Is Starting A Reptile Business Right For You?

If you are reading this post, then you are most likely a reptile enthusiast asking yourself questions such as “Is there any way I can support my reptile hobby expenses or make money from doing something with reptiles?” Do not feel like you are alone if you are asking these types of questions. In most hobbies, people eventually hit the point where they start asking themselves if their hobby can pay for itself. They want to know if it has the potential to earn extra income, or even be a possible way for them to quit their day job. Since most people I run into seem to be focused on starting some sort of captive breeding program with reptiles, I will be referencing reptile keeping or breeding several times. If you aren’t interested in that aspect of reptiles, then this article still applies and you still will need to make some of the same considerations….so keep reading.

As with any other hobby, reptile keeping does offer money-making opportunities. People that enjoy keeping reptiles as pets have always found opportunities to earn extra income from aspects of the pet reptile industry. These opportunities commonly include cage construction and sales, equipment and supply sales, reptile feed sales, and supplying pet reptiles. If you are considering starting a reptile related business, you need to answer numerous questions. To help keep you on the right path, this post was put together as a set of questions and considerations that you should think about before leaping into a reptile business.

The Different Types of Hobby Reptile Businesses

When discussing reptile related hobby businesses, I feel it is necessary to classify the different types of hobby businesses in the pet reptile industry. If you are interested in keeping reptiles as a hobby only and do not expect to break even financially (or if you don’t expect to even make a little of your money back from your activities), then this guide probably isn’t for you. That said, a lot of hobbyists may sell reptiles or supplies on occasion. If you are going to sell something on the rare occasion, you probably do not need to set up a business. For most hobbyists, the question of starting a business usually arises when you have the potential to sell multiple offsprings from a breeding project.

Treating your reptile hobby like a business, but not registering it as a business.

Based on what I have seen over the years, a good number of reptile hobbyists already fall into this category. These hobby reptile keepers breed and sell some reptiles but are not registered as a business. Any financial transactions are usually conducted using the person’s name. Money earned usually goes directly back into the hobby activities or is used to offset the costs of the hobby.

Any income earned from this sort of activity should be claimed as additional personal income on your income taxes. According to the Internal Revenue Service of the United States of America, all income that you earn from any activity (hobby or business) must be reported and is taxable. So if you are selling snakes online, the tax code does not make a differentiation between hobby and business from an income perspective; if you make any money, you should claim it on your taxes.

While this may not be considered a big deal by many reptile keepers, failing to claim this income on taxes can have serious consequences if you happen to be audited by the Internal Revenue Service (IRS). These types of keepers also need to keep in mind that conducting a large number of sales in this manner could cause them a tax burden that they may not be prepared to pay.

Types of Registered Hobby Reptile Businesses

When reptile hobbyists go through the process of setting up a business, they most likely end up fitting into one of two types of reptile hobby businesses. These two types of businesses are directly related to their business status with the Internal Revenue Service (IRS). So what criteria does the IRS use to determine if your activity is a business or a hobby?

Your business must have a motive to make a profit. This criterion means that your business must have all the essential components of formal business and function like a formal business.

The easiest way for the IRS to confirm that you have a business is to make a profit for 3 years over 5 years. If you don’t have a profit for 3 out of 5 years, you run a higher risk of getting audited. The IRS audit process can be unpleasant and it will be your responsibility to prove that you are a legitimate business. So if you can’t meet these IRS criteria, what can you do? You can still register your business but you simply cannot declare losses on your taxes. For an IRS classified hobby business, you can only deduct expenses up to the amount of income your business made for that year.

Type 1: Your hobby reptile business is registered, but not considered a business by tax standards.

For this type of business, the reptile hobbyist has gone through all the procedures of setting up the registered business but is missing one component: business tax status. The business fails to meet the tax standards to be considered a business by the IRS. The hobby business functions as a business in all aspects but can’t claim losses on taxes.

Type 2: Your hobby reptile business is registered and is considered a business by tax standards.

The hobby reptile business functions just like any other registered business. Type 2 is the same as Type 1, but the business meets the IRS criteria for formal business. The business can claim losses on taxes. While this may not seem like a big deal to many people, it can greatly reduce tax obligations and offset the income earned by selling reptiles.

What benefits does having a hobby reptile business offer?

