Trade or Business

A trade or business is generally an activity carried on for a livelihood or in good faith to make a profit. The facts and circumstances of each case determine whether an activity is a trade or business. Some of the important facts and circumstances used to make this determination include:

  1. regularity of the activities,
  2. regularity of the transactions,
  3. production of income, and
  4. ongoing efforts to further the interests of your business.

You do not need to make a profit to be operating a trade or business but you do need to have a profit motive.  The above list is not all inclusive in the determination of whether an activity is trade or business. For more information about making this determination, see Five Things to Remember about Hobby Income and Expenses and How do you Distinguish Between a Business and a Hobby.

Part-time Business

You do not have to carry on regular full-time business activities to be self-employed. Having a part-time business in addition to your regular job or business also may be self-employment.

Example: You are employed full time as an engineer at the local plant. You fix televisions and radios during the weekends. You have your own shop, equipment, and tools. You get your customers from advertising and word of mouth. You are self-employed as the owner of a part-time repair shop.