Posted on October 18, 2012 @ 06:46:00 AM by Paul Meagher
In the farming industry, there are lots of "hobby farmers". Presumably this refers to people who are into farming for the lifestyle aspects of it rather than to make it into significant source of income. The tax code also likes to distinguish between hobby farming versus serious farming, where hobby farmers are more likely to get audited if they claim too many expenses - the Canadian Revenue Agency views it as a potentially illegitimate tax shelter.
What is true of farming is probably true of many entrepreneurs who have "hobbies" that they invest money into and improve over time. The amount of expenses they want to claim on a "hobby" might be limited by their fear of upsetting the tax man by claiming "personal" expenses.
It could be argued that the difference between a hobby and a real business is how willing you are to manage the tax accounting for that business as a real business. So if you are fishing around for a new business to start up, consider the option of turning your hobby into a serious line-of-business by starting to journal all the income and expenses related to that business. Consider investing more into your hobby and claiming the full tax-sheltering benefits of doing so.
Sometimes starting a new business is not about coming up with a innovative new concept but rather getting serious about a hobby by deciding 1) to investing more into it, and 2) running it as a fully journalled and expensed line-of-business. When your new business is ready for, and has a plan for more investor capital, consider registering with Planet Dealflow and submitting your proposal to our network of business investors.