First, good luck Loren, since it was your IRS thread that got me thinking about this.

I am thinking 2006 will be my first year for keeping track of any expenses I may have doing my photography. Not knowing a lot on that end of it, do I need to incorporate myself, or how should I do things as far from a business end.

I know that there have been some changes in the small business realm where you can take as long as five years, I think, to show a profit. If I do this, I just want to make sure that I am doing it all correctly.

Incorporation is only one of your options. You can also be a sole proprietor, meaning that you lump your business income and personal income into one. Incorporating is not required, but it does create the business as its own entity. So if someone sues the company, Srobb the person is much less likely to lose everything, only the business will take a hit.

I don't know if it's different in KY versus IL, but my wife incorporated her business when she got started - and she is the only employee. It costs a fair amount to do it (several hundred?) but will give you the most protection against liability. Whether or not you're ready for that would probably be best answered by a CPA.

Thanks for the comments, guys. Doubt I will go the incorporation route right now, though, from a financial standpoint. That is just not feasible at this time.

Sebastian, is there any certain I way I would have to combine the two incomes? Could I still make deductions for like gas used on photog trips and such?

Srobb,

I don't know much about the different options available to a business. I know that there are different tax options available to each type of business, and I think you can still write off some expenses, but you would need to talk to a lawyer or an accountant.

I'm not sure how true this is, but I've heard that you can get your company incorportated in Delaware for free. You only need to have a PO box in the state. If you're looking to incorporate, you'll be able to save yourself a lot of money.

Sean

Sebastian, is there any certain I way I would have to combine the two incomes? Could I still make deductions for like gas used on photog trips and such?

I'm sure your state's laws are different, but here you can still deduct stuff like gas, etc. Check the laws in your state and to be sure consult with a CPA. I tend to let some things slip in favor of making it easier on me, like the gas for example. I don't keep track of it, and I don't deduct it.

Thanks, Sebastian. I have been looking over the site for stuff like that for here. Looks like for now if I do anything, it will be as a sole proprietership. I just need to check locally and with state to make sure there are no licenses I need to get.

Thanks, Sebastian. I have been looking over the site for stuff like that for here. Looks like for now if I do anything, it will be as a sole proprietership. I just need to check locally and with state to make sure there are no licenses I need to get.

Yeah, check about licenses. Here, it's county-specific. My county only requires that you register with them if your business name is not your own name. "Sebastian Photography" would not have to be registered, "Magic Carpet Sears Tower Tours" would have to be registered. It's so if someone needs to find the owner of the business, they can go to the county and find the records pointing them in the right direction. If I wanted to run a studio out of my house, I would have to check with state/county/city governments for any potential licenses.

Hello srobb...I can't talk from a photography standpoint, but I have been in several organizations that have considered their options to protect their membership. In most cases...to protect yourself and your family, incorporation is the way to go. In many cases, especially when it is a small business, you can do it yourself and it's not too expensive...but can save you lots in the long run. The only state that I've actually dealt with this was Arizona. And one of our members actually did the whole thing. Prior to filing, we did have a lawyer member look it over for us. Many lawyers will sometimes look things over for you, sometimes for free or a very small fee. Basically, you'll need to do a lot of research...but most if not all you need to know "can" be found on the internet...even the forms you'll need for filing.
As for licenses and such, sounds like you're on the right track. Oh, and don't forget to get liability insurance on yourself. Even a small camera on a tripod can cause a bad gouge that could set you back a couple hundred for an emergency room visit by a vendictive passer by!!!
Ken

At what point financially does it make sense to incorporate? I understand the liability protection but what about the numbers? At what point or profit amount do I break even or need to incorporate? My amount of business is small but it seems to be growing. I've never written off anything. At what point is this a valid option? Over $5k annual sales?

Thanks,

In the past, I have incorporated my business. The amount you pay varies widely from state to state. In Colorado at the time, it was $50 initially and $25/year afterwards. The forms are very simple to fill out and the local county offices have blanks for free. If you hire someone to do the work it can get extremely expensive. Some states really get you on the fees, others do not. There is nothing complex, nothing to mess up.

Incorporation, according to the IRS, requires that you show a profit at least 2 out of the first 5 years. You can not deduct more than you earn. A subchapter S corporation is probably what you are looking for, very simple and no complex issues.

The corporation will protect your assets in case of trouble... up to a point. Most people will sue both the corporation and the officers personally. However, the separation you get is so much easier to compute and handle.

You will have to have some corporation officers and hold a corporate meeting at least once per year. The minutes of those meetings have to be on file in case the IRS or state asks to see them. You will need a company seal to make the paperwork official.

If you are making very little right now, the corporation won't help you that much. But if you are sucessful, its good to have all of that already done. Good luck!

Hi, I'm new to the site, but my day job is incorporating our clients. It is more costly to go through a lawyer or cpa to have it done. You can do it yourself, getting the necessary forms from the Secretary of States office that you wish to incorporate in. You can incorporate in any state you wish, even if you do not live there. But then you would need to pay for Registered Agent services as well. It really isn't that hard, just alot of work. I do the initial incorporation with the state and then prepare their corporate minute books with by-laws and special minutes required for certain tax deductions. There are plenty of books out there that will tell you how to write these minutes also. Hope this helps!

kj

Well, it seems like I have been away forever. Just happened to look at this old post. Glad to see your post Cailteshae. Looks like I will be looking into all of this possibly sooner than I thought. I just recently began the process of printing notecards with my images on the front. Granted they are people that have seen my work for the last year, or so, but I was excited yesterday to find that I have a total 5 orders.

I am packaging them 5 to a set (should I make that an even 6?) and selling them for $10 a set. I try to group the images together as like things much as possible. I am waiting on a catalog from a company I can get boxes from and then it will be to see if I can get them placed in some of the boutique stores around town.:D

Hello All!

Just a little info on the subject, considering I work for a law and accounting office and deal with these types of issues daily.

Incorporating is a good thing, such as a Single Member LLC (Limited Liability Corporation). With that you get the benefit of having liability coverage (lawsuits, contract issues, etc) and just adding the income and expense on your personal tax return, as a separate schedule on your 1040. There is minimal set up cost (depending on state - CA is expensive!!) and maintenance fees each year, as well as minimal additional tax prep fees.

If you are not going to be make large sums of money, but want the tax benefit without a lot of out-of-pocket expense, a S-corp is NOT the way you want to go.

When you have a S-Corp, you are required to do quarterly payroll tax reports and pay payroll taxes (this is my area of expertise). If you are self sufficient enough, you can track down all the info for this, but it is a lot of work. Depending on your state, you have State withholding, Unemplyment Insurance as well as your federal taxes. Then you have to file the appropriate forms to get those state and UI numbers, then do W-2s for yourself at the end of the year, etc. (Unless you want to pay someone like me to do it for you. :D )

Either way you go, you really should talk with a CPA or Lawyer. A business is very easy to get set up and maintain. And can be very benficial.

For example: My husband and I started a Single Member LLC (SMLLC) for our off-road photography business. Because of the nature of the majority of our shots, my husband has been building a Jeep to get us to a lot of the areas that we take shots. We will be able to write off about 85% of the build up of the Jeep as a business expense. We are also going to be able to take a percentage of our mortgage, utility bill and phone bill for our Home office, as well as, cell phones, fuel, meals, camper for our truck (lodging), etc as write-offs.

Thanks for letting me ramble, hope it was helpful.