hobby is rarely ut and dried. There's no income level that your hobby needs to reach in order for it to then be called a business. You need to be actively taking steps to have your endeavours deemed to be a business.
Need assistance with your business? Give Mary-Louise a call on 0422 391 370.