Blog – Business or Hobby?

Happy Monday morning! I’m back to work and I figured, why not give someone else a chance to write for my blog? I deserve a day off, don’t I? (You’re probably saying no…considering I just had 5)  I’ve seen a couple of questions around twitter on whether blogs should be set up as a business or not.

Honestly, if I didn’t have a husband who did this for a living, I’d probably have no idea and then come tax time, I’d be in big trouble. Luckily, I have someone that can give me great financial advice…and will do everything for me. All I had to do was sign on the dotted line…good thing I trust him. So I figured, why not share some of that wealth of knowledge with you? Should your blog be a business, or should it just be something you do for fun?

So with that said, I’ll let Danny take it away. This is some pretty heavy stuff, but it’s worth taking the time to read. It may save you some big bucks…and you may even figure out how to get those goji berries to become tax deductible.

It’s tax season!  I know everyone is not excited as I am, but Nicole thought it would be a good idea for me to share some ideas on how you should set up your blog financially.

The first decision you need to make: is your blog a business or a hobby?  If it’s a hobby then you either don’t have any income or it’s small. If that’s the case, then you can’t deduct any, or at least that many expenses.

If your blog is a business then there are a number of things you can do to help you save money.  You should talk to your accountant or tax advisor for specific questions or advice on how your blog should be set up as a business, but I will review some general ideas.

First thing’s first, you should set up a separate bank account. This will establish your blog as a business and help you separate income and expenses that have to do with your blog from other types of income.

Some examples of business expenses are website hosting, advertising expenses or computer equipment.  Business income is income you earn either from your blog or any consulting services you do.  If you have a full time job where you get paid as an employee these checks should still be deposited in your personal checking account.

The IRS wants you to have a separate bank account, so that is a reason in itself to do it.  Once you have a bank account it will be easier for you to track your income and expenses.  This is important, because if you are a business and earning income, you should file quarterly estimated tax payments.  If you are set up as a business there are benefits to you, even if your blog is not making income right away.  At the end of the year your taxable income will be reduced by the amount of money your business has lost.  In addition to a bank account, setting up a credit card that will be used only for your blog or business is a good idea.  This will help you track expenses and give you some additional cash flow in case you have to make any large purchases.

As time goes on and your blog grows, you will build up a record with your yearly tax filings and financial statements that proves the profitability of your blog.  This will help if you ever want to get a loan for a business investment or try to attract investors.  Lastly, it is important to talk to a lawyer or possibly your accountant to understand your liability.  As you make more money and give more advice your liability may increase and you may want to think about buying insurance or setting up a corporation or LLC.

Good luck and if you have any other questions or would like any help with your financials give me an email, we’ll work something out.  [email protected]

Do you have your blog set up as a business? Is this just mumbo jumbo to you?

Back to regularly scheduled programming tomorrow.

Tagged as: Blog, business, hobby, money, taxes