I recently had an inquiry from a referred client regarding a business startup in the equine business.  As it’s just in the startup phase with no meaningful revenue yet and it being about a month away from tax deadline, I wanted get some thoughts on whether it’s worth learning the business or referring to more experience.  The client obtained the LLC structure in mid-2022.  My research on this type of business indicate that it is very difficult to be profitable unless you diversify your revenue stream/offering of services (lessons, boarding, etc.).  The client currently works full time in an unrelated industry but would like to pursue the equine industry progressively over the next few years until the business takes off (progressively meaning more time within the industry while reducing time within the full-time work).

As there were limited to no income in 2022 and considering that the individual does not spend 100% of their time operating the LLC; I’m wondering should they even file a schedule C for the year in which they open the LLC.  They potentially do have expenses but I’m somewhat hesitant to file a schedule C which would show a loss for expenses and since this year is one and I’m not sure on the time frame when business may take off or the time that the individual will invest in the business as the year progress; this may end up being viewed as a hobby.  And also, if you don’t file a schedule C in the first year, potential startups costs deduction may be missed.  Based on discussions, the clients intent is to make it a profitable business while at the same time maintaining the LLC structure (liability protection) and avoid dissolution of the business LLC due to lack of business use.  I’m thinking for 2022, to just file with minimal to income or expenses and see what happens in 2023 as the business develops?