Going legit, biz-wise

Discussion in 'Beyond the Basics' started by gabelimom, Dec 1, 2007.

  1. gabelimom

    gabelimom TPF Noob!

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    Hi all-

    2007 marks the first year that I worked as a photog....and got paid for it! Prob is, now I'm going to have to pay taxes. :grumpy:

    Apart from a cool name, a website, and being a member of PPA, I do not have any sort of legal anything attached to my photography. Some people have suggested that I should do a LLC, but I'm not even sure all that it encompasses.

    Is it even worth it to register my business? How much do you have to make to claim expenses (I have a LOT of those!). Any advice would be appreciated! Thanks!
     
  2. JerryPH

    JerryPH No longer a newbie, moving up!

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    Thats going to depend on what country and even what state or province you live in.

    One of the issues of posting for legal advice on an internaltional forum is that you will get vastly different answers, likely not many that pertain to you at all.

    At the very least, in terms of Canada and the USA, I would register the business. Generally, in Canada once a business rolls over more than 25,000/year or they deal in situations where they could be sued, I suggest incporporating the business. That way if someone sues you and wins, you will not lose personal assets like the family home, just the business assets.

    I would definately suggest that you talk to someone LOCAL to you that can offer you the correct and more complete advice.
     
  3. hyp0rbyte

    hyp0rbyte TPF Noob!

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    If you are in the US, a Subchapter S corporation is what I would recommend. It offers protection between you and the business. IE if the business is sued, they can't come after you personally. You can goto your local secretary of state office/website to get the paperwork needed to open an S corp. After you incorporate you will need to file for an EIN with the IRS (I know you can fax this, you may be able to do it online now), and declare your chapter S status (else the IRS treats you as a C corp (publicly traded) which is bad.

    You can use a service that will take these steps for you, but you should be able to ask the SOS office for tips, or find the proper information online. You will need your incorporation documents, your EIN, chapter S filling, and your bylaws (possibly) to open your bank account. You probably won't be able to get (good) insurance until you are open for 1 year other than slip/fall liability and sometimes they want a business open for a while for that.

    Keep in mind that once you open this, you will be taxed a bit so I would only take this step if you are doing very well with photography. You will also need an accountant to fill out tax returns, K-1s etc.. The profit from the corporation flows to the shareholders. If you are 100% shareholder you will pay income tax on any profit the company makes... so if the business makes $10,000 in profit (after expenses) then this will flow to you as an individual.. and you will file it with your personal 1040 etc.. in the form of a K-1.

    You can not do all of this and be a sole-proprieter, but you would be CRAZY because if someone doesn't like your photos, bye bye house, car, dog, and any income until the millions filled against you go away.

    I saw an article a few weeks ago about a drunk that fell asleep under a tanker truck at a gas station. He sued the trucking company and the gas station and won 3million dollars... Do you think you can win against someone with missing/bad photos (not judging your abilities, but things happen).

    This is why I am not "professionally" doing photography. I am turning people away because I don't want the liability/taxes.

    I hope this helps.
     
  4. hyp0rbyte

    hyp0rbyte TPF Noob!

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    Please overlook the pesismism.
     
  5. jols

    jols TPF Noob!

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    that is easily sorted with public liability insurance of course its not a probelm at all
     
  6. Alpha

    Alpha Troll Extraordinaire

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    I was under the impression that the point of the s-corporation was that you could avoid the double tax. Normally, I thought that 100% shareholders essentially paid taxes on company profits, and then paid taxes on them again as income, where the s-corporation allowed you to avoid one.
     
  7. hyp0rbyte

    hyp0rbyte TPF Noob!

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    As soon as you file a claim with your insurance they will "non-renew" (cancel) your policy. It will be difficult (though not impossible) to get another carrier to agree to insure your business.
     
  8. hyp0rbyte

    hyp0rbyte TPF Noob!

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    You would need to give yourself an income, with a withdrawl (i'm not sure on how this is done), or declare dividends.. All taxed differently. An accountant could help you with that. If you have an income, you have to pay both income + profit via K1s.
     
  9. jols

    jols TPF Noob!

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    but the possibility of someone making a claim against you is small and at least you will be covered if someone falls asleep under your tri pod and gets injured. Thus sueing you for 3 mil
     
  10. Alpha

    Alpha Troll Extraordinaire

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    Not true. Try asking a wedding photographer if the possibility of getting sued is low.
     
  11. jols

    jols TPF Noob!

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    i shoot weddings and know dozens of wedding togs and the possibility is very low.

    do you shoot weddings max or are you not good enough or scared
     
  12. hyp0rbyte

    hyp0rbyte TPF Noob!

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    Wasn't just a month ago someone sued because the color of the flowers wasn't quite right... I've done photos for a few weddings (they were going to have aunt x do it), but I'm no longer doing it because of these issues.
     

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