Turn Your Hobby Into a Business

After months of hearing your friends and family say, "You're so good. You should sell these!", you finally did it. You decided to turn your hobby into a business.

That said, there's so much more to this than simply selling your products. If you continue to treat your hobby like a hobby, then you won't generate steady income.

There are many things to consider when transitioning your hobby to a business. I know this may sound like a lot, but it's easy enough to do once we break it down.


First, when you are deciding on your name, make sure that you're not limiting yourself. For example, if I started a business named "Katie's Bows," I would be limited as far as what I could offer. It would be hard for me to branch off into onesies and t-shirts.

In actuality, my creative business was called Katie Did Creations. I wasn't limited by any particular product, and people knew that what I created was probably handmade.


The way that you should register your business varies by state. Some states require you to register as an LLC. Some require you to become incorporated. And others simply ask that you register your fictitious name, or DBA.

You can find out how to register your business on your state's website. In most states, it only takes $10 to register a fictitious name. The requirements for becoming an LLC or an incorporation also vary by state.

It's important to register as soon as possible so you are legit from the get-go!


This is the most common line I see people draw for themselves. They think that if they have not yet made $600 in their businesses, then they still have hobbies and not businesses and don't have to file a business return.

This is not true!

As soon as you have the intent to make a profit, the IRS considers you a business. What constitutes have an intent to make a profit?

  • Having a business Facebook page
  • Selling your products in any fashion
  • Marketing your items for sale

The IRS does say that if you are spending more money that you are making, then you are exempted from claiming this income on your tax return. 

This means that you need to actually try to make an income instead of treating this like a tax deduction. If the deductions amount to more than your income for too long, the IRS will stop you from being able to claim those deductions.

Bank Account

Speaking of profit, it is important that you are separating this income from your personal funds as soon as possible. The IRS does not appreciate those who mix their business and personal finances, including income, expenses, and assets. I recommend using your local credit union.

Upon hearing this, people often then ask me, "But don't I need to have a business income to open a business bank account??"

No! You can make what's called an owner's contribution. This is taking $100, for example, and using it to open up your business account. At any point, you can pay yourself back by making an owner's withdrawal.


The requirements for business insurance typically vary by type of business and state stature. Typically, the average handmade business will not require business insurance. That said, your residence insurance may not cover all of your business assets. 

To find out, you can call your renter's or homeowner's insurance company to notify them of your in-home business and find out what they cover. This is particularly important if you have expensive pieces of equipment or a lot of inventory in your home.


It's time to stop treating your business like a hobby!

I know, I know. This is easier said than done. Unless, of course, you have the steps broken down like I'm about to do for you:

  1. Set goals.
    • Set ALLLLLLLLL the goals: financial goals, sales goals, and product goals. Whatever motivates you, make a goal for that.
    • Personally, I am motivated by money, so most of my goals are financial. I always know how much money I want to make, and I figure out what I need to do to reach those goals.
  2. Track all of your income and expenses. 
    • Do the best that you can. If you struggle with this, feel free to check out one of my many programs to help get you on track! I also have a ton of resources on the other blog posts.
  3. Keep accurate records.
    • Yes, this includes keeping all of your receipts.
    • Make detailed notes on all of your receipts, income logs, and expense logs. Know exactly where all of your money is going. The more accurate the better!
  4. Set your standards.
    • What will your shipping standards be?
    • What are your return standards?
    • How will you treat your customers? Not everyone is going to be nice to you, so it's better to have a plan in advance on how to treat your difficult customers.
  5. Serve like no other.
    • People tell me all the time, "But Katie, they sell the exact same thing that I do! Why would someone buy from me when they can get it from her?" But if you serve like no one else, that will not go unnoticed.
    • If you ever make a mistake, and you fix it with dignity, respect, and compassion, I promise you will be creating return customers who will come back to you over and over. New customers are good, but returning customers are amazing.
    • Take the extra step. Serve like no one else. I promise that this will help you build a business with a solid foundation.

By following these steps and following these actions, you will be well on your way from turning your hobby into a business. Not just any business, but you will have one that is built with integrity, to be financially stable, and to open you up to new opportunities.


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