Setting up new business

[OortCloud]

I'm in Illinois, Chicago area. I've been shooting weddings as an independent contractor for several companies for several years while doing occasional weddings for myself. Now I would like to start my own business. I'm thinking about two options: sole proprietor or LLC/Inc. and there will be no employees but me. But what do I start with? Someone told me I should go to my county and register as "doing business as". Someone said I'd need a licence and that would cost thousands of dollars.

So where do I start and what cost could be involved?

If I start this new business, should I separate it from my freelance wedding work working for other companies or combine it in order to simplify my taxes?

What if I'm not profitable for a couple of years?

Please, if you have any advice based on your own experience, share it with me. Would be great if someone local could give this advice too.

Thank you!

 

[Richard Weisgrau]

I suggest that you contact the Small Business Administration Office in your area. The will have sources of authoritative information that will answer your questions. Expert advice is always better than off the cuff advice. You also should have a brief discussion with an attorney about the best form for your business based upon potential liability.

 

[RhysM]

I am not fully versed in the US practices/issues in this area, but I'd guess they are relatively similar so to that of the UK, so take this advice as a starting point on topics you might wish to consider/discuss with an advisor in your country, as opposed to verbatim advice.

In the UK the vast majority of photographers in your position are sole traders. This means they can call their business anything they like i.e. it can have an actual business name, but are still trading as individuals, i.e. there is no legal separation between them and the business.

Some do set up a limited company as to have the business as a separate legal entity. This means that if the business went downhill and couldn't pay its debts or got sued, etc. the personal assets of the photographer would (in the majority of cases) be safe and separate to the business.

Now, if you have appropriate insurance cover, for a one man business the reality is it doesn't make any difference whether you are a sole trader or incorporate in the form of a privately owned company. It would have to be a pretty drastic, disastrous and contrived chain of events that would need to take place where the protection of a limited company would be needed over and above that of an appropriate insurance policy(s) sufficiently indemnifying you against. And if such a chain of events/situation did take place a judge could remove the protection anyway, this is referred to as piercing the corporate veil (though as alluded to I can't imagine how a one man photographer could ever get themselves into any such serious hot-water as for this to materialise as a real world issue).

In more practical terms if you set up as a limited company for the first few years you may have trouble getting credit/finance to buy gear, rent premises, lease a vehicle, etc and would be asked for a personal guarantee or refused point blank, as the company has no credit history or accounts to examine to check it financial health status. Secondly, the book-keeping/accounting aspect becomes a bit more complex and depending on your proficiency in this area may have to pay someone to do it. Also for a single person business with a moderately low turnover the difference in taxation liability/savings between the two would be of limited if any benefit.

So in short, I think that for you, forming a company vs just trading as an individual (provided you have insurance) is probably more hassle than it's worth.

 

[axcentphoto]

Thanks Richard. I never thought of the SBA.

 

[OortCloud]

Thanks so much for your insight! You may be right about being a sole trader/proprietor. Maybe that's all I need.

 

[Michael Fryd]

I'm in Illinois, Chicago area. I've been shooting weddings as an independent contractor for several companies for several years while doing occasional weddings for myself. Now I would like to start my own business. I'm thinking about two options: sole proprietor or LLC/Inc. and there will be no employees but me. But what do I start with? Someone told me I should go to my county and register as "doing business as". Someone said I'd need a licence and that would cost thousands of dollars.

So where do I start and what cost could be involved?

If I start this new business, should I separate it from my freelance wedding work working for other companies or combine it in order to simplify my taxes?

What if I'm not profitable for a couple of years?

Please, if you have any advice based on your own experience, share it with me. Would be great if someone local could give this advice too.

Thank you!

This is primarily a legal and tax issue.

The structure of the business can affect the amount of your taxes and your liability should there be an issue.

Structuring as a Sub-Chapter S Corporation may allow you to reduce your exposure to Social Security and Medicare taxes.

Suppose an assistant accidentally hurts a guest at a wedding and medical bills top $100,000. With a Sole Proprietorship you might be personally liable, and they can go after all your assets. If your business is structured as a corporation, then your personal assets may be protected, and they can only go after the business assets.

There is no one universal answer. A lot depends on your existing assets and your projected income form the business. Do you intend to have employees? Do you expect to take on partners?

