You can even register a business for things that you might consider a hobby as long as you can earn a little bit of money doing it. For example, I know someone who is an amateur photographer who occasionally takes photos for his friends at weddings or other family gatherings. His business only barely breaks even, but it does allow him to consider his camera and computer equipment as business expenses - things that he would probably spend money on for himself anyway.
this is not exactly true, there has to be a reasonable chance that this is a profitable enterprise defined both by your effort/intention and at least some profitability over a period of time. if it doesn't meet these standards, it's a hobby and you cannot deduct associated expenses. see here: http://www.irs.gov/newsroom/article/0,,id=169490,00.html
You are correct, in this case the person does make a little bit of money from photography, some from friends and some from stock photography sites. He did speak with a tax expert and is apparently in the clear as far as the IRS is concerned. I think his "income" is somewhere in the $100/year range.
My point was just that there are a lot of activities that most of us might be doing anyway for fun, not considering the tax advantages of organizing a business. e.g. amateur photography, helping people with computer and website issues, personal services, blogging, etc.
The point of the business/hobby distinction is to prevent individual taxpayers from deducting losses for hobby activities. If the activity is profitable, the taxpayer gets taxed, so the IRS couldn't care less whether its a hobby or an actual business.
Attempts to generate profit by incorporated entities are, by definition, business activities. For pass-through entities like LLCs and S-Corps, this means that they are treated as business activities for purposes of taxing the managing/active investors.
The activities don't have to have a reasonable chance of being profitable; otherwise, speculative ventures would never be treated as businesses. The key test of whether something is a business activity is whether it generates revenue and whether the taxpayer puts effort into generating revenue. For example: painting is normally a hobby, unless the painter also puts effort into selling those paintings.
Any small business owner should be familiar with the IRS Guides at http://www.irs.gov/businesses/small/index.html , and especially Publication 535, which tells you business expenses are allowable: http://www.irs.gov/publications/p535/index.html