Sounds like a hobby but...

[BHoffman]

Client set up an LLC and filed an SS4. Opened a bank account. Filed sales tax applications. All ready to go out there and make a lot of money.

Recorded and produces musical CDs. Offered them for sale at a coffeehouse. No sales at all. They have around $1,100 in expenses. Lead guitarist is ill, and they don't intend to do anymore coffeehouse gigs. The coffeehouse is not open for business to the public, and is just a building in a friend's backyard where folks get together and enjoy evenings of caffeine and mellow music. They were not paid performers and received no tips. None of them earn money performing and all have day jobs.

So, is this a hobby? They want to keep the LLC alive in the hope that perhaps they might actually sell a CD or two. I'm reluctant to report the expenses on the LLC form 1065 because there doesn't seem to be much enthusiasm on their part to continue offering the CDs for sale and this is looking like a "vanity press" hobby to me.

Any advice?

[Gretel]

It doesn't sound they run it as a business now. Maybe in the beginning the intention was there and this intention would justify one year of business filing.

This 1065's are rather expensive I would advise not starting this process and wait until they have more inclination to run it as a business.

Just the fact that they offer their products to an exclusive club would not be an indication that it is not a business. If the club exists of 10 people only it's a different story.

[BHoffman]

Hi Gretel - I think the 1065 must still be filed even if there are no business operations. I don't charge very much for these small returns.

[Gretel]

Yes, 1065 must be filed but could also be filed with no activity if justified.