I find that if your are serious about the business, then you should consider a Sub-Chapter S Corporation.

Once you have your legal structure in place, you may need to register for a local business license. If you want to run your business out of your home, make sure that this does not violate zoning or homeowner association rules.

 

[Deardorff]

Why would you think a business license for any type of one man band would cost thousands of dollars?

 

[SKersting66]

SP vs LLC (or other entity).

It's kind of like gear insurance...what do you have you could loose?

Advantage of SP... simpler, business loss can offset personal income.

Advantage of corporation... isolation of personal finances/assets from the corp. Less "risk."

However; a single person LLC not handled correctly *is* a SP business as far as taxes/laws are concerned. It is a "corp" in name only and provides no real benefits/protections.

In either case you need to register, probably for sales tax as well.

 

[PenguinPhotoCo]

call your local township and ask them - in my town I can have a business at my house - but not all towns work that way. There are rules if clients come to you (extra parking being one, employee rules, signage, etc).
I pay a $25 fee for the license. No other costs. Other towns charge a 1% business tax (sales tax basically).
IL may require you to collect sales tax or need a biz license - only they can truly answer that for you.

Here all photo services and products are sales-taxable so I needed a state issued sales tax license (free).

If i do business under MY name no other paperwork is needed. My wife files a DBA with the state - $75 fee and she's supposed to advertise in the local BAR assoc paper and public newspaper (but our cpa says nobody does it). The letter from the state giving her DBA official status is needed for a bank account (so people that make a check to 'photoking' can be cashed by you, the owner).

The only benefit to being LLC is POTENTIALLY liability - but in your case, sorry, its a waste o fyour time an dmoney. IF you had employees it would be worth it. See, if you screw up a wedding and a client sues they'll sue your LLC and the photog that screwed up...YOU in this case. So the LLC gives you no protection.

And no judge is gonna take your house or car or cameras because a bride is unhappy. Have good contracts and do the job as promised and you'll be fine.

 

[OortCloud]

call your local township and ask them - in my town I can have a business at my house - but not all towns work that way. There are rules if clients come to you (extra parking being one, employee rules, signage, etc).
I pay a $25 fee for the license. No other costs. Other towns charge a 1% business tax (sales tax basically).
IL may require you to collect sales tax or need a biz license - only they can truly answer that for you.

Here all photo services and products are sales-taxable so I needed a state issued sales tax license (free).

If i do business under MY name no other paperwork is needed. My wife files a DBA with the state - $75 fee and she's supposed to advertise in the local BAR assoc paper and public newspaper (but our cpa says nobody does it). The letter from the state giving her DBA official status is needed for a bank account (so people that make a check to 'photoking' can be cashed by you, the owner).

The only benefit to being LLC is POTENTIALLY liability - but in your case, sorry, its a waste o fyour time an dmoney. IF you had employees it would be worth it. See, if you screw up a wedding and a client sues they'll sue your LLC and the photog that screwed up...YOU in this case. So the LLC gives you no protection.

And no judge is gonna take your house or car or cameras because a bride is unhappy. Have good contracts and do the job as promised and you'll be fine.

 

[OortCloud]

Thank you!

 

[OortCloud]

Thank you for your input, guys! I guess I'll have to find out the specifics from the local government.

 

[markhayphotography]

I live in the nw suburbs of Chicago and I have a part time photo business that I legitimized last year.

I decided to stay as a sole proprietor for the time being. I don't have a lot of assets at risk. Anyway, I joined PPA to get the indemnification trust, and I purchased additional liability insurance through PPA, which cost me $323 for a year of coverage for up to 1,000,000. I figure that I'm covered for now. Between PPA and the extra insurance, I'm protected for about $650/year.

Some other advice (since I am also in Illinois)

...to get things rolling, I needed to "know what I didn't know." I got in touch with the Illinois SBDC and they gave me a lot of free business advice (best thing you can do). The only other advice I was getting was what I read on this forum and it is mostly doom and gloom around here. Anyway, I had a few free meetings with SBDC and they lead me through the various steps and decisions I needed to make. They helped me make a proper business plan and taught me what I needed to be keeping track of and how. It was really helpful.

