Converting Hobby to Business

[grids]

How do I convert several decades of supply and material purchases over to a business? Since many of the purchases are quite old, I do not have the receipts and could only estimate what I paid. I can look up current value. For accounting purposes, do I personally sell the items to my business? Or, do I not do anything and when I make an item to sell, I estimate the value of the materials that went into the item for use as my expenses? Is it best to convert one large lump of supplies and materials up front, or just on a project by project basis I convert some materials to the business as I actually use them? Once the business is started, making supply purchases and tracking the expenses will be easy, but what do I do about the many thousands of dollars of materials I've already accumulated? Will I still be able to deduct these expenses? Also, if you know of an in-depth resource on this topic, hobby to business, I'd appreciate it.

[FranklinF]

As stated by the IRS:

A HOBBY is any activity that a person pursues because they enjoy it and with no intention of making a profit. People operate a business with the intention of making a profit. Many people engage in hobby activities that turn into a source of income. However, determining if that hobby has grown into a business can be confusing.

To help simplify things, the IRS has established factors taxpayers must consider when determining whether their activity is a business or hobby.

For more information on this topic, please click on the following link:
Here’s how to tell the difference between a hobby and a business for tax purposes 

Converting a Hobby to Business
Now, it is VERY IMPORTANT to track those expenses one way or the other and have some sort of documentation for said expenses. Once you have been able to do this, you could deduct your hobby expenses as startup cost as prescribed by the IRS.
Here’s how businesses can deduct startup costs from their federal taxes