Are you blogging as a hobby or business? If you’re asking yourself this question, then this blog post is for you!
In 2014, I was in my senior year of college and I decided to start my blog Emma’s Edition to ensure I always had a creative outlet in my career. I was gearing up to step into corporate America and I had no intention of turning my blog into a business. I merely wanted a space to share my favorite pieces, daily outfits, and my fashion tips.
Fast forward 4 years, I’m still in a corporate career but my blogging outlet has become more than hobby. I’ve defined a mission statement “inspiring the modern woman with fashion, career, and life tips”. I’ve identified specific audiences I create content for – specifically writing to the college girl and young professional. I’ve worked with both local and national brands as an ambassador and on paid campaigns. I’ve discovered my voice, embraced my identity, and finally believe I can thrive in the creative and fashion industry. I’ve found a passion in content creation and the digital media space. And I’ve even taken it to the next level and pursue a Master’s of Communication in Digital Media.
In 2018, my 17,000 followers and 6,000 page views/month are generating an income. While I still have plenty of goals of what content to create and how I want to reach more audiences, I’ve realized that my influence/following/readers are valuable to the brands I work with. As a blogger/micro influencer, I’m signing contracts, I’m regularly talking to brands via Instagram or email, and I’ve made it a priority to engage with my audience.
At this point of my blogging career, I’m questioning if I’m blogging as a hobby or business?
Am I generating enough income to be a business? If I’m supposed to file as a business, what should I file as? And if I choose to not file as a business, do I still have to report my income? Wait, are gifted items considered income?
My final project for my law of digital media class…
I’ve been thinking about these questions since the beginning of the year so I decided to dedicate my law of digital media final project around: when bloggers and influencers should file as a business, what types of business they can file as, and why they should file as a business – if they’re at that point in their creative career. Additionally I’ll be discussing the impact of the influencer industry – how much businesses are spending on influencer marketing as well as the repercussions of not properly filing and disclosing the income you’ve earned.
Maybe you’re like me and you started your blog and Instagram as a creative outlet. Or maybe you started your blog and Instagram with the intention to turn into a business. No matter what your intentions are, you probably will hit a point where you’re asking yourself: when do I turn my blog into a business? If you are an aspiring blogger or influencer asking all the same questions I asked myself this year, this blog series is for you.
Here’s what my Business of Blogging series will be covering:
1. The influencer marketing industry explosion (part one)
2. Hobby or business? Here’s how you figure out where you’re at (part one)
3. When to file as a business in Washington State (part one)
4. Ready to file as a business? Here are your options.
5. If you’re not ready to file as a business, here is what you need to know.
We’ll be going over these topics with the objective to help you figure out if you are still blogging as a hobby or business. And also to help demystify questions like: are gifted items taxable income? Or what’s the difference between a sole proprietor and an LLC? Before we get into the nuts and bolts about filing as a business, how big is the influencer marketing industry?
1. The Business of Blogging: The influencer marketing industry explosion
According to Mediakix, the influencer industry is projected to be a $5-10 billion market in these next few years. In 2018, Mediakix projects that advertiser will spend close $1.6 billion on Instagram. And in 2019, Mediakix projects the influencer market will grow over $2 billion with over 32 million brand sponsored posts.
More brands are turning to influencer marketing as they attempt to combat dropping television viewership and ad blocking by focusing on digital channels. For instance, in 2016 Nielsen reported that the 18-34 years old age group makes up 51% of the total average audience of digital platforms. Influencer Marketing Hub also reported that 59% of marketers are planning on increasing their influencer marketing budget this upcoming year. Adweek also reported that a big reason why companies are turning to influencers is because for every $1 spent on influencer marketing, a company received $6.85 in earned media value.
