Is it necessary to really have a business licence?

[sm4him]

the one thing that got me was sales tax. if your pretending to be a business the state wants there sales tax. and if you don't pay it, and they find out your doing business and can not verify money then they just hit you with a standard fee. $500 a month Is what Indiana decides is an average sales figure so that is the bill they send you. Yeah nothing like being in business for a few months, forgetting to turn in my sales tax for a month and then getting that bill in the mail. Talk about freaking out.

So, let's say I register as a business, but in six months' time, I haven't actually sold anything, or maybe I make a $25-50 sale two of those six months. Am I gonna hit with a bill like that because they just ASSUME I must be making money since I'm "in business?"
Would I have to file a sales tax report every month JUST to say I didn't sell anything? Because THAT sounds like a giant pain in the sit-upon.

The idea of all the extra paperwork is what keeps me from seriously considering making the leap. Since I'm NOT registered, though, I also go out of my way to NOT charge money for anything I do. If I do a shoot for someone it's either free, or maybe they buy me lunch. If I "sell" a print, I sell it for what it cost me, because I don't want the hassle of keeping up with all that, when I probably wouldn't make $500 a year from all of it, anyway (and by "make," I mean gross, not net. I probably wouldn't MAKE anything in the way of profit).

 

[pixmedic]

the one thing that got me was sales tax. if your pretending to be a business the state wants there sales tax. and if you don't pay it, and they find out your doing business and can not verify money then they just hit you with a standard fee. $500 a month Is what Indiana decides is an average sales figure so that is the bill they send you. Yeah nothing like being in business for a few months, forgetting to turn in my sales tax for a month and then getting that bill in the mail. Talk about freaking out.

So, let's say I register as a business, but in six months' time, I haven't actually sold anything, or maybe I make a $25-50 sale two of those six months. Am I gonna hit with a bill like that because they just ASSUME I must be making money since I'm "in business?"
Would I have to file a sales tax report every month JUST to say I didn't sell anything? Because THAT sounds like a giant pain in the sit-upon.

The idea of all the extra paperwork is what keeps me from seriously considering making the leap. Since I'm NOT registered, though, I also go out of my way to NOT charge money for anything I do. If I do a shoot for someone it's either free, or maybe they buy me lunch. If I "sell" a print, I sell it for what it cost me, because I don't want the hassle of keeping up with all that, when I probably wouldn't make $500 a year from all of it, anyway (and by "make," I mean gross, not net. I probably wouldn't MAKE anything in the way of profit).

if you dont file, it isnt a bill for what they assume you have been making, but a set fine for failing to pay sales taxes.
as soon as you tell the state you have a business, you have to file sales taxes quarterly or you are fined for it.

 

[imagemaker46]

Basically if you don't register, don't let any city, state, provincial bodies know that you are running a "quiet" business then the chances of anyone tracking you is slim. So stay quiet, make money, pay your taxes on it when you file as extra income, and they would be more than happy to get the taxes without question, and that's all that is necessary to run professional photographic business.

Does this bother any of the working professionals on this forum that are running their businesses, or is it another one of those who really cares what other people do?

 

[pixmedic]

Basically if you don't register, don't let any city, state, provincial bodies know that you are running a "quiet" business then the chances of anyone tracking you is slim. So stay quiet, make money, pay your taxes on it when you file as extra income, and they would be more than happy to get the taxes without question, and that's all that is necessary to run professional photographic business.

Does this bother any of the working professionals on this forum that are running their businesses, or is it another one of those who really cares what other people do?

it will also depend on how much money you are making. you can only declare so much "recreational" income before they want to know where its coming from.
it doesn't bother me much what other people do, but if you ASK me what it takes set up a photography business, proper licensing per your county is at the top of my list.
personally, I find people operating under the table like that to be morally questionable. taxes are what makes the country function. its what funds our schools, roads, water treatment, fire/EMS, hospitals....and many of those things are suffering. people willing to subvert income the system needs (and legally requires) makes me wonder what other things they are willing to morally and ethically "overlook" for their own greed.

