I'm mulling over whether I can set up Smalltyme Cardigans as a separate business entity for tax purposes. We all know that breeding and showing dogs is not what you'd call a profitable venture, but I'm wondering if I can offset some of the associated costs by deducting them as business expenses. To my (unBELIEVEably limited) knowledge, I would need to come up with something like a 5-year business plan; and I would need to set up a separate bank account, pay all show related expenses from it, and keep all of the receipts. But I'm still fuzzy on where the IRS draws the line between what is legitimately a business in its own right, and what is considered a hobby and therefore not deductible.
Does anyone out in the blogosphere have any knowledge or experience in this?