So you have decided to start a photography business? Or maybe you have in business for a while as a sole proprietor and you are questioning a different business structure. This article is for you! Today we will discuss legal structure for your photography business.
Deciding on the legal structure for your photography business can be confusing. Many new business owners start out in the role of sole proprietorship and assume that is the best is the way to go. It could good for you but maybe not. It is time to educate yourself on all of the options before making the decision on the legal structure for your photography business.
There are basically six main business types of legal structures to consider for your business:
Limited Liability Company (LLC),
The most common types of legal structure for most new photography businesses, is the sole proprietorship or in the case of more than one person, a general partnership. It is the easiest to manage and easiest to handle in terms of taxes and filings for the one-man show. One major drawback, however, with the sole proprietorship and general partnerships the owners of the businesses are completely liable for their business. This means your house, your car and any other assets you own are subject to possession should you incur any debt from your business such as vendor bills, leases and even being sued!
You may also consider forming a partnership if you are running your business with another person. This is very similar to a sole proprietorship in terms of liability and taxes. Each of you will be responsible for filing your own self-employment and all profits are split based on percentages. Of course, you will also want to keep in mind that all liabilities are also split between both partners. This provides a little more protection in that you are not solely responsible but still leaves your personal assets vulnerable.
LLC’s and Corporations
There are several different types of corporations. For the small business owner one of the biggest benefits of any corporation is the protection from personal liability. For most beginner photography studios, a C-Corporation is too much structurally. There are also issues with double tax levels for the corporation, required annual reporting and other more complex issues that you may not wish to contend with.
The S Corp and LLC corporate structures are both quite popular among small businesses. A large majority of photography studios will choose the simplicity of an LLC to protect personal assets and to streamline bookkeeping. Both of these types of corporations provide one level of tax and also provide that layer of protection from personal liability.
With an S Corp. you gain the added benefit of a tax savings on your own self-employment. The S Corp. structure is a very popular structure among residential studio photographers; however, you will want to talk with an accountant to ensure an S Corp is right from you.
** We highly advise talking with an attorney and your accountant before making any major legal decisions for your business. After seeking proper counsel, many photographers have found success in forming their own corporation without the high fees involved when using an attorney by using an inexpensive service such as LegalZoom.com to quickly and easily file for their corporation for very little money and paperwork. **
*Please remember, we are not attorneys or legal advisers. ALWAYS contact your own attorney and accountant before making any legal decisions about your business. ShootQ is not a source of legal advice and cannot be held accountable for any repercussions therein.*