 

[KmH]

Is it necessary to really have a business licence?

It's necessary if you don't want to suffer the financial burdens (fines and penalties) imposed if caught.

As pointed out by Mike, requirements vary by state, city, or county if you're outside a city limit.

Basically if you don't register, don't let any city, state, provincial bodies know that you are running a "quiet" business then the chances of anyone tracking you is slim. So stay quiet, make money, pay your taxes on it when you file as extra income, and they would be more than happy to get the taxes without question, and that's all that is necessary to run professional photographic business.

Does this bother any of the working professionals on this forum that are running their businesses, or is it another one of those who really cares what other people do?

Actually, the chances of being caught are a lot greater than many people realize.

An appreciable % of un-registered/licensed businesses that come to the attention of authorities get reported by competitors and/or unhappy customers.
A lot of cities/towns/counties/states have budget problems and use computer programs to help them identify un-registered/licensed businesses.
Some of the computer programs compare employer reported income to tax payer reported income and raise red flags when there is an undocumented discrepancy.

Notwithstanding that without a registered/license business, there are other legal implications.

Other businesses that are legal definitely should be bothered by un-registered/licensed businesses, because as mentioned un-registered/licensed businesses are generally not collecting/paying applicable sales/use/city taxes, not keeping the required business records, and generally taking, intentionally or unintentionally, as many shortcuts as possible.

 

[Big Mike]

Does this bother any of the working professionals on this forum that are running their businesses, or is it another one of those who really cares what other people do?

I'd guess that a lot of those people are mostly ignorant of the rules, and while I don't like it, it doesn't bother me too much. But if people are willfully avoiding getting a licence and paying their fees & taxes, then I have a problem with it.

Now...if those people were in direct competition with me, and if I were loosing clients to them...well then, that's a problem isn't it? I don' know how often it happens, but you might think that it would be in a professional photographer's best interests to turn in their competitors who are breaking the law.

 

[Big Mike]

Another issue, here in Canada is registering for (and thus charging) GST (Goods and Service Tax). The threshold is (iirc) $20,000. If you make more than that, you must have a GST number and charge/pay it. On the plus side, by having a GST number you are allowed to directly write off the GST that you pay for business purchases. (or something like that).

Might be similar for Provincial Sales Tax (PST) but I live & work in Alberta, so I don't know anything about PST .

 

[imagemaker46]

Does this bother any of the working professionals on this forum that are running their businesses, or is it another one of those who really cares what other people do?

I'd guess that a lot of those people are mostly ignorant of the rules, and while I don't like it, it doesn't bother me too much. But if people are willfully avoiding getting a licence and paying their fees & taxes, then I have a problem with it.

Now...if those people were in direct competition with me, and if I were loosing clients to them...well then, that's a problem isn't it? I don' know how often it happens, but you might think that it would be in a professional photographer's best interests to turn in their competitors who are breaking the law.

I think it happens a lot more than would be expected. I know of several in my home town that are working full time as photographers and aren't charging taxes on any of the income they are making. They feel that using the name photographer isn't the same as using photography, one sounds personal the other sounds business.

These guys are in direct competition with me. I'm guessing you'll find quite a few in Edmonton as well.

 

[imagemaker46]

Another issue, here in Canada is registering for (and thus charging) GST (Goods and Service Tax). The threshold is (iirc) $20,000. If you make more than that, you must have a GST number and charge/pay it. On the plus side, by having a GST number you are allowed to directly write off the GST that you pay for business purchases. (or something like that).

Might be similar for Provincial Sales Tax (PST) but I live & work in Alberta, so I don't know anything about PST .

Isn't it $30,000, or has that changed?

 

[amolitor]

I assume that being a properly set up legal business makes much of the accounting easier. Are you depreciating camera gear? Would you like to offset some taxes with the money you spent on gas getting to gigs? And so on.