I got the DBA. It cost me $5 at the courthouse in Lake County and $75 for the local paper to make it official....it takes three weeks or so. Once I nailed that down, I registered with the state at https://mytax.illinois.gov . Then I was notified that I was passed due on my quarterly sales tax statements (great welcome call from the state). At that point, I hired a CPA for one hour to teach me everything I need to know in order to submit my quarterly sales tax correctly. It cost $125 for the hour, but I feel pretty comfortable with it now.

Finally, I snagged up an EIN and opened the separate business checking account and made sure that everything was separated for 2015 (should've done that earlier).

Good luck!

Mark

www.timehonoredphotography.net

 

[Michael Fryd]

...

The only benefit to being LLC is POTENTIALLY liability - but in your case, sorry, its a waste o fyour time an dmoney. IF you had employees it would be worth it. See, if you screw up a wedding and a client sues they'll sue your LLC and the photog that screwed up...YOU in this case. So the LLC gives you no protection.

And no judge is gonna take your house or car or cameras because a bride is unhappy. Have good contracts and do the job as promised and you'll be fine.

...

A Sub-Chapter S corp can offer tax benefits in addition to liability protection.

.

Liability protection is not just for brides unhappy with your work.

While clients may sue if they are unhappy with your work, the real danger is that someone will get hurt or that property will be damaged. Imagine you have a light on a stand at a wedding reception. The light falls and hits someone in the head. A judge may very well take your car or camera to pay the medical bills of the injured person. If you are a Sole Proprietorship, you may lose other assets, completely unrelated to the business (i.e. the savings account for your son's college education).

A business structure such as a Sub-Chapter S offers an additional level of liability protection.

While a client might try to sue you personally, if their contract was with the business, then they may not have a legitimate claim against you.

 

[PenguinPhotoCo]

To set up a subchapter s corp will run $600-800. then you need to do corporate income tax PLUS the individual you do now and comply with the laws for corp officers, meetings, etc. AND keep the funds and bank accounts very separate from your personal ones. Corp inc tax filing/ forms can cost you $400-600 a year on top of whateve ryou pay for tax prep and books now.

AND you ahve to be an emplyee of the corporation..so you'll need workers comp insurance and payroll (taxes, filings, W2, etc). More costs ($600-800 a year).

So you spent THOUSANDS of dollars to get setup and will spend $1500-2k a year to keep it going.

For what?

IF you have income of 40k and up you MAY save that on FICA taxes...take some of your salary as dividends and not paycheck.

...

The only benefit to being LLC is POTENTIALLY liability - but in your case, sorry, its a waste o fyour time an dmoney. IF you had employees it would be worth it. See, if you screw up a wedding and a client sues they'll sue your LLC and the photog that screwed up...YOU in this case. So the LLC gives you no protection.

And no judge is gonna take your house or car or cameras because a bride is unhappy. Have good contracts and do the job as promised and you'll be fine.

...

A Sub-Chapter S corp can offer tax benefits in addition to liability protection.

.

Liability protection is not just for brides unhappy with your work.

While clients may sue if they are unhappy with your work, the real danger is that someone will get hurt or that property will be damaged. Imagine you have a light on a stand at a wedding reception. The light falls and hits someone in the head. A judge may very well take your car or camera to pay the medical bills of the injured person. If you are a Sole Proprietorship, you may lose other assets, completely unrelated to the business (i.e. the savings account for your son's college education).

A business structure such as a Sub-Chapter S offers an additional level of liability protection.

While a client might try to sue you personally, if their contract was with the business, then they may not have a legitimate claim against you.

Yes and no... Say a truck driver for a big corporation runs over your kid. You're gonna sue the corporation AND the driver, right? I've seen it happen (made the news a few years ago when a driver didn't hook up a trailer right and it came off, crossed teh center line and killed a family in a minivan). Sorry, but the driver was sued (and went to jail). Corp or not he did the deed and is the one being held responsible.

So youre light stand falls on the flower girl...they're gonna sue your photo corp AND you - YOU are the responsible party so you will be added to the lawsuit. GUARANTEED. If they win against YOU then yep, you're gonna lsoe that college savings account (unless its in his name..then it's not your assett). Now your CORP has insurance...do YOU have any PERSONAL liability that covers things you do at work? I doubt it. As a sole prop my biz insurance does that though.

