Is It Necessary to Become an LLC? What did you do about your business setup?

[PeK77]

I've been looking into starting an LLC in Pennsylvania as I'm starting to prepare my year long plan to launch my photography business. My problem is that I seem to be getting different opinions on if I need to start an LLC.

Let me start by saying, I don't own enough photography gear to warrant an insurance policy in a case where I may be sued. I'm very professional in the way I treat people I shoot for but am concerned that if I were to go into a home and set up lights, backdrops and stands and something was to fall and hurt somebody that they could file a lawsuit. One person recommended starting an LLC so my personal belongings would not be able to be touched in a lawsuit. Another told me that even with an LLC I could be sued and my personal items could be in danger unless I start an S corp.

I know you're not an attorney and I should find one in my jurisdiction but what did you do?

 

[sscarmack]

You should start it as a business once you start accepting money for it........ :roll:

 

[PeK77]

You should start it as a business once you start accepting money for it........ :roll:

Right. That will be happening within 6 months. The question is - what kind of business to start.

 

[sscarmack]

I honestly don't remember what I did, but I am registered and I have my business ID number.


Try searching google for your states business requirements


Someone will come along shortly

 

[The_Traveler]

Liability insurance is for much more than you dropping a light stand on someone.

 

[Overread15 3]

Try asking your local council - they often have advice and initiatives setup to help new local businesses and much of it is often free information or information packs which might well help you setup.

 

[Will722]

Here is more info on an LLC LLC Basics. Limited Liability Company Business Structure | Nolo.com

Personal assets are protected.

 

[PeK77]

Try asking your local council - they often have advice and initiatives setup to help new local businesses and much of it is often free information or information packs which might well help you setup.

Just talked to my borough and they said I may need a "Home Occupancy" application? Government makes everything so complicated. I can't wait to see what kind of information they send me....ugh. May end up taking is slower if this is the kind of stuff that is going to happen.

 

[Will722]

You may also want to find out if you need a business license in order to operate a business in city limits.

 

[KmH]

Are you in the USA? (No location in profile).

If you are the only member of an LLC (single member or SMLLC), your personal possessions may indeed at risk if you lose a law suit.
The LL stands for Limited Liability and does not mean NO liability.
LLC law is state law, so there are 50 slightly different versions.

Single Member Limited Liability Companies

What is a Single Member LLC?

There is some lingering worry among legal analysts as to whether a member of SMLLC will be given the same protection from liability as a member of a limited liability company with multiple members. In most states, the statute appears clear, but it may take many years for case law to develop to the extent that some lawyers will have the comfort level that they have from decades of case law on one-shareholder corporations. In the end, it seems probable that a member of a SMLLC will have no less protection than a sole shareholder of a corporation.

Limited Liability Company (LLC) | SBA.gov

 

[PeK77]

Are you in the USA? (No location in profile).

If you are the only member of an LLC (single member or SMLLC), your personal possessions may indeed at risk if you lose a law suit.
The LL stands for Limited Liability and does not mean NO liability.
LLC law is state law, so there are 50 slightly different versions.

Single Member Limited Liability Companies

What is a Single Member LLC?

There is some lingering worry among legal analysts as to whether a member of SMLLC will be given the same protection from liability as a member of a limited liability company with multiple members. In most states, the statute appears clear, but it may take many years for case law to develop to the extent that some lawyers will have the comfort level that they have from decades of case law on one-shareholder corporations. In the end, it seems probable that a member of a SMLLC will have no less protection than a sole shareholder of a corporation.

Limited Liability Company (LLC) | SBA.gov

I guess the real question is - How much $ should I be making before I take these steps. I thought building a website to get my name out there would be a nice way to show my work and let people know that I'm available. A neighbor suggested the LLC as thats what he did for his consultant business. Maybe I should wait until I have earned enough to do this. I think there are ways to file for income earned without going through all of these steps.

 

[JoeW27 1]

I've been looking into starting an LLC in Pennsylvania as I'm starting to prepare my year long plan to launch my photography business. My problem is that I seem to be getting different opinions on if I need to start an LLC.

Let me start by saying, I don't own enough photography gear to warrant an insurance policy in a case where I may be sued. I'm very professional in the way I treat people I shoot for but am concerned that if I were to go into a home and set up lights, backdrops and stands and something was to fall and hurt somebody that they could file a lawsuit. One person recommended starting an LLC so my personal belongings would not be able to be touched in a lawsuit. Another told me that even with an LLC I could be sued and my personal items could be in danger unless I start an S corp.

I know you're not an attorney and I should find one in my jurisdiction but what did you do?

I'm going to assume you're in the USA (you may not be). Incorporation and local tax laws vary with each state. So the appropriate format for Ohio may be different for Utah or Mississippi or NY. Also, I'm no lawyer (nor do I play one on TV). So take all of this advice as nothing more than gossip. Go see a lawyer or tax attorney (or some localities with have offices in city hall aimed at helping new businesses and they can offer advice on which model to go with). Or...contact SCORE (free advice...retired Executives provide coaching and help, administered by the US Dept. of Commerce. Okay, all of those caveats aside, I've been a sole-propriotorship, an LLC, a partnership (in some states, an LLC and a partnership are the same, in others they're not), a C-corp and an S-corp (hey--35+ years of business). Here is what I'd have to say...

1. The argument most people give for incorporation in some form is to protect yourself legally. I think that's a weak one. You need legal protection of course but it's called insurance and the appropriate forms (like very specific model releases and client agreements). LLC is usually the best combination of legal protection while minimizing paperwork requirements. The legal considerations may be important if you have a spouse who makes big money or if you shoot stuff that can get you sued (lots of corporate work, porn, paparazzo, corporate espionage/private investigator work). S-Corp worked best if you were getting paid in dividends rather than actually salary.

