Why LLC

Discussion in 'General Shop Talk' started by wxnut, Feb 14, 2007.

  1. wxnut

    wxnut TPF Noob!

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    Do any of you photographers in business have an LLC business? Do you think its smart to have? I am not sure I know exactly how it works but I am guessing its something like this...

    I have $5000 worth of photography equip. assets... etc.

    I am doing a photoshoot at someone's house using my studio lights. Something goes wrong and my lights start a fire causing $20,000 in damage. They can only sue me for the $5000 my business is worth. Is that right.

    Its $130 to apply for an LLC and I think $25 per year after. Is there any other benefits to being an LLC business?

    Any info would be appreciated.

    Doug Raflik
     
  2. ksmattfish

    ksmattfish Now 100% DC - not as cool as I once was, but still

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    Talk to an accountant. I'm a sole proprietorship mainly because it's easy, and I haven't talked to an accountant. I know nothing about liability issues, but there are differences in how the taxation works.
     
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  3. Icon72

    Icon72 TPF Noob!

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    Simply put, if you do business as an LLC and someone decides they want to sue you because your lighting rig tipped over on them and they broke a nail, only the business can be sued, not you personally. You can live in a million dollar home and run a rinky dink business and only the business assets are at stake.

    Disclaimer: I am not a lawyer nor any kind of business expert. It's always best to do your own research. Here's a good starting point: http://www.sba.gov/index.html
     
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  4. ZyxKor

    ZyxKor TPF Noob!

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    In general there's a lot of reasons that you want an LLC. The two biggest reasons are liability and taxes. Having a limited liability company does significantly limit what you could lose if you were to be sued. Be aware though that it's not a failsafe way of protecting assets, it varies widely according to the state that you register in - not necessarily the state you live in. In large $ amount litigation and depending on the circumstances you will generally still be named personally as a defendant.

    Secondly with an LLC you can lower your tax rate legally by changing the type of income that you generate. It works best if you can afford not to have a large monthly salary and instead take distributions. What does that mean? It means that you go from earned income (salary) to investment income / capital gains, at a much lower tax rate. If you earn a fairly large amount of income it is a good way to lower your effective tax rate. Ask an accountant about it, they would be able to give you a good estimate of how much you might gain from it and all the tricks of the trade to save you money. The downside is that there is more paperwork involved and some costs. It's up for you to decide which is best for you.
     
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  5. PNA

    PNA TPF Noob!

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    I am not familiar with LLC, so I would suggest a sub chapter S corporation issuing stock to the principals of the company. This limits the stock holders liability and taxes. Insurance is another issue altogether.

    Best bet is to check with an accountant.
     
  6. ZyxKor

    ZyxKor TPF Noob!

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  7. JD in Socal

    JD in Socal TPF Noob!

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    In my state (Calif.) all of the net income flows through to your (my) pesonal tax return, so there is no direct tax effect. As a matter of fact, I have to pay 1% tax on the gross income at the LLC level, then pay the normal rate on the net income at the personal level. Also, there is an $800 annual fee here for the LLC.

    The primary advantage here is the liability shield. I'm not sure the liability issue is huge for a photographer, as you are unlikely to do any great damage. If you are building bridges or designing buildings, the potential liability is huge. For a photographer, it is much less. You can also manage that risk with adequate insurance.

    The other (and better) reason for an LLC is to create a separate entity for multiple owner/partners. You can have an LLC operating agreement (equivalent to a partnership agreement) to document the roles of the partners ("members", in an LLC) and outline what happens in the event of death of a partner, a buy-out, etc. Also, the liability issue is larger when another owner/partner could do something to create liability against all of the owners.

    JD
     

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