NOOBS Guide To Starting A Business

[bazooka]

Question: Under what circumstances would it be better to be a sole proprietor? If none, why is it available as an option?

Can you expand on each of these different type of business structures or do you have a link or book that you recommend that explains them?

Regarding your question about being a Sole Proprietor, it is never a good idea. You can be sued for all of your personal assets if something happens. With a Corp or LLC you have protection from such lawsuits. Sole Proprietor is a cheap way to do business if you don't have the cash to file the proper paperwork to form a corporation. You also need to figure out which structure will work best for you. If you don't mind risking everything, Sole Proprietor will work just fine. The same applies to Partnerships. I personally always file for an LLC. Here in Nevada it's only $75 to incorporate and $125 for the initial list of officers. $200 total for corporate status and protection.

Yeah, it seems like common sense to get an LLC. I don't want to risk losing my home if my frame falls of the wall of someones home and kills somebody.... So of the people here that run their own photog businesses, you guys are all LLC's or Corps? No Sole proprietorships represented here?

 

[KmH]

Question: Under what circumstances would it be better to be a sole proprietor? If none, why is it available as an option?

Can you expand on each of these different type of business structures or do you have a link or book that you recommend that explains them?

Regarding your question about being a Sole Proprietor, it is never a good idea. You can be sued for all of your personal assets if something happens. With a Corp or LLC you have protection from such lawsuits. Sole Proprietor is a cheap way to do business if you don't have the cash to file the proper paperwork to form a corporation. You also need to figure out which structure will work best for you. If you don't mind risking everything, Sole Proprietor will work just fine. The same applies to Partnerships. I personally always file for an LLC. Here in Nevada it's only $75 to incorporate and $125 for the initial list of officers. $200 total for corporate status and protection.

I strongly disagree that being a Sole Propietor is never a good idea. For many small business it makes the most sense even when the issue of liability is considered.

Business Structure and Tax Implications | SBA.gov

"State Income Taxes Nearly every state levies a business or corporate income tax. Like federal taxes, your state tax requirement depends on the legal structure of your business. For example, if your business is an LLC, the LLC is taxed separately from the owners of the business, while sole proprietors report their personal and business income taxes using the same form used to report their business taxes."

Which also means more stringent reporting and record keeping requirements for business that ar not SP's.

Like most business legal issues, getting the advice of a qualified attorney and accountant is preferable to business legal advice in an online photography forum.

 

[KmH]

Yeah, it seems like common sense to get an LLC. I don't want to risk losing my home if my frame falls of the wall of someones home and kills somebody.... So of the people here that run their own photog businesses, you guys are all LLC's or Corps? No Sole proprietorships represented here?

Who says you could lose your home if your business type is a Sole Proprietorship?

My last business was a Sole Proprietorship.

 

[2WheelPhoto]

Question: Under what circumstances would it be better to be a sole proprietor? If none, why is it available as an option?

Can you expand on each of these different type of business structures or do you have a link or book that you recommend that explains them?

Regarding your question about being a Sole Proprietor, it is never a good idea. You can be sued for all of your personal assets if something happens. With a Corp or LLC you have protection from such lawsuits. Sole Proprietor is a cheap way to do business if you don't have the cash to file the proper paperwork to form a corporation. You also need to figure out which structure will work best for you. If you don't mind risking everything, Sole Proprietor will work just fine. The same applies to Partnerships. I personally always file for an LLC. Here in Nevada it's only $75 to incorporate and $125 for the initial list of officers. $200 total for corporate status and protection.

Yeah, it seems like common sense to get an LLC. I don't want to risk losing my home if my frame falls of the wall of someones home and kills somebody.... So of the people here that run their own photog businesses, you guys are all LLC's or Corps? No Sole proprietorships represented here?

What about insurance? As cheap as it is in this industry seems the only way to go anyway.

 

[etnad0]

Question: Under what circumstances would it be better to be a sole proprietor? If none, why is it available as an option?

Can you expand on each of these different type of business structures or do you have a link or book that you recommend that explains them?

Regarding your question about being a Sole Proprietor, it is never a good idea. You can be sued for all of your personal assets if something happens. With a Corp or LLC you have protection from such lawsuits. Sole Proprietor is a cheap way to do business if you don't have the cash to file the proper paperwork to form a corporation. You also need to figure out which structure will work best for you. If you don't mind risking everything, Sole Proprietor will work just fine. The same applies to Partnerships. I personally always file for an LLC. Here in Nevada it's only $75 to incorporate and $125 for the initial list of officers. $200 total for corporate status and protection.

I strongly disagree that being a Sole Propietor is never a good idea. For many small business it makes the most sense even when the issue of liability is considered.

Business Structure and Tax Implications | SBA.gov

"State Income Taxes Nearly every state levies a business or corporate income tax. Like federal taxes, your state tax requirement depends on the legal structure of your business. For example, if your business is an LLC, the LLC is taxed separately from the owners of the business, while sole proprietors report their personal and business income taxes using the same form used to report their business taxes."