If you're making more than a few bucks, I assume that being a properly legal business pays for itself quite briskly, in most jurisdictions.

 

[Overread]

Variations in state, county, city, and national laws mean that the question is too complex for a simple answer on an international forum where multiple different groups are aware only of their own local setup.

I think that encouraging newbies to register at the very least gives them the incentive to actually go look at their local laws. To consider for themselves if they really need to or are required to as well as the penalties for failing to do so. IT is very solid an good stock advice for the newbie to consider and also makes them think more seriously about the job. It's their own choice and option to research their own personal situation and then make the right choice based on what their local and national laws require of them.

 

[nycphotography]

Does this bother any of the working professionals on this forum that are running their businesses, or is it another one of those who really cares what other people do?

I'd guess that a lot of those people are mostly ignorant of the rules, and while I don't like it, it doesn't bother me too much. But if people are willfully avoiding getting a licence and paying their fees & taxes, then I have a problem with it.

Now...if those people were in direct competition with me, and if I were loosing clients to them...well then, that's a problem isn't it? I don' know how often it happens, but you might think that it would be in a professional photographer's best interests to turn in their competitors who are breaking the law.

I think it happens a lot more than would be expected. I know of several in my home town that are working full time as photographers and aren't charging taxes on any of the income they are making. They feel that using the name photographer isn't the same as using photography, one sounds personal the other sounds business.

These guys are in direct competition with me. I'm guessing you'll find quite a few in Edmonton as well.

How do you "charge" taxes on "income"? That is a nonsense statement. In the US you "report" income, "deduct" expenses, and "pay" taxes on what's left. You charge sales tax on products sold, but products sold does not = income (hint, any product has a cost of good sold (else it is a service) and thus, income is not the same as sales).

Now consider... a wedding photographer might shoot in 3 or 5 or even 20 counties, and sometimes in 2 or 3 states (NY, NJ, CT for example). Nothing like dealing with 15 different "authorities" to consume a whole lot of time you're prefer to spend actually adding value to your business. This is why people tend to avoid licensing. Yes they might be avoiding taxes also, but really, if you're making less than 5k a yer doing something, the odds are your expenses will wipe out most of it and the tax evasion is in the low 3 figures, not the high 4 or 5 figures people like to assume.

Having done several side businesses over the years in various jurisdictions and having dealt with the authorities appropriately, I currently REFUSE to do ANYTHING where I will ever have to hire an employee. The paperwork, reporting, and compliance risk is JUST NOT WORTH IT. I also refuse to start any business activity that is required to collect or report sales tax. The paperwork, reporting, and compliance risk is JUST NOT WORTH IT.

If I were starving and HAD to do that kind of business, the fact that I were starving would almost certainly mean I would start out under the radar. how long would I stay under the radar? Hard to say, but the fact is once someone finds a way to make things work, they tend not to rethink or change them.

Am I an evil tax dodger? I don't think so, but you're welcome to form your own opinion.

I think the premise that "unlicensed" = "nefarious intent" is a broken assumption. Yeah, sometimes it's true. But stupid **** like if I don't file a sales tax return, rather than "assuming" a zero sales return and "coalescing the nulls" with a zero cost event, they "assume" I'm stealing income and fining me $500? that just means I'll never, ever, opt in to that system so long as I an possibly find a way to avoid it. The reality is that the asshats in the local governments make it as painful as possible to deal with them. THAT'S why people avoid them like the plague.

 

[jamesbjenkins]

So, let's say I register as a business, but in six months' time, I haven't actually sold anything, or maybe I make a $25-50 sale two of those six months. Am I gonna hit with a bill like that because they just ASSUME I must be making money since I'm "in business?"
Would I have to file a sales tax report every month JUST to say I didn't sell anything? Because THAT sounds like a giant pain in the sit-upon.

