Profit

[12sndsgood]

i'm at the point where anything bought, paid for, etc comes out of the business. one day I hope to pay myself a bit.

 

[KmH]

What counts is what the the Commonwealth of Virginia and the US Federal government think.
www.score.org

Your salary should be considered part of your cost of doing business, just like paying someone to clean your studio would be part of your CODB.

It's a good business practice to keep your personal income separate from your business income.

Commonwealth of Virginia Department of Taxation

In Virginia and being self-employed, you may have to pay use taxes and unemployment insurance taxes as well as personal and business income taxes. Virginia Employment Commission | Virginia Employment Commission

As far as the feds - Filing Information for Self-Employed & Small-Business

If you do not meet federal requirements, they may deem what you do a hobby, making a variety of federal business deductions unavailable to you.
Is Your Hobby a For-Profit Endeavor?

An activity is presumed for profit if it makes a profit in at least three of the last five tax years, including the current year.If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations.

 

[cgipson1]

Your salary should be considered part of your cost of doing business, just like paying someone to clean your studio would be part of your CODB.

It's a good business practice to keep your personal income separate from your business income.

^^^ THIS!

 

[12sndsgood]

Wonder by their definition do you have to figure in your hourly cost and minimum wage, or can you pay yourself a dollar a year like you hear some ceo's doing.

 

[jwbryson1]

Wonder by their definition do you have to figure in your hourly cost and minimum wage, or can you pay yourself a dollar a year like you hear some ceo's doing.

Let's assume she establishes an LLC as her business entity of choice. As a single member LLC, she can elect to either be taxed as a C Corporation, in which case the LLC will be responsible for paying federal income taxes on its net income, or alternatively she can elect to be taxed as a "non-entity" (aka "disregarded entity") which means that the earnings of the LLC flow through the entity directly to her and she reports her gross receipts and expenses on Schedule C. As a non-entity, she could end up reporting taxable net income on her personal tax return without ever taking a dime of distributions from the LLC. That sucks because it's like "phantom income" since you didn't pay yourself but still have to pay taxes on the income...

 

[amolitor]

Wonder by their definition do you have to figure in your hourly cost and minimum wage, or can you pay yourself a dollar a year like you hear some ceo's doing.

Let's assume she establishes an LLC as her business entity of choice. As a single member LLC, she can elect to either be taxed as a C Corporation, in which case the LLC will be responsible for paying federal income taxes on its net income, or alternatively she can elect to be taxed as a "non-entity" (aka "disregarded entity") which means that the earnings of the LLC flow through the entity directly to her and she reports her gross receipts and expenses on Schedule C. As a non-entity, she could end up reporting taxable net income on her personal tax return without ever taking a dime of distributions from the LLC. That sucks because it's like "phantom income" since you didn't pay yourself but still have to pay taxes on the income...

I am so turned on right now.

 

[12sndsgood]

and this is why I have a guy do our taxes.

 

[jwbryson1]

Wonder by their definition do you have to figure in your hourly cost and minimum wage, or can you pay yourself a dollar a year like you hear some ceo's doing.

Let's assume she establishes an LLC as her business entity of choice. As a single member LLC, she can elect to either be taxed as a C Corporation, in which case the LLC will be responsible for paying federal income taxes on its net income, or alternatively she can elect to be taxed as a "non-entity" (aka "disregarded entity") which means that the earnings of the LLC flow through the entity directly to her and she reports her gross receipts and expenses on Schedule C. As a non-entity, she could end up reporting taxable net income on her personal tax return without ever taking a dime of distributions from the LLC. That sucks because it's like "phantom income" since you didn't pay yourself but still have to pay taxes on the income...

I am so turned on right now.

Me too. I guess I'm in the right business...

 

[KmH]

Earning 20% more than your costs is a good profit margin for a retail photography business.
Few retail photography businesses achieve that though.

Various professional photographer association surveys have shown that photographers that do not have a studio generally have a higher profit margin than studio owners do.
But while studio owners generally have a lower overall profit margin because they have higher costs, their total revenue is much higher so they realize more income.

 

[jwbryson1]

and this is why I have a guy do our taxes.

I usually bill at $425 per hour. You do the math.

 

[kathyt]

and this is why I have a guy do our taxes.

I usually bill at $425 per hour. You do the math.

That's not what you charged me. I got a discount.

 

[Gavjenks]

Edit: Apparently I already posted something similar to this on page 1, and have NO RECOLLECTION of doing so, even though it was just 2 weeks ago, and even after reading it. Plus I missed it when reading through the thread again just now at first. I think I may be going insane.


In general, in any self-employed business, you should count your own time as an expense equal to whatever you would have been able to make per hour if you were doing whatever else other than photography would make you the most money per hour.

So if you're a neurosurgeon, and are considering leaving your job to start a photography business for purely financial reasons, then you need to value your time at $600 an hour or whatever in order to determine whether your business is making you net profits or not.

If, on the other hand, you're a high school dropout, then you only need to value your time at minimum wage (assuming you can hold normal jobs at McDonalds, etc. if not, less than minimum wage) in order to determine whether you are making a net profit or not.

https://en.wikipedia.org/wiki/Opportunity_cost

 

[Steve5D]

There are two different kinds of "profit".

The first that you'll ralize is "gross profit". This means that if you shoot a wedding for $5,000.00 on a Saturday afternoon, and a 50 year anniversary party on Sunday for $750.00, your gross profit for the weekend is $5,750.00.

Out of that "gross profit" comes the other kind of profit, which is "net profit". After you deduct what it cost you to do those two weekend jobs, you get the net profit for your business. Out of the gross profit also comes your pay. If your CODB for those two gigs is, for argument's sake, $1,000.00, your net profit is not $4,750.00. Give yourself a paycheck out of that $4,750.00, and the remainder is the net profit realized by your business...