Starting a business provides many additional opportunities and benefits to the hobby reptile keeper. Most benefits even apply to both types of businesses. Typically, the only significant difference in benefit between the two types of hobby reptile businesses defined previously is related to the potential reduction of tax obligations to the IRS. Outside of tax issues, the two types of hobby businesses share several key benefits.

Personal liability protection

The business entity itself offers some degree of personal liability protection. To find out more details concerning the different forms of liability protection a registered business offers, I would recommend speaking with legal counsel or a small business assistance agency. With its registration, your business will also be able to acquire a business liability insurance policy to further protect you against claims related to your business operations.

Separation of personal and hobby business finances

Intermingling business and personal finances can be troublesome at times. With a registered business, you can set up checking accounts under the business’s name. Separate finances allow you to better keep track of expenses related to your reptile breeding operations and also provides for additional customer payment options such as credit card processing and wire transfers.

Sales and marketing

Having a registered business can significantly benefit your reputation and the general perception of your marketing efforts. In general, people are more likely to do business with someone that is operating as an official business than simply as a random person selling reptiles.

Taxes

The significance of the tax benefits of creating a business comes into play when your business is making a profit and qualifies as a business under IRS standards. The IRS makes concessions for expenses for business operations. Expenses such as supplies, computers, office expenses, and travel expenses may be deductible from your income. Business deductions can reduce tax obligations and result in more income for a small business. For a hobby, all income should be reported but deductions are limited to the amount of income you earn. The tax deductions may only be claimed under itemized deductions and have particular limitations placed on them by the IRS. For a business, all income is also reported but it can be reduced by business expense.

What are the Downsides of Starting a Hobby Reptile Business?

Starting a hobby reptile business has two particular downsides: higher costs and more work. Now, these downsides should not scare you away from starting a hobby reptile business. Starting a business simply requires the time, effort and money needed to get the job done.

Additional expenses

These additional expenses are related to actual business expenses such as accounting, tax preparation, and business filings. These are the costs of being a legitimate business and any business must pay them. Going from hobby only to a hobby business will most likely not affect any of your current reptile operations, so do not expect to pay more for feeders or supplies simply because you are a registered business.

Additional work

If you have a full-time job, you best be prepared to take a few days off of work to help you get your business started. You can also expect to have more work in keeping business records. Your general activities will not change, but you will need to keep a better record of things you spend money on and where your income comes from. Businesses do not run themselves and if you are going at this alone, then you will have to devote more time to keeping the business operating correctly.

12 Questions for you to Answer When Considering Starting a Hobby Reptile Business

Considering the previous sections, you may still be questioning yourself if you are ready to start a reptile business. To help you solidify your resolve or to confirm that a reptile business isn’t right for you, I have put together 12 questions to help you in making the final decision on how to proceed. While the decision to start a business is solely up to you, these questions may help put several things into the proper perspective going forward.

Question 1: What are your top three reasons for starting a reptile business?

You should have at least three reasons why you want to start a hobby reptile business. If one of your answers was not “to make a profit” or some variation, then maybe you should reconsider starting a hobby reptile business. The sole purpose of ANY business is to make a profit. If you are not concerned about making a profit, then you are better off keeping your reptiles solely a hobby. Not desiring a profit does not mean that you cannot register as a business, but it does mean that you are not going to meet the IRS criteria for a business and should handle your business finances and taxes accordingly.

Question 2: What are the legal requirements for starting a reptile business?

This question should be asked by every reptile keeper regardless of business status. What are the regulations and laws related to reptiles in your state, county or parish, and city/town/village? Laws and regulations vary from city to city, county to county, and state to state. These laws are very difficult to keep track of sometimes and violating these laws could cause you heartache and financial loss.

Having a familiarity with researching laws can benefit any reptile keeper. Some reptiles may be legal to own in your area but illegal in other locations. One of the easiest ways to find out your county, parish or city’s laws concerning reptiles is to simply call the government body. When you call a government agency, you will most likely need to speak with a clerk of some kind. When you call, ask to speak with someone familiar with ordinances and statutes within the government’s jurisdiction. Most government bodies also have online resources available that allow you to search through the codes and regulations.

Question 3: How long will it take for your business to start making a profit?

