I have a hobby that is growing into a business.  I am an IT Guy by day working for the man and a Welder at night working for me.  I personally owned the work area, tools, truck/trailer, etc before this got crazy.  I produce a niche item that is in demand seasonally, has no moving parts, but could injure someone if they were careless.  It is just me working alone and I do not intend for this to scale up into a full time gig, but it has become a nice supplemental income.  Net is maybe 20% of my day job, so it's evolved past just beer money.  I am now at the point that I need to invest in some higher end tools to keep production levels up with increased demand.  Nothing big ticket like a truck, but around $5K for new welding equipment, work area improvement, etc.

So do I need an LLC?  More than one?  What does that cost?  Can I just set this up with Legal Zoom?  Or do I need a Lawyer and an Accountant?  I'd read something about CorpA owns the equipment and rents it to CorpB that produces/sells the product.  Then if CorpB is sued for whatever reason the assets are protected.  

I'm middle-aged, happily married, and have a couple of kids.  The extra cash is useful, but once the IRS/Lawyer/Bureuacracy is involved I'm not sure how profitable it will be?  If it isn't profitable I'd rather just quit doing it.  On the other hand if going legit is reasonable $$ wise it would be nice to have the structure in place should I scale this into a full time gig.  It is always nice to have some fallback employment in this economy.  Maybe even a semi retirement type job to keep me busy.

Any tips from the ArfCom Oracle?

Dollar wise - you aren't even remotely close. Needs to be full time.

Liability wise - I'd go ahead and form some sort of corp and carry insurance from what you describe.

I will have to disagree.  The IRS already considers your activities a business, and so should you.

It is definitely worth exploring an LLC.  I don't feel myself qualified to give you any more advice, however.

Good luck in your business/hobby.  

Look at Nolo Press online. They have all kinds of threads and stuff about business law. They can tell you what you need to know about a LLC.

In a nutshell it means "Limited Liability Company." (NOT corporation BTW.) It gives you similar protection against liability that a corporation does, without the complex financial stuff.

If there isnt a lot of liability involved a person can easily work as a sole proprietor rather than forming a business entity. Just because you report income doesnt mean you need to form a business in every case.

Ive seen that mistake a lot. Guys have 3 or 7 "companies" that dont even amount to a full time wage. Lot of hassle for nothing. In op's case if isnt a bad idea though.

Double tap

Here we have an example of the definition of words drifting over time.

I would consider a sole proprietorship to be a business.

When I was young, that was an accepted definition.

Apparently, now the meaning has changed.

My advice to treat it as a business still stands, no matter what the current definition of business is.

Sorry for the misunderstanding.

Fair enough. When I worked as a sole proprietor with no employees it was all on my personal returns (itemized) so I don't really consider it a business although that's just semantics. For me, a "business" is it's own entity and files a return. Just semantics though, really.

The important thing is reporting your income properly and ask a pro how you should protect yourself with an llc or whatever is needed.

It sounds like you have a business, although it's not officially registered, but it is a business.
Are you selling to end consumers or to another business that will retail the product?  If you are selling to a consumer you need to register with your state and local municipality to collect and remit sales tax (if your state has a sales tax).
Regardless of how income is generated, legally you must report it to the IRS (and state if you have a state income tax).  You will need to pay both your share and employer's share of FICA/Medicare/Social Security taxes along with income taxes.
If you are selling to another business and receiving more than $600 annually you should be receiving a Form 1099 at year end from that business.


To go legitimate will take a decent amount of effort.  Is the product a design that you created?  Is it something that can be patented?  If so have you considered that?  At that point you could license the patent out to a local professional shop to produce and you get a cut off of all units sold with none of the bureaucracy, i.e. Mailbox Money.

Years back I did some IT Consulting on the side and ran that income through a Schedule C on my 1040.  I didn't sell any hard goods, just billed for labor.  My bigger clients issued 1099 at year end.

I do not intend for this to be a general welding services shop.  I won't be fixing your trailer, truck bumper, or farm implement.  More like Yard Art, Custom Signs, Fire Pits (the liability), maybe a BBQ Smoker.  Nothing unique enough to be patented, although I have had some copy cats of my designs.

My thoughts are if I'm going to continue doing this I need to upgrade some equipment, decent website, etc.  That means some sizable deductions to offset taxes if I were to go legit.  So maybe now is the time to make it official?  I've explored the cost of product liability insurance a bit.  I just have no idea of what an LLC Cost, Biz licenses, Quarterly Taxes, etc.  Do I now need commercial insurance on my truck since I use it for deliveries?  If I'm running the biz from a portion of my PoleBarn do I need to insure it differently?

Do I just approach another small business owner, buy them dinner, and pick their brain about what all is needed to get setup?  
Would a local Accountant/Lawyer have these answers?
Is there some FRIENDLY .gov office that would assist with the Bureaucracy?

A good accountant can help with all of the that except the liability. Insurance company and possibly a lawyer might need to advise you on that. You can set up a basic business easily if you figure out which kind. The forms can be filled out on the web for state and federal last time I did it. Takes about 35 minutes for each.

Someone with more knowledge can probably chime in with more detail.

If you operated a sole proprietorship and took itemized deductions for your business expenses, you were doing it wrong.  All activity for that business should have been reported on Schedule C, not Schedule A.

I came to post this exact question.

I have had an idea rolling around in my head to build a couple different things that I use and others may find useful.  However, as the OP stated, they could cause injury if misused.

So the risk of someone getting hurt is more of a reason to start an official business than legal reasons I am taking it?

Of course no one wants to provoke the IRS, but insuring my shop, car, etc. and all this other stuff for $1000/year income???