The idea of all the extra paperwork is what keeps me from seriously considering making the leap. Since I'm NOT registered, though, I also go out of my way to NOT charge money for anything I do. If I do a shoot for someone it's either free, or maybe they buy me lunch. If I "sell" a print, I sell it for what it cost me, because I don't want the hassle of keeping up with all that, when I probably wouldn't make $500 a year from all of it, anyway (and by "make," I mean gross, not net. I probably wouldn't MAKE anything in the way of profit).

I can't speak for the other states, but up until 2013, Texas had quarterly filings required if you held a sales and use tax ID. This year they changed it to an annual filing (Thanks to be God!)

If you didn't make anything, for that quarter/year, then you just file your form for $0. No tax. Yet another reason why Texas is better...especially better than Maine.

Edit:

As to your original question, Imagemaker... I'd guess that the vast majority of self-proclaimed professional photographers don't follow the law and register their business. However, that's no surprise since they mostly don't have a clue about anything in photography or business. However, I can almost guarantee that every last person who takes it very seriously is going to be registered. If you're the type to spend $20k on gear, thousands of hours practicing and studying, untold amounts of energy marketing yourself...chances are pretty good you're going to jump through a couple of hoops to make sure you're above board with Uncle Sam.

 

[imagemaker46]

I'd guess that a lot of those people are mostly ignorant of the rules, and while I don't like it, it doesn't bother me too much. But if people are willfully avoiding getting a licence and paying their fees & taxes, then I have a problem with it.

Now...if those people were in direct competition with me, and if I were loosing clients to them...well then, that's a problem isn't it? I don' know how often it happens, but you might think that it would be in a professional photographer's best interests to turn in their competitors who are breaking the law.

I think it happens a lot more than would be expected. I know of several in my home town that are working full time as photographers and aren't charging taxes on any of the income they are making. They feel that using the name photographer isn't the same as using photography, one sounds personal the other sounds business.

These guys are in direct competition with me. I'm guessing you'll find quite a few in Edmonton as well.

How do you "charge" taxes on "income"? That is a nonsense statement. In the US you "report" income, "deduct" expenses, and "pay" taxes on what's left. You charge sales tax on products sold, but products sold does not = income (hint, any product has a cost of good sold (else it is a service) and thus, income is not the same as sales).

Now consider... a wedding photographer might shoot in 3 or 5 or even 20 counties, and sometimes in 2 or 3 states (NY, NJ, CT for example). Nothing like dealing with 15 different "authorities" to consume a whole lot of time you're prefer to spend actually adding value to your business. This is why people tend to avoid licensing. Yes they might be avoiding taxes also, but really, if you're making less than 5k a yer doing something, the odds are your expenses will wipe out most of it and the tax evasion is in the low 3 figures, not the high 4 or 5 figures people like to assume.

Having done several side businesses over the years in various jurisdictions and having dealt with the authorities appropriately, I currently REFUSE to do ANYTHING where I will ever have to hire an employee. The paperwork, reporting, and compliance risk is JUST NOT WORTH IT. I also refuse to start any business activity that is required to collect or report sales tax. The paperwork, reporting, and compliance risk is JUST NOT WORTH IT.

If I were starving and HAD to do that kind of business, the fact that I were starving would almost certainly mean I would start out under the radar. how long would I stay under the radar? Hard to say, but the fact is once someone finds a way to make things work, they tend not to rethink or change them.

Am I an evil tax dodger? I don't think so, but you're welcome to form your own opinion.

I think the premise that "unlicensed" = "nefarious intent" is a broken assumption. Yeah, sometimes it's true. But stupid **** like if I don't file a sales tax return, rather than "assuming" a zero sales return and "coalescing the nulls" with a zero cost event, they "assume" I'm stealing income and fining me $500? that just means I'll never, ever, opt in to that system so long as I an possibly find a way to avoid it. The reality is that the asshats in the local governments make it as painful as possible to deal with them. THAT'S why people avoid them like the plague.

