Attorneys, accountants, and many other individuals may conduct activities in addition to their main line of work. These activities may be chartering boats, breeding dogs, selling antiques, or any other manner of business. Some of these sideline activities may be profitable ventures while others run in the red. From a tax perspective, the treatment of income and losses can be good or bad; it all depends.

Profitable Sideline Activities

If a sideline activity generates income after subtracting deductible expenses, the income is taxed in the same way as any other business income; it’s ordinary income. Usually, sideline activities are conducted as sole proprietorships, so income and expenses are reported on Schedule C of Form 1040. But there is nothing that prevents a sideline activity from being run through a corporation or limited liability company.