Can A Hobbyist Sell Items?

[BrentDH]

I have never really tried to make my woodworking hobby into a money making business.  When I have made things for other people, I typically do it for free or just charge them for the materials.  I am approaching retirement age and can see some value in supplementing my income (even if just to keep the shop supplied).  Additionally, I purchased a cnc router that gives me the ability to "mass produce" some items.  I have a game board design for a game called "Pegs and Jokers" that I think would sell easily.  As I think about testing the waters on something like Etsy, all I see is a bunch of red tape that makes me wonder if it is even worth it.  Maybe someone out there can enlighten me.

If I try to sell items:
Do I need to have a talk with my homeowners insurance guy about now running a business inside my home?
Do I need to collect sales tax from everybody I sell to at the rate of the state the buyer lives in?
I assume as a hobbyist I have to report every dollar I receive as ordinary income and cannot deduct any of my expenses unless I turn it into a full fledged business.
It looks like I need some other forms of insurance to sell items.

All I really want to do is make 20-30 games and see if there is a market for them.  But reporting the gross revenue as income, adding insurance liabilities, and tracking sales tax seems to outweigh the potential upside.

The government sure doesn't seem to want to make it easy to do any kind of a trial run.  I am guessing that I need to just keep doing what I have been doing and basically choose who I want to do things for locally and either give them away or ask for material cost.  Am I missing anything?

[measurecutcurse]

My daughter finished her freshman year in college last spring, and for a variety of reasons decided she didn't want to work outside the house. I had her research incorporating a business in NJ where we live and being the sole employee to make and sell cutting boards (she took a yearlong ww class in high school, will be a studio art major in college, and is very creative). I also spoke to my accountant.

To register a company, you need to do a search to insure the name isn't taken already, and basically pay a fee (~$400-500) or so. The benefits are that you can then open a bank account in the business's name, but supplies tax free etc.

However, I spoke to my accountant, and while he was happy to help that process, He said it wasn't necessary. You can just make whatever you want, track what you spent on good, track the income and report it on your personal income taxes.

My daughter built and sold ~20 or so boards a variety of ways, and then went back to school in the fall.

We'll handle on our taxes as we file for 2021.

As for business insurance and homeowners, for the scale you describe, my non professional advice is to not worry about that. OF course, if you are concerned about being sued for something if somebody is injured by a game you make, you're personally going to liable....But that risk seems low.

Good luck

[meackerman]

I would say it depends.

years ago I used to have a business license and resellers permit, put it all on my taxes and yada yada.


Now I sell one-off things a few times a year so I don't worry about any of that.

[Handplanesandmore]

Since your goal is to make some pocket money rather than to support a family. you can make lots of things to sell (etsy?) such as cutting boards, stools, games etc, esp if you can customize designs with your cnc. Spoons are hot too. Pens, stationary items, etc if you turn

The big question though is after spending time on that, do you still any left for your woodworking interest? I've sold something not because I built them for sale, but I won't want to build things to sell...too nice...I want to keep them, too plain and household, I am not interested in making them to start with.

Simon

[goaliedad]

Talk to your tax person first. I would also talk to SCORE for advice.

As someone else said, fob you want woodworking to become a business, or do you want to continue enjoying it? There was a time that I made and sold Adirondack chairs. Most were sold thru a resale shop. That lead to farmers tables. I was able to make a few bucks. Luckily I did not need to rely on the money to pay the bills, but it was nice. Whenever I took a commission I was very clear about deadlines things were done on my timeline.
I recently retired, but have been very busy with a major remodel of our retirement home. I am getting close to having time to do paying jobs, but really don’t want to get caught up in “I need it by this weekend”.

[AHill]

I've sold cutting boards, pens, bowls, and a couple of custom made pastry boards. I also helped a friend build a TV stand/console for which he provided all the materials. Nothing to get rich off of, and nothing that really kept me awake at night. I really don't have the time to make items for sale. Besides, once you transition from hobby to sales, it's really no longer a hobby.

[MarkWells]

The government sure doesn't seem to want to make it easy to do any kind of a trial run.