As businesses allocate more of their marketing and advertising dollars into influencer advertising, the rise of macro and micro influencers continues to trend upward. Contevo, a digital marketing agency, reveals in a 2016 study that 70% of consumers consult and check products and services on social media before making their buying decisions. While brands may choose to work with celebrity (Kim Kardashian) or macro influencers (Aimee Song from Song of Style), brands can also choose to work with micro influencers. If a brand chooses to work with a macro or celebrity influencer, they may only be getting a 1.7% engagement rate on that influencer’s channel. Micro influencers with 1,000-4,000 followers on the other hand average a 4.5% engagement rate. Depending on the brands social media goals, brands can generate a greater reach and impact by using a batch of micro influencers vs. using a macro influencer.
Whether you’re a micro or macro influencer, you have the opportunity to reap some of the benefits of the $5-10 billion influencer marketing industry. While most of us aren’t at the celebrity Kim Kardashian level, we all the chance to grow our personal brands and audiences. And regardless of your size, you have the opportunity to work with brands on both a paid and gifted basis. Blogging and social media has evolved to be a new form for advertising, building customer relationships, and creating content for brands. And the data has shown that companies are seeing the value and the return on investment when they work with influencers.
2. The Business of Blogging: Hobby or business? Here’s how you figure out where you’re at:
“In order to make this determination, taxpayers should consider the following factors:
- Whether you carry on the activity in a businesslike manner and maintain complete and accurate books and records.
- Whether the time and effort you put into the activity indicate you intend to make it profitable.
- Whether you depend on income from the activity for your livelihood.
- Whether your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business).
- Whether you change your methods of operation in an attempt to improve profitability.
- Whether you or your advisors have the knowledge needed to carry on the activity as a successful business.
- Whether you were successful in making a profit in similar activities in the past.
- Whether the activity makes a profit in some years and how much profit it makes.
- Whether you can expect to make a future profit from the appreciation of the assets used in the activity.”
The IRS also states that an activity can be considered profitable if you make a profit at least 3 out of the 4 tax years – meaning you can be considered as a business. Being profitable means that the income or revenue you brought in for the year exceeded the costs spent on your business/blog.
To translate this on blogging/social media terms to help you figure out if you’re a hobby or business, you should ask yourself:
- Does the time and effort I put into creating content (blog post, photos, videos) demonstrate an intention to make a profit?
- Do I depend on the gifted products/monetary compensation from this activity (creating content)?
- Have I changed my methods of operation (invested in classes around photography, Instagram or hired a photographer or web developer) to improve my profitability?
- Do I have the knowledge to carry on blog and Instagram as a successful business?
- Have I made any money with blogging/Instagram this past year?
- Do you think you will make money in the future with the content you produce on your blog or Instagram?
Disclaimer: These questions were created by me and not written/published/or shared by the IRS. I thought it would be helpful to reapply this questions to the everyday micro/macro influencer.
3. The Business of Blogging: When to file as a business in Washington State:
According to the Department of Revenue in Washington State, you should register your business when your gross income is $12,000 per year. Your business will be required to collect sales tax and also pay taxes and fees to the Department of Revenue. If you’re ready to file as a business, here is the business application from the Business Licensing Services department. You can also find more information on how to file as a business in Washington State here.
While this is the standard for Washington State, each state has their own set of recommendations and guidelines of when to file as a business. I’d recommend searching “when to file as a business in XXX state” to see when your home state says you should file.
If you choose to file as a business, you will also have to get federal and state tax ID for your business. A federal tax number is also called an EIN (employer identification number) and it’s like a social security number for your business. This EIN number will allow you to file federal taxes and open up a business bank account. You can find the step by step process listed on the U.S. Administration Small Business website.
This is blog post was created for the research I’ve done on the IRS website, Washington State’s Department of Revenue website, and other influencer agency/digital media websites. Please consult with a lawyer or account for any questions around blogging as a hobby or business – I’m a graduate student in Digital Media and not a lawyer or accountant.
This concludes part 1 of my final project for my law of digital media class. I hope I was able to shed some light about whether you’re a hobby or business as a blogger or influencer. The next blog post will be about the types of businesses you can file as a blogger! Thank you for reading!
Photos: Karya Schanilec