Some depends on the state where you are - my state a married couple is like a corp -my house, cars, etc are in BOTH names - sorry, no judge can take them away (maybe lien them against future sale of the asset). And here you can declare bankrupty- and the state WILL NOT let your 'tools of the trade' be taken in bankrupty...aka, your camera - your ability to earn a living!!

So there isn't much that can be taken...ASSUMING your insurance company can't cover whatever the issue is. Or you can't settle out of court in the first place. Or that it even gets that far.

What is most likely (as insurance agents) is that you'll damage a house or venue (knock over a lamp in the brides house, etc). A local venue here now demands proof of insurance from all vendors because a DJ dropped soemthong on their new marble dance floor and damaged it and had no insurance - so YES, he's being sued by the VENUE. No contract he had with a bride will protect him from that (see another recent thread about contracts). No corp will save him from having to pay. It's not the sort of lawsuit that will (or should) bankrupt him and no judge is gonna take his kids college fun and the house over a broken dance floor.

 

[Michael Fryd]

To set up a subchapter s corp will run $600-800. then you need to do corporate income tax PLUS the individual you do now and comply with the laws for corp officers, meetings, etc. AND keep the funds and bank accounts very separate from your personal ones. Corp inc tax filing/ forms can cost you $400-600 a year on top of whateve ryou pay for tax prep and books now.

You can pay that much to setup a Sub-S Corp., but you don't have to. Legal Zoom will do it for $150. Incfile.com will do it for as little as $50. If you are good at reading instructions, and filling out forms, you can do it on your own.

So you spent THOUSANDS of dollars to get setup and will spend $1500-2k a year to keep it going.

No. You would spend thousands. Some people would spend more, but many would spend less.

For what?
IF you have income of 40k and up you MAY save that on FICA taxes...take some of your salary as dividends and not paycheck.

FICA taxes are about 15.3%. If you are able to shift $20K into dividend income you will save about $3,000 in taxes for the year. If you make more than $40K a year in profit, than you can save even more in taxes.

Michael Fryd, post: 55196211, member: 691345"]

...A Sub-Chapter S corp can offer tax benefits in addition to liability protection.

.

Liability protection is not just for brides unhappy with your work.

While clients may sue if they are unhappy with your work, the real danger is that someone will get hurt or that property will be damaged. Imagine you have a light on a stand at a wedding reception. The light falls and hits someone in the head. A judge may very well take your car or camera to pay the medical bills of the injured person. If you are a Sole Proprietorship, you may lose other assets, completely unrelated to the business (i.e. the savings account for your son's college education).

A business structure such as a Sub-Chapter S offers an additional level of liability protection.

While a client might try to sue you personally, if their contract was with the business, then they may not have a legitimate claim against you.

Yes and no... Say a truck driver for a big corporation runs over your kid. You're gonna sue the corporation AND the driver, right? I've seen it happen (made the news a few years ago when a driver didn't hook up a trailer right and it came off, crossed teh center line and killed a family in a minivan). Sorry, but the driver was sued (and went to jail). Corp or not he did the deed and is the one being held responsible.

You don't go to jail for losing a suit. You go to jail for committing a crime. If the driver did jail time, it wasn't from the suit, it was from committing a crime.

A Sub-S Corp doesn't shield you if you commit a crime. Kill someone while driving drunk, and it doesn't matter how your business is structured.

So youre light stand falls on the flower girl...they're gonna sue your photo corp AND you - YOU are the responsible party so you will be added to the lawsuit. GUARANTEED. If they win against YOU then yep, you're gonna lsoe that college savings account (unless its in his name..then it's not your assett). Now your CORP has insurance...do YOU have any PERSONAL liability that covers things you do at work? I doubt it. As a sole prop my biz insurance does that though.

Yes, people can sue anybody for anything. The first step in a defense is to show that the complaint is rightfully against the business, and not the individual. This is usually enough to get the personal name dropped from the suit.

My wife is being personally sued for something her office did before she was even employed there. I am not worried as she will be dropped from the suit long before it goes to trial. The fact that you are sued, does not mean that the suit was appropriate.

