How many years of loss before dissolving LLC (in NJ)?

[user44]

What is the name of your state (only U.S. law)? NJ

Have an LLC (in NJ) with a third year of loss. What is the number of years of losses, for tax purposes, after which point the business (LLC) is considered a hobby?

Thank you in advance.

 

[LdiJ]

What is the name of your state (only U.S. law)? NJ

Have an LLC (in NJ) with a third year of loss. What is the number of years of losses, for tax purposes, after which point the business (LLC) is considered a hobby?

Thank you in advance.

Generally, the IRS wants to see a profit in at least 2 out of 5 years. However, it also depends on the nature of the business and whether or not its growing.

 

[tranquility]

It also depends on how you run your business. If you run it as a business with an intent to make a profit, the presumption is immaterial. The problem comes up more when you're doing things you'd do anyway. Paint toy soldiers, run model trains, ride horses or try your luck on the golfing pro tour with never quite making the cut, would all be a bit problematical. Toilet unplugger, not so much a problem. In both cases they look at all the facts of the situation to see if you have a realistic plan to make a profit and are working appropriately towards that.

(By the way, my understanding is the presumption is 3 out of 5 years of profit--except for horses is 2 out of 7.)[IRS Code 183(d)]

 

[davew128]

Either your activity is a hobby or it is not. Years of losses is not indicative of anything except losses.