This question relates to the standard of the IRS relating to hobby and business classification. According to the IRS, your business is only considered a business if it has been profitable for 3 years out of 5 years. Since reptiles can take 3 to 5 years before they first start producing offspring, you will need to consider how long it will take to make a profit. The answer to this question will help you decide which type of hobby reptile business you are going to attempt to run. If you can’t meet the IRS standard for a business, do not worry. You simply have to run your business like it is only a hobby. Your accountant should be able to help you navigate the particular IRS requirements.

Question 4: Are you prepared to devote the time needed for starting a reptile business?

The act of creating a business requires some time. If you are a small scale operation, you can expect to spend an additional 4 to 8 hours a week on simply managing your business. If you are a larger operation, you can expect a lot more. You might have to take a few days off from your full-time job to run necessary errands for the business. As said earlier, businesses do not run themselves. You will have to be prepared to devote more time to keeping the business operating correctly.

Question 5: Do you have the money to formally starting a reptile business?

Startup costs for businesses can range from a few hundred dollars to over a thousand dollars. Some cost items you may need include fees for licenses, permits, insurance, lawyer and accountant consultations, website, business cards, and business accounts. You should detail all your potential startup costs as a part of your business planning. Although these costs will most likely be necessary, you can schedule activities to spread them out so you are not paying them all at once.

Question 6: Do you currently keep records of costs related to your reptile collection?

If you are already keeping detailed records of your hobby costs, then you have already made a step toward keeping proper business records. If you do not keep detailed records, then now is the time to start. You will need to begin keeping receipts for all transactions.

Question 7: Are you comfortable and confident selling?

You cannot run a business if you are not comfortable selling your product. To sell, you have to have confidence in the animals you produce. Selling anything is usually more about establishing relationships than the actual act of selling. Are you more likely to buy from someone who is constantly asking you to buy from them or from someone who offers advice and assistance? You also need to ask yourself who is your ideal client. What types of people are you interested in selling to? You must know your potential customers and feel comfortable asking them to buy from your business.

Question 8: How will you compete with others in the marketplace?

Some segments of the reptile marketplace can be very competitive. What separates you from the rest of those in the marketplace? Who are your direct competitors? As a business owner, you will need to develop a plan to deal with your competitors. Will you be differentiating your business by offering the most affordable reptiles or the highest quality reptiles? Will you try to set yourself apart by offering excellent customer service? You need to define how you intend to make your business special when compared to others in the industry.

Question 9: How will you handle complaints and problems?

No matter how well you run a business, you may still have complaints and have to deal with problems. With any business, I recommend creating a list of “what if’s” and deciding how to handle them in advance. This exercise can help you keep from panicking if something goes wrong and also allows you to address the situation more rapidly and professionally.

Question 10: What are the three goals for your reptile business?

Any business must have goals to measure their success. You will need to define at least three goals for your business. These goals can be relatively simple but should give you something to work toward. Example goals would include activities such as attending your first reptile show as a vendor or selling out of all your reptile offspring within 4 months.

Question 11: Do you have the support of those around you?

Since having a business will require some additional time and money, support from your family and friends can always be beneficial. If you are going to have to listen to your significant other complaints about the time and money you spend on the business, then the whole experience may not be enjoyable. Sit down with other people that matter in your life and discuss your business intentions with them. Understanding what you expect to achieve and what obligations they may expect you to keep can help you maintain the support of those around you during the operation of your new business. If you are going to spend a few extra hours in the evening managing business stuff, let you’re significant another know ahead of time. Getting these issues worked out beforehand can be a great benefit to you and your business.

Question 12: Who can you talk to for help?

A business mentor can be a great help along the way. Most successful business persons have someone they can contact for advice. These people can be friends, family, or even a reptile breeder you have purchased from in the past. No one knows everything. By determining what resources you have before starting a business, you will immediately know who to contact to get the additional support you need to be successful.

So, is Starting a Reptile Business Right for you?

The only person that can answer the question if starting a reptile business is the right course of action, are you? Once you decide to transition to a business, you need to immediately begin treating your hobby like it is a full-blown business. You will need to start seriously managing your activities just like any other business operation. You will need to keep records of your income and expenses. You may want to consider getting a separate bank account. You will have to start making decisions about your business name, what your website will look like, and what type of business entity you will form.

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