Some depends on the state where you are - my state a married couple is like a corp -my house, cars, etc are in BOTH names - sorry, no judge can take them away (maybe lien them against future sale of the asset). And here you can declare bankrupty- and the state WILL NOT let your 'tools of the trade' be taken in bankrupty...aka, your camera - your ability to earn a living!!

I would be hesitant to talk in absolutes. With a Sole-P, you would need to show that your wife wasn't helping you with the business. If she was (for instance she answers the phone, or pays some bills) then joint assets might be up for grabs. With the separation provided by a corporation, it would be much harder to drag your wife into it, even if she worked for the company. If you work for a company, you are generally not liable for the mistakes of other employees.

As for declaring bankruptcy, that route generally requires you to lose most of your assets. If you have a lot of assets (a boat, a small vacation cabin, a time share, a retirement account) then you will likely lose those assets. If you don't have any assets, then there is less of a need for a corporate liability shield.

So there isn't much that can be taken...ASSUMING your insurance company can't cover whatever the issue is. Or you can't settle out of court in the first place. Or that it even gets that far.

What is most likely (as insurance agents) is that you'll damage a house or venue (knock over a lamp in the brides house, etc). A local venue here now demands proof of insurance from all vendors because a DJ dropped soemthong on their new marble dance floor and damaged it and had no insurance - so YES, he's being sued by the VENUE. No contract he had with a bride will protect him from that (see another recent thread about contracts). No corp will save him from having to pay. It's not the sort of lawsuit that will (or should) bankrupt him and no judge is gonna take his kids college fun and the house over a broken dance floor.

If the DJ is a Sole-P, then he is likely personally liable for the damage to the dance floor. If the bride contracted with a corporation, and the DJ was an employee of that corporation, then he likely is not personally liable. The venue will likely go after the DJ personally, but it is unlikely they will be successful.

 

[tcg550]

To set up a subchapter s corp will run $600-800. then you need to do corporate income tax PLUS the individual you do now and comply with the laws for corp officers, meetings, etc. AND keep the funds and bank accounts very separate from your personal ones. Corp inc tax filing/ forms can cost you $400-600 a year on top of whateve ryou pay for tax prep and books now.

AND you ahve to be an emplyee of the corporation..so you'll need workers comp insurance and payroll (taxes, filings, W2, etc). More costs ($600-800 a year).

So you spent THOUSANDS of dollars to get setup and will spend $1500-2k a year to keep it going.

For what?
IF you have income of 40k and up you MAY save that on FICA taxes...take some of your salary as dividends and not paycheck.

...

The only benefit to being LLC is POTENTIALLY liability - but in your case, sorry, its a waste o fyour time an dmoney. IF you had employees it would be worth it. See, if you screw up a wedding and a client sues they'll sue your LLC and the photog that screwed up...YOU in this case. So the LLC gives you no protection.

And no judge is gonna take your house or car or cameras because a bride is unhappy. Have good contracts and do the job as promised and you'll be fine.

...

A Sub-Chapter S corp can offer tax benefits in addition to liability protection.

.

Liability protection is not just for brides unhappy with your work.

While clients may sue if they are unhappy with your work, the real danger is that someone will get hurt or that property will be damaged. Imagine you have a light on a stand at a wedding reception. The light falls and hits someone in the head. A judge may very well take your car or camera to pay the medical bills of the injured person. If you are a Sole Proprietorship, you may lose other assets, completely unrelated to the business (i.e. the savings account for your son's college education).

A business structure such as a Sub-Chapter S offers an additional level of liability protection.

While a client might try to sue you personally, if their contract was with the business, then they may not have a legitimate claim against you.

Yes and no... Say a truck driver for a big corporation runs over your kid. You're gonna sue the corporation AND the driver, right? I've seen it happen (made the news a few years ago when a driver didn't hook up a trailer right and it came off, crossed teh center line and killed a family in a minivan). Sorry, but the driver was sued (and went to jail). Corp or not he did the deed and is the one being held responsible.

So youre light stand falls on the flower girl...they're gonna sue your photo corp AND you - YOU are the responsible party so you will be added to the lawsuit. GUARANTEED. If they win against YOU then yep, you're gonna lsoe that college savings account (unless its in his name..then it's not your assett). Now your CORP has insurance...do YOU have any PERSONAL liability that covers things you do at work? I doubt it. As a sole prop my biz insurance does that though.

