“Should we register as a home business?”---->I guess it depends;the IRS reminds taxpayers to follow appropriate guidelines when determining whether an activity is a business or a hobby, an activity not engaged in for profit. In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business. An ordinary expense is an expense that is common and accepted in the taxpayer’s trade or business. A necessary expense is one that is appropriate for the business. Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit. In order to make this determination, you should consider if the time and effort put into the activity indicate an intention to make a profit ;you depend on income from the activity or etc. The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years. If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. Some activities are viewed more skeptically by the IRS than others. Craft businesses are often viewed as hobbies, where a consulting business or professional firm might not be.
“ Is it mandatory or merely advantageous?’---->As described above; NOT mandatory bur it depends on the situation.
“ Is there anything we should know that we probably don't?”----> Many legitimate businesses start out with a loss their first few years. But the IRS expects that a legitimate business will be set up to make a profit, not just have a hobby. Unfortunately, some people start "businesses" which are really hobbies just to claim the expenses and the loss on their tax returns. These situations have caused the IRS to look skeptically at all small businesses that have a hobby component to them, making it more difficult for businesses to be viewed as "real" if they have losses at start-up. If you follow these guidelines, you can minimize your chances of being considered a hobby.