By: John S. Morlu II, CPA
Let’s be real. At our CPA firm, we’ve seen it all. Every January, a fresh batch of hopefuls walks through our doors, eyes wide, dreams bigger than their checking account balances.
They all say the same thing:
“I’m starting a business.”
We nod. Smile. And quietly pull out our mental checklist—because, truth is, not all businesses are the same. And some aren’t businesses at all.
So before we even talk about LLCs or S-Corps, EINs or IRS codes, we help them figure out what they’re actually building. And let me tell you—90% of the time, they’re not building a business. They’re building a hobby with receipts.
Let me break it down, nice and simple:
1. The Lifestyle Business: A.K.A. The Side Hustle with a Passport
This one is popular. Real popular.
You work your 9 to 5, then from 6 to midnight you bake cupcakes, fix iPhones, walk dogs, or sell personalized mugs on Etsy. You write off your laptop, your “home office” (a.k.a. the corner of your dining table), and use the extra money to fly to Jamaica and pay off that credit card you’ve been ignoring.
Fun fact: Over 40% of Americans have a side hustle—but 80% of them never turn a profit.
You might think you’re the next Jeff Bezos because you have a Shopify store. But if your goal is to “make just enough to fund your next vacation,” congratulations. You’re in Lifestyle Land.
And hey—it’s not bad. Just don’t confuse it with a real, scalable business. We’ll smile, give you advice, and send you back to your full-time job.
2. The Hobby Business: A.K.A. Your Passion, IRS Edition
We love passion. Passion is cute. Passion paints, sculpts, knits, brews kombucha, makes candles, writes poetry, and teaches yoga on weekends.
But passion doesn’t always pay the bills.
So what does the IRS say? Simple:
If you report a loss 3 out of 5 years, it’s a hobby—not a business.
Translation: You can’t keep deducting the cost of your hobby and calling it a business. You bought a drone, edited three wedding videos for friends, and made $200—but wrote off $3,000 in gear. Nah. That dog won’t hunt.
And yes, we had a guy try to write off a flamethrower because he was “testing for YouTube views.” Spoiler: he didn’t go viral. The fire department did.
3. The Profitable Business: A.K.A. Money Day One
Now this—this is where the real action begins. These are your mom-and-pop shops. The barber who cuts 20 heads a day. The street vendor with a grill and 50 customers before noon. The freelance bookkeeper, plumber, or caterer who knows their stuff and charges what they’re worth.
No VCs. No hype. No pitch deck. Just hustle, clients, and income from day one.
Fun fact: 60% of businesses in America are “non-employer” businesses—meaning it’s just one person doing work and making money. Many of them are quietly profitable.
These are the folks we do take on as clients. They need structure, tax planning, and guidance. But they don’t need hype—they need systems.
And here’s how you really know it’s a profitable business:
When the owner dies, the business dies too.
Because they were the business. It was their hands, their brain, their phone calls, their relationships. There’s no exit plan, no succession, no IPO—just a smooth, profitable ride until one day the lights go out.
We don’t mourn. We salute. That was a good run.
4. The Scalable Business: A.K.A. 12 Years of Pain for 5 Minutes of Fame
Here’s the big one. The unicorn dream. The billion-dollar baby.
You’ve got a big idea. You raise money. You hire engineers. You build an app. You get in TechCrunch. You burn through cash like it’s napkins at a BBQ. You live on ramen and Red Bull. You grind 18 hours a day for a decade, and maybe—just maybe—you’ll see a dime.
And if you’re lucky, you win big. Like CNBC-calling-you-at-6am big.
But most don’t. Because this game? It’s brutal.
Jeff Bezos once said, “Overnight success takes about 10 years.”
NVIDIA took over 20 years to become a household name.
Most startups? They don’t survive past year five.
It’s win or die. Billion-dollar exits or bankruptcies with blog posts. No in-between.
We respect these folks, but we warn them too: this isn’t business. This is high-stakes chess. And if you don’t have the grit, the luck, and the money, you’re toast. But if you do… you’re the next headline.
Final Word: Know Thyself
At our CPA firm, we don’t judge. But we do diagnose.
Before we register your business, file your taxes, or set up your QuickBooks, Xero, Sage and Finovatepro, we ask:
What are you actually building?
If it’s a hobby, we’ll smile and say, “Have fun.”
If it’s a lifestyle play, we’ll help you keep it clean and legal.
If it’s a real, profitable business—we’re all in.
And if it’s a scalable dream, we’ll bring the calculator, the caution tape, and the courage.
Because not every business is a business.
But every entrepreneur deserves to know the truth.
About the Author
John is an entrepreneur, strategist, and founder of JS Morlu, LLC, a Virginia based CPA firm with multiple software ventures including www.FinovatePro.com, www.Recksoft.com and www.Fixaars.com . With operations spanning multiple countries, John is on a mission to build global infrastructure that empowers small businesses, entrepreneurs, and professionals to thrive in an increasingly competitive world. He believes in hard truths, smart execution, and the relentless pursuit of excellence. When he’s not writing or building, he’s challenging someone to a productivity contest—or inventing software that automates it.