Some depends on the state where you are - my state a married couple is like a corp -my house, cars, etc are in BOTH names - sorry, no judge can take them away (maybe lien them against future sale of the asset). And here you can declare bankrupty- and the state WILL NOT let your 'tools of the trade' be taken in bankrupty...aka, your camera - your ability to earn a living!!

So there isn't much that can be taken...ASSUMING your insurance company can't cover whatever the issue is. Or you can't settle out of court in the first place. Or that it even gets that far.

What is most likely (as insurance agents) is that you'll damage a house or venue (knock over a lamp in the brides house, etc). A local venue here now demands proof of insurance from all vendors because a DJ dropped soemthong on their new marble dance floor and damaged it and had no insurance - so YES, he's being sued by the VENUE. No contract he had with a bride will protect him from that (see another recent thread about contracts). No corp will save him from having to pay. It's not the sort of lawsuit that will (or should) bankrupt him and no judge is gonna take his kids college fun and the house over a broken dance floor.

 

[OortCloud]

To set up a subchapter s corp will run $600-800. then you need to do corporate income tax PLUS the individual you do now and comply with the laws for corp officers, meetings, etc. AND keep the funds and bank accounts very separate from your personal ones. Corp inc tax filing/ forms can cost you $400-600 a year on top of whateve ryou pay for tax prep and books now.

AND you ahve to be an emplyee of the corporation..so you'll need workers comp insurance and payroll (taxes, filings, W2, etc). More costs ($600-800 a year).

So you spent THOUSANDS of dollars to get setup and will spend $1500-2k a year to keep it going.

For what?
IF you have income of 40k and up you MAY save that on FICA taxes...take some of your salary as dividends and not paycheck.

...

The only benefit to being LLC is POTENTIALLY liability - but in your case, sorry, its a waste o fyour time an dmoney. IF you had employees it would be worth it. See, if you screw up a wedding and a client sues they'll sue your LLC and the photog that screwed up...YOU in this case. So the LLC gives you no protection.

And no judge is gonna take your house or car or cameras because a bride is unhappy. Have good contracts and do the job as promised and you'll be fine.

...

A Sub-Chapter S corp can offer tax benefits in addition to liability protection.

.

Liability protection is not just for brides unhappy with your work.

While clients may sue if they are unhappy with your work, the real danger is that someone will get hurt or that property will be damaged. Imagine you have a light on a stand at a wedding reception. The light falls and hits someone in the head. A judge may very well take your car or camera to pay the medical bills of the injured person. If you are a Sole Proprietorship, you may lose other assets, completely unrelated to the business (i.e. the savings account for your son's college education).

A business structure such as a Sub-Chapter S offers an additional level of liability protection.

While a client might try to sue you personally, if their contract was with the business, then they may not have a legitimate claim against you.

Yes and no... Say a truck driver for a big corporation runs over your kid. You're gonna sue the corporation AND the driver, right? I've seen it happen (made the news a few years ago when a driver didn't hook up a trailer right and it came off, crossed teh center line and killed a family in a minivan). Sorry, but the driver was sued (and went to jail). Corp or not he did the deed and is the one being held responsible.

So youre light stand falls on the flower girl...they're gonna sue your photo corp AND you - YOU are the responsible party so you will be added to the lawsuit. GUARANTEED. If they win against YOU then yep, you're gonna lsoe that college savings account (unless its in his name..then it's not your assett). Now your CORP has insurance...do YOU have any PERSONAL liability that covers things you do at work? I doubt it. As a sole prop my biz insurance does that though.

Some depends on the state where you are - my state a married couple is like a corp -my house, cars, etc are in BOTH names - sorry, no judge can take them away (maybe lien them against future sale of the asset). And here you can declare bankrupty- and the state WILL NOT let your 'tools of the trade' be taken in bankrupty...aka, your camera - your ability to earn a living!!

So there isn't much that can be taken...ASSUMING your insurance company can't cover whatever the issue is. Or you can't settle out of court in the first place. Or that it even gets that far.