I think the most important thing to figure out is why you want to sell things.  Do you want:
* an excuse to make things?
* money?
* affirmation?
* "work?"
* a reason to get out of the house?
* a way to get rid of things you made?

A lot of small businesses start out semi-legal and then fix things up later.  I wouldn't worry too much about experimenting by selling a few things.

I dabbled in making toys and enjoyed getting the affirmation of a few dollars of appreciation for the work I had done.  But I realized pretty quickly that making the same thing over and over again wasn't what I enjoyed about woodworking and the money didn't amount to anything that mattered.  It also wasn't worth the liability risk to me.

On the other hand, I have friends who are retired and enjoyably operate woodworking businesses.  My impression is that it is a way to stay active.  I would try it and worry about all the legal structure and taxes later.

Another way to experiment would be to look around your community for places your skills might be needed.  Here's some ideas from around me:
* Some church bookstores sell handmade items which you could make and donate. 
* A public school near me serves kids with severe special needs.  They have all kinds of custom made implements to help the kids navigate the world.  Maybe they need more or they need some contraptions to send home with the kids.
*  My woodworking club built small scale furniture for a local non-profit that is expanding a village of tiny houses for people who are chronically unhoused. (We enjoyed doing it, but they needed way more furniture than we could deliver.)
* Near me there are many thrift stores that support non-profits.  You could repair furniture that gets donated.
* Donate to charity auctions (just don't expect it to sell for much).

If any one of those non-profit ideas was something you enjoyed, you could probably turn it into a business if you wanted to.  (That's how Paul Newman became a Salad Oil Executive.)

Mark

[®smpr_fi_mac®]

https://www.youtube.com/c/HawthornLaw


He discusses the various paths you can take, such as an LLC, SP, and others.  I would recommend spending a few hours going through his videos to learn the basics.


If you want a trial run, simply look up setting up a sole proprietorship. They are the easiest to begin and use, but offer limited protections (which you probably don't need at this point).

[taxman]

Hi, 

Lots of good interesting answers here.  First of all, I am a CPA who handles many small businesses. So here is a very basic approach to this, of course without any knowledge of your other tax issues, your shop size, etc.

1. Of course you can produce anything with the intention of selling.
2. Your ability to sell speaks more to your marketing skills and choosing to produce what the market wants. 
3. Insurance needs change drastically (and perhaps only begin) when you have employees or have customers inside your work space. 
4. If you offer items for sale, and sell a handful a year: taxes will be simple. (i.e. 1040 Sch C)
5. depending on the rest of your tax position, it is completely "legal" to set up a $15,000 manufacturing facility, writing it all off. There is a requirement for intention to make a profit, but there is no tax penalty for only selling $300 per year. Continuing this for more than 3 years without significant revenue or a prayer of profit is where you cross the "hobby" line.
6. If you start successfully selling and you are comfortable this is a viable business, you should get serious about professional tax help including licenses, incorporate, etc. 
7. biggest shortfall most small businesses have is keeping good records from the day you decide to try business, and waiting too long to discuss with a professional for guidance. Speak to your tax preparer with this year's taxes for input. If he/she isn't able to offer concrete suggestions - find someone else. Spending time with SCORE volunteers is a cheap way to start. Understanding you get what you pay for.

Hope this helps. As there are many books on this subject, this is only the most basic of advice. 

Lance P. Mirrer, CPA
www.taxmancpa.com

[FS7]

The short answer is yes. You don't have to have a business to do it. I know plenty of people who sell things on Etsy and at local markets. You'll quickly find out what sells well for you. Usually, it's one or two things, like a blanket ladder, cutting board, cheese/charcuterie board, serving tray, or whatever. I make and sell a lot of different things, not a lot of any particular thing, but cutting boards more so than anything. 

I do have an LLC, but I don't advertise it much because I haven't bothered to build out my website yet. I can afford to keep it active and compliant, so I do. I have never made or lost more than $1500 in any given year, so it's an afterthought in terms of financial impact. But at some point maybe I'll do more, and I will have that "age" to help - having a business active for more years matters even if you didn't do anything with it.