I charge my clients taxes on my professional fees/service, prints, print sales, computer work, mileage, well everything really. I don't charge taxes on work outside of Canada.

 

[pixmedic]

I'd guess that a lot of those people are mostly ignorant of the rules, and while I don't like it, it doesn't bother me too much. But if people are willfully avoiding getting a licence and paying their fees & taxes, then I have a problem with it.

Now...if those people were in direct competition with me, and if I were loosing clients to them...well then, that's a problem isn't it? I don' know how often it happens, but you might think that it would be in a professional photographer's best interests to turn in their competitors who are breaking the law.

I think it happens a lot more than would be expected. I know of several in my home town that are working full time as photographers and aren't charging taxes on any of the income they are making. They feel that using the name photographer isn't the same as using photography, one sounds personal the other sounds business.

These guys are in direct competition with me. I'm guessing you'll find quite a few in Edmonton as well.

How do you "charge" taxes on "income"? That is a nonsense statement. In the US you "report" income, "deduct" expenses, and "pay" taxes on what's left. You charge sales tax on products sold, but products sold does not = income (hint, any product has a cost of good sold (else it is a service) and thus, income is not the same as sales).

Now consider... a wedding photographer might shoot in 3 or 5 or even 20 counties, and sometimes in 2 or 3 states (NY, NJ, CT for example). Nothing like dealing with 15 different "authorities" to consume a whole lot of time you're prefer to spend actually adding value to your business. This is why people tend to avoid licensing. Yes they might be avoiding taxes also, but really, if you're making less than 5k a yer doing something, the odds are your expenses will wipe out most of it and the tax evasion is in the low 3 figures, not the high 4 or 5 figures people like to assume.

Having done several side businesses over the years in various jurisdictions and having dealt with the authorities appropriately, I currently REFUSE to do ANYTHING where I will ever have to hire an employee. The paperwork, reporting, and compliance risk is JUST NOT WORTH IT. I also refuse to start any business activity that is required to collect or report sales tax. The paperwork, reporting, and compliance risk is JUST NOT WORTH IT.

If I were starving and HAD to do that kind of business, the fact that I were starving would almost certainly mean I would start out under the radar. how long would I stay under the radar? Hard to say, but the fact is once someone finds a way to make things work, they tend not to rethink or change them.

Am I an evil tax dodger? I don't think so, but you're welcome to form your own opinion.

I think the premise that "unlicensed" = "nefarious intent" is a broken assumption. Yeah, sometimes it's true. But stupid **** like if I don't file a sales tax return, rather than "assuming" a zero sales return and "coalescing the nulls" with a zero cost event, they "assume" I'm stealing income and fining me $500? that just means I'll never, ever, opt in to that system so long as I an possibly find a way to avoid it. The reality is that the asshats in the local governments make it as painful as possible to deal with them. THAT'S why people avoid them like the plague.

if you charge for photography, you legally have to collect sales tax. you are selling a product. period.
the taxes businesses pay quarterly is a sales tax, which is completely separate from when you file your income taxes in april.
even if you provide a service, and not a directly transferable produce, you are STILL responsible for collecting and paying sales tax.
it doesn't matter whether you are selling a product, a service, or even an opinion.
if a wedding photographer is shooting in 15 counties, they STILL only have a business registered in ONE county. and that is the county in which they pay their taxes.
it actually isn't THAT horribly complicated. if, at some point, it DOES become "that horribly complicated" there are tax consultants in pretty much every county to get that stuff straightened out. if your shooting in 15 counties and multiple states, you probably make enough to hire a tax guy. if not, you should probably just stick to your home area.

yea, the department of revenue is absolutely RETARDED...as are their business methods. I HATE dealing with them.
but it is still the law. ignorance, inconvenience, or monetary gain is not an excuse to circumvent the law.
the reason is irrelevant, the penalties are the same.

most people here dont want to hear any excuses for committing copyright infringement, or image theft...why are excuses for tax evasion so different?