To be or to LLC?

When does a business cross the line from being a hobby into a business? This question led me to do much soul searching on behalf of White Haired Man. The IRS has some guidelines about when a hobby may cross over into a business:

• Do you keep records of sales, purchases, inventory, etc? 
• Are you attempting to make a profit, as opposed to just being an hobbyist? 
• Do you depend on the income from said "hobby?"
• Do you do things differently to make more profit from your efforts? Etc.

I found that White Haired Man really borders more on being a hobby as opposed to a business proper. However, I do keep records of transactions and I hope that someday we will be wildly popular and successful.

This leads to choosing how to structure White Haired Man. The IRS lays out all the options here:

• Sole Proprietorships
• Partnerships
• Corporations
• S Corporations
• Limited Liability Company (LLC)

According to the IRS an LLC is described as follows:

"A Limited Liability Company (LLC) is a business structure allowed by state statute. Each state may use different regulations, you should check with your state if you are interested in starting a Limited Liability Company.

Owners of an LLC are called members. Most states do not restrict ownership, so members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. Most states also permit “single-member” LLCs, those having only one owner.

A few types of businesses generally cannot be LLCs, such as banks and insurance companies. Check your state’s requirements and the federal tax regulations for further information. There are special rules for foreign LLCs."

After careful consideration I find that the LLC is the best choice for structuring our small RPG publishing company. It makes the most sense as we are not expecting any other members to join the organization in the short term, and any losses or income will be divided among the current members at tax time. We are also not a bank or insurance company, which would bar us from this choice. Being an LLC also conveys protection for the members of White Haired Man in the event of a lawsuit. Others would be able to sue the company but not the individuals who own it in most cases.