How do you go from business to hobby?

Asked over 3 years ago - Tacoma, WA

My husband and I recently started a small music & video business (LLC) but have realized we bit off more than we can chew. We have very little income, the business made only $300 last year and doesn't look like it will make much more this year. All the paperwork and taxes are overwhelming and taking time away from doing what we love. Is there any way we can dissolve the LLC but still do video & music as a hobby on the side and just to make a little money here and there?

Additional information

Also will we still need a business license with the State?

Attorney answers (1)

  1. Bryant Keith Martin

    Contributor Level 18

    Answered . Yes, you can do business without the shelter of an LLC. Many people rush to form an LLC when it isn't necessary. Your business probably is a low-risk one that doesn't need liability protection. You should nevertheless buy business liability insurance.
    Deductibility of certain business expenses is prohbited if the activity is found to be a hobby. An activity is presumed not to be a hobby if profits result in any 3 of 5 consecutive years ending with the tax year in question. A special election on this is available on Form 5213.
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    DISCLAIMER—This answer is for informational purposes only under the AVVO system, its terms and conditions. It is not intended as specific legal advice regarding your question. The answer could be different if all the facts were known. This answer does not establish an attorney client relationship. I am admitted only in California.
    (Bryant) Keith Martin
    Circular 230 Disclaimer - Advice given in this response cannot be used to eliminate penalties with the IRS or any other governmental agency.

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