What is most likely (as insurance agents) is that you'll damage a house or venue (knock over a lamp in the brides house, etc). A local venue here now demands proof of insurance from all vendors because a DJ dropped soemthong on their new marble dance floor and damaged it and had no insurance - so YES, he's being sued by the VENUE. No contract he had with a bride will protect him from that (see another recent thread about contracts). No corp will save him from having to pay. It's not the sort of lawsuit that will (or should) bankrupt him and no judge is gonna take his kids college fun and the house over a broken dance floor.

--
I don't like nice people. I like tough, honest people.
Woody Hayes

I totally agree with you. I'd rather be a sole proprietor and take an extended liability insurance.

 

[OortCloud]

To set up a subchapter s corp will run $600-800. then you need to do corporate income tax PLUS the individual you do now and comply with the laws for corp officers, meetings, etc. AND keep the funds and bank accounts very separate from your personal ones. Corp inc tax filing/ forms can cost you $400-600 a year on top of whateve ryou pay for tax prep and books now.

AND you ahve to be an emplyee of the corporation..so you'll need workers comp insurance and payroll (taxes, filings, W2, etc). More costs ($600-800 a year).

So you spent THOUSANDS of dollars to get setup and will spend $1500-2k a year to keep it going.

For what?
IF you have income of 40k and up you MAY save that on FICA taxes...take some of your salary as dividends and not paycheck.

...

The only benefit to being LLC is POTENTIALLY liability - but in your case, sorry, its a waste o fyour time an dmoney. IF you had employees it would be worth it. See, if you screw up a wedding and a client sues they'll sue your LLC and the photog that screwed up...YOU in this case. So the LLC gives you no protection.

And no judge is gonna take your house or car or cameras because a bride is unhappy. Have good contracts and do the job as promised and you'll be fine.

...

A Sub-Chapter S corp can offer tax benefits in addition to liability protection.

.

Liability protection is not just for brides unhappy with your work.

While clients may sue if they are unhappy with your work, the real danger is that someone will get hurt or that property will be damaged. Imagine you have a light on a stand at a wedding reception. The light falls and hits someone in the head. A judge may very well take your car or camera to pay the medical bills of the injured person. If you are a Sole Proprietorship, you may lose other assets, completely unrelated to the business (i.e. the savings account for your son's college education).

A business structure such as a Sub-Chapter S offers an additional level of liability protection.

While a client might try to sue you personally, if their contract was with the business, then they may not have a legitimate claim against you.

Yes and no... Say a truck driver for a big corporation runs over your kid. You're gonna sue the corporation AND the driver, right? I've seen it happen (made the news a few years ago when a driver didn't hook up a trailer right and it came off, crossed teh center line and killed a family in a minivan). Sorry, but the driver was sued (and went to jail). Corp or not he did the deed and is the one being held responsible.

So youre light stand falls on the flower girl...they're gonna sue your photo corp AND you - YOU are the responsible party so you will be added to the lawsuit. GUARANTEED. If they win against YOU then yep, you're gonna lsoe that college savings account (unless its in his name..then it's not your assett). Now your CORP has insurance...do YOU have any PERSONAL liability that covers things you do at work? I doubt it. As a sole prop my biz insurance does that though.

Some depends on the state where you are - my state a married couple is like a corp -my house, cars, etc are in BOTH names - sorry, no judge can take them away (maybe lien them against future sale of the asset). And here you can declare bankrupty- and the state WILL NOT let your 'tools of the trade' be taken in bankrupty...aka, your camera - your ability to earn a living!!

So there isn't much that can be taken...ASSUMING your insurance company can't cover whatever the issue is. Or you can't settle out of court in the first place. Or that it even gets that far.

What is most likely (as insurance agents) is that you'll damage a house or venue (knock over a lamp in the brides house, etc). A local venue here now demands proof of insurance from all vendors because a DJ dropped soemthong on their new marble dance floor and damaged it and had no insurance - so YES, he's being sued by the VENUE. No contract he had with a bride will protect him from that (see another recent thread about contracts). No corp will save him from having to pay. It's not the sort of lawsuit that will (or should) bankrupt him and no judge is gonna take his kids college fun and the house over a broken dance floor.

--
I don't like nice people. I like tough, honest people.
Woody Hayes

I have set up a S-Corp and an LLC that has elected to be treated as an S-Corp.

The S-Corp was many years ago and it cost 50 bucks to file the paperwork. No lawyer was used. The LLC/S-Corp was done a few years ago and also cost 50 bucks with no lawyer.