Which also means more stringent reporting and record keeping requirements for business that ar not SP's.

Like most business legal issues, getting the advice of a qualified attorney and accountant is preferable to business legal advice in an online photography forum.

This is great advice. Get legal advice from an ATTORNEY. As far as my opinion, I have to admit it is biased because here in Nevada WE DON'T HAVE ANY STATE TAX LOL. We file our taxes quarterly (once every 3 months) so it's not that bad.

 

[etnad0]

Regarding your question about being a Sole Proprietor, it is never a good idea. You can be sued for all of your personal assets if something happens. With a Corp or LLC you have protection from such lawsuits. Sole Proprietor is a cheap way to do business if you don't have the cash to file the proper paperwork to form a corporation. You also need to figure out which structure will work best for you. If you don't mind risking everything, Sole Proprietor will work just fine. The same applies to Partnerships. I personally always file for an LLC. Here in Nevada it's only $75 to incorporate and $125 for the initial list of officers. $200 total for corporate status and protection.

Yeah, it seems like common sense to get an LLC. I don't want to risk losing my home if my frame falls of the wall of someones home and kills somebody.... So of the people here that run their own photog businesses, you guys are all LLC's or Corps? No Sole proprietorships represented here?

What about insurance? As cheap as it is in this industry seems the only way to go anyway.

Insurance is listed in the OP.

 

[etnad0]

Yeah, it seems like common sense to get an LLC. I don't want to risk losing my home if my frame falls of the wall of someones home and kills somebody.... So of the people here that run their own photog businesses, you guys are all LLC's or Corps? No Sole proprietorships represented here?

Who says you could lose your home if your business type is a Sole Proprietorship?

My last business was a Sole Proprietorship.

Did you get sued? In a corporate structure people can go after the corporate assets. Just look at successful companies, can you name one single successful company that remains a sole proprietorship? I can't. Not to say that it can't be done, but if someone gets hurt, they are coming after you, your home, etc, if you don't have enough insurance. The reason for this is because there is no "corporate veil" protecting you when you do work as a sole proprietor. With that said, even with an LLC or Corp, there are ways to screw up the corporate protection and people can still come after your personal assets.

People seem to think that simply filing the paperwork provides the protection, but certain things like meeting minutes must be kept to maintain a legitimate corporate status. You can't mix personal and business funds, etc.

If you've never been sued while having a sole proprietorship, look up some info on it. There are things you can do with an LLC or corp that you can't do with a Sole Proprietorship when it comes to taxes and finances as well.

 

[swanchild]

This is all great advice! Thanks for putting this together. I printed it out.

 

[Filipebr]

Very great post!! 5 stars

When I coach my clients I have very hard to install in their head that they should treat this as a true BUSINESS. They get caught up in the fact that they just "love doing this kind of work" and they don't really care about "giving discounts" or working more hours for free, since it is not such a "hard labor" they feel like it's ok to just put whatever price they feel like, offer what they feel like and etc...

But the only thing about offering the client exactly what the client wants is where I have to deviate a little, because I suggest not offering too many things, choice can really hurt a business because people love to give you a hard time. So I suggest a pre-made package and offer certain things so that the person can see what you have to offer and not try to "get creative" and end up wasting your time getting too fancy.

 

[pollutia]

These steps are really helpful. Everything is there. Thanks for sharing.

 

[MuddyRiver]

Awesome post. Thanks for sharing.

 

[MuddyRiver]

What risks do I run taking pictures for a small monetary cost without doing all of the things here... Such as the legal paperwork?

For example, I sometimes charge my friends $30 - $50 for a shoot for them to cover gas and editing time. Are there risks involved there?

 

[KmH]

You risk serious financial burdens from a variety of sources if you do not have a legal business - customer law suits, local, state, federal, fines and penalties.
Charging for your photography services, gas, editing time, selling prints, discs of photos, etc - is running a business regardless if your customers are friends, family, or someone who contacted you through your web site.

More start up, self-employed businesses have been financially done in by failing to collect and forward state sales taxes than any other type of government sanction. You may also have to pay Use taxes.
You have to have effective accounting procedures in place and have to meet various reporting requirements. If you don't, the government people will estimate, and they rarely estimate low.
Sales and Use Tax
http://www.texas.gov/en/discover/Pages/topic.aspx?topicid=/business/start
Starting & Managing a Business | SBA.gov
Obtain Business Licenses & Permits | SBA.gov
Understand Business Law & Regulations | SBA.gov

Regular insurance, like homeowners and car insurance usually does not cover a business, legal or otherwise.

The minimum amount recommended for business liability insurance is $1,000,000, but $2,000,000 is better. You likely need an Inland Marine insurance rider to cover all your camera, computer, software, etc you use for the business. You also need to check about insurance your car when using it for business.

It is my understanding that Texas, like other states, gives a % of unpaid taxes, fines, penalties they collect as a reward to someone reporting your not legal business to them.

 

[MuddyRiver]

Thank you!

 

[Photobe]

Great post, thanks for sharing!