Solo Founder without any salary

The IRS has many factors in considering if there is a business with actual deductions or a hobby with nondeductible losses. Some of the factors are

• Is the activity carried out in a business-like manner with complete and accurate books and records.
• The time and effort showing intent to make it profitable.
• The taxpayer depends on income from the activity for their livelihood.
• If there are personal motives for carrying out the activity.
• If the taxpayer has enough income from other activities to fund the operation.
• Losses are out of control or due to the type of business.
• There have been methods changed to improve profitability chances.
• There is the expectation of profit in future years.

All facts and issues need to be considered.  With start up restaurant there would be expectation of profit seen in the first couple of years but a business raising racing horses could take close to 20 years.  So it is not only the questions but also what might be considered comparable for the activity.  Not showing a profit for a business tax return can raise questions and increase the risk to examination.