2. The model of incorporation has impact on what kind of tax forms you fill out.

3. Sole proprietorship makes sense if you just want to name your business after yourself (PeK77 & Associates). You don't have to file a corporate return, legal requirements and tax requirements are minimal. Otherwise, you don't have a lot of protection for your company name...you can come up with something really cool and another company can take that name. Also, some organizations won't do business with a sole-proprietor (think of it as if a photographer proposed to shoot your wedding and they showed up with a point and shoot...you'd assume they were no good). Additionally, if you're looking at renting/leasing office space or getting certain kinds of insurance you probably need to be incorporated in some form (LLC, partnership, C-corp, S-corp). Sole proprietorship also significantly limited the benefits you can claim tax-wise (for instance, I don't think you can write off travel expenses to scout out your next location shoot).

4. How much money should you make first before doing this...that's the wrong question. Do a business plan. Every smart business needs one. If this is just a hobby for you and you're making beer money, skip the business plan and just get insurance and get a local lawyer to generate the model release and any other key forms. But if you intend to make money off of this and (at some point), make this your sole or primary income, then create a business plan. If you do this, you'll have a target market/niche. It will identify if developing a website is a key priority or something to do 2 years from now. It will tell you if you need to incorporate right now and if there is a particular format that matters to you. It will identify critical expenses (for instance if you're shooting kids sports teams then a critical expense is space rental at local elementary schools, if you're shooting formal portraits than a studio is probably a critical expense, if you're shooting architecture than a tilt-shift lens is a critical expense, sports...than you need some f2.8 200mm and 400mm zoom lens). The SCORE reference I mentioned earlier can help you with this (the business plan).

Bottom line: don't obsess about the organizational form. Make sure you've got insurance. Make sure you have good, well-written, locality appropriate forms (such as model releases, property usage, contracts for your most common types of work like if you specialize in weddings or dog shows or kids sports teams).

 

[JLaurenPhoto]

I've been looking into starting an LLC in Pennsylvania as I'm starting to prepare my year long plan to launch my photography business. My problem is that I seem to be getting different opinions on if I need to start an LLC.

Let me start by saying, I don't own enough photography gear to warrant an insurance policy in a case where I may be sued. I'm very professional in the way I treat people I shoot for but am concerned that if I were to go into a home and set up lights, backdrops and stands and something was to fall and hurt somebody that they could file a lawsuit. One person recommended starting an LLC so my personal belongings would not be able to be touched in a lawsuit. Another told me that even with an LLC I could be sued and my personal items could be in danger unless I start an S corp.

I know you're not an attorney and I should find one in my jurisdiction but what did you do?

Well everyone has said very good information the main thing about having an llc or corporation is having line between personal and business.

 

[W.Fovall]

you don't need anything.. just use your last name as the business name and add a Schedule C-EZ to you tax return..(if you want to pay taxes on the income) you can buy liability insurance separately fairly cheaply if you think your going to start hitting people with light stands.. biggest risk is getting caught shooting at a location on private property or at a event you don't have rights to and trying to sell the images.
If you make a big photo studio in your house and have people coming over all the time you may need a business license from your city and check your homeowners association if your allowed to..

 

[colnago1331]

You absolutely want to start an LLC or similar type business. Anyone who doesn't leaves himself personally exposed. And not just what he owns. His future earnings could also be at risk. Insurance is great - definitely get it. But your insurance only protects you up to the limit you choose, and it may not protect you at all.

Let me give you an example. You don't set yourself up as a business. You agree to shoot a wedding. You start out the day of the wedding shooting the bride at her house while she's getting ready. Then, you get in your car to drive to the church for the actual ceremony itself. On the way, you get a text message. You start to read the message, and while doing so you blow a red light and hit and kill a pedestrian. That's okay - you've got auto insurance. But wait - the limits are only $100,000 for bodily injury to others and you hit a doctor, whose life is worth millions (arguably)! So your insurance pays the $100,000 but you're still personally liable for damages over $100,000 because you never set up a business. Or worse, your insurance denies coverage because your policy contains a business auto exclusion - i.e. your personal auto policy does not cover you while you're in the course and scope of your employment (as a photographer). Now they won't even pay the $100,000. But you, personally, have a house, a car, and all that expensive photo equipment so the doctor's estate comes after you personally.

In the alternative, you set up an LLC. Generally, so long as you keep your LLC's finances completely separate from your personal finances, your personal assets are protected in the above situation. You might lose the photography equipment as it may be considered to be owned by the LLC, but your house, car, etc. are likely protected.

Second, you set up your LLC and get business auto insurance, which will likely protect you in the above situation. But you should also get general liability insurance. General liability insurance can help you in a variety of situations, from if you drop a camera on someone's toe to if your strobe falls over and starts a fire. It could even protect you if you get accused of sexually harassing a model. And something many people don't know about insurance policies - if you get sued for something that might be covered under the insurance policy, then the insurer will provide you with an attorney to represent you in that lawsuit. In most cases you'll probably only have to pay your deductible, and in auto accident cases you may not even have a liability deductible. Without the right insurance in place, you might be stuck defending yourself or having to pay an attorney out of your own pocket . . . and that can be very very expensive.

Finally, in addition to getting insurance you should also have a strong Operating Agreement for the LLC (even if you're the only member of the LLC), and you should run your LLC as the Operating Agreement requires. Doing this along with keeping finances separate help insulate your personal life from your business life.

If you're seriously considering a business of any kind I highly recommend you contact a local business attorney who can help you set up the right business entity for you. If you don't know of one, call your local bar association; most have a referral service and can give you names/numbers of business attorneys.

**The preceding is not intended to be, nor should it be considered to be, legal advice**