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LLC for hobbyist? Or sales contracts?
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LLC for hobbyist? Or sales contracts?
Hey everyone. I build as a hobby but in the last couple years have been selling more and taking on commissions. As my clientele starts to branch out from friends and friends of friends to people I don’t actually know, I realized I may need to consider protecting myself from a legal standpoint.
The worst-case I want to avoid is someone suing me as an individual, and potentially going after my house or assets. I’m not doing repairs, so I’d think that the worst case within the realm of reason would be that someone hates what I build them, so I refund them. But I don’t want to make any assumptions about people being rationale.
Should I look into creating an LLC? Or some other business entity? By the IRS definition, my operation would likely still be considered a hobby. So is there a better way to protect myself, like possibly a sales contract with clear provisions?
Thanks for any advice!
irs.gov
Income & Expenses | Internal Revenue Service
How do you distinguish between a business and a hobby?
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3 Replies
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Well. what my CPA told me was NEVER have a hobby. Always be a business if you’re doing things for money. Keep track of your income and your expenses. Whether you do an LLC or not is kinda up to your and your accountant, but at bare minimum, call it a business and do a Schedule C on your taxes. You are doing business, so you should benefit from your business income/expense.
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To protect yourself you need to have published terms of sale.
Remember, you are the one at risk.
Most people are great, scope out the clients in advance and learn to avoid problem people.
The last thing needed is an obnoxious client.
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Not a lawyer.
https://www.artistscontract.com/contracts
But you might look at the sample contract for commissions, and see if it works for you. Then run it past an attorney in your state to see if it holds water.
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