Your state may or may not require an operating agreement. Mine did not. But you can find examples of those and do it yourself. Legal Zoom is an option if you don't want to do it yourself. I'm pretty sure Quickbooks also offers a service to help you set up a LLC or S-Corp for very little money.

I went to my state's website downloaded the forms called them twice to clarify a couple things then submitted the forms. It all went through within a couple days.

The only yearly fee is 25 bucks to file an annual corporate meeting form. It's a one page form.

The S-Corp files a tax return but normally does not pay taxes. That is the benefit. All the income I pull out of the company is reported on a regular pay check to me or on a K-1 at the end of the year for money I pulled out not as a pay check. That income is then reported on my personal tax return as additional income and I pay whatever my current rate is.

The S-Corp also files and pays quarterly withholding for my paycheck and any other employees I may have. It also has to file a 941 for W-2 wages but that is done online and takes a few minutes and costs nothing.

The S-Corp has a bank account in the company name. All checks are deposited into the account.

Keeping money separate is really quite easy. Money comes in and it goes out as an expense, paycheck, or shareholder (me) draw. But mostly it's paychecks because it easier for me that way. I'm also very diligent about expenses. You do not use the company checkbook to buy groceries for example. That money would have to come out as a paycheck or a shareholders draw. It could get complicated if you use the company checkbook for personal expenses that don't get reported as income to yourself.

I'm afraid of the IRS so I keep good records and keep things very separate.

The point is it does not cost thousands of dollars a year to run a simple one man LLC or S-Corp. Nor is it all that complicated. My first S-Corp had 3 members/shareholders and even that was pretty easy to run and set up.

You may want to consult an accountant a couple times a year or at the end of the year until you figure it out but even that is not thousands. Once you understand how it works it really is pretty simple to do yourself.

As a matter of fact the OP should consult an actual accountant to explain the benefits of each method of setting up a business and not rely on anonymous internet posters, including myself, on a photography forum for business or legal advice.

Good luck to the OP and have fun.

This was very informative. Thank you!

 

[OortCloud]

I live in the nw suburbs of Chicago and I have a part time photo business that I legitimized last year.

I decided to stay as a sole proprietor for the time being. I don't have a lot of assets at risk. Anyway, I joined PPA to get the indemnification trust, and I purchased additional liability insurance through PPA, which cost me $323 for a year of coverage for up to 1,000,000. I figure that I'm covered for now. Between PPA and the extra insurance, I'm protected for about $650/year.

Some other advice (since I am also in Illinois)

...to get things rolling, I needed to "know what I didn't know." I got in touch with the Illinois SBDC and they gave me a lot of free business advice (best thing you can do). The only other advice I was getting was what I read on this forum and it is mostly doom and gloom around here. Anyway, I had a few free meetings with SBDC and they lead me through the various steps and decisions I needed to make. They helped me make a proper business plan and taught me what I needed to be keeping track of and how. It was really helpful.

I got the DBA. It cost me $5 at the courthouse in Lake County and $75 for the local paper to make it official....it takes three weeks or so. Once I nailed that down, I registered with the state at https://mytax.illinois.gov . Then I was notified that I was passed due on my quarterly sales tax statements (great welcome call from the state). At that point, I hired a CPA for one hour to teach me everything I need to know in order to submit my quarterly sales tax correctly. It cost $125 for the hour, but I feel pretty comfortable with it now.

Finally, I snagged up an EIN and opened the separate business checking account and made sure that everything was separated for 2015 (should've done that earlier).

Good luck!

Mark

www.timehonoredphotography.net

Hi Mark,

Thanks a lot for sharing! I think I'll follow your advice and contact the local BC. But I won't need DBA since I do not intend to use an assumed name, and therefore I won't need a separate account.

I fact I've been filing taxes as Sole-P working for other companies and I don't sell prints, so Illinois didn't tell me anything about being behind on sales tax. I'll probably continue to file the same way working for myself. I use TurboTax Small Business and it practically leads me through everything and in the end I send everything off via Intuit's website.

What i wanted to ask you is that how did you set up those free meetings with your SBDC.

And what do I need to join PPA and apply for that insurance.

Thanks a lot?