An LLC is one of the most common business structure options for photographers. Learn why you should have one and how to do it.
Disclaimer: The legal information in this post is provided for informational purposes only. Please consult with a lawyer prior to implementation.
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What’s an LLC?
LLC stands for Limited Liability Company, and it’s a business structure that provides more liability coverage than a sole proprietorship.
Often, new business owners will get started as a sole proprietor because it’s the simplest way to start a business.
A sole proprietorship is owned and run by one person. The downside to this business structure is that there’s no distinction between you and your business.
Since there’s no legal separation, your personal assets can be held accountable for debts, legal situations, and other obligations for your business (Source: Small Business Administration).
That’s where a Limited Liability Company comes in. It’ll protect you from personal liability.
In the event that your business faces bankruptcy or lawsuits, your personal assets won’t be held liable.
Why your photography business should be an LLC
Forming an LLC isn’t that much harder than setting up a sole proprietorship. However, you get many benefits that a sole proprietor doesn’t have.
The following are reasons your photography business needs to be an LLC:
1. Personal protection. The primary benefit of setting up your photography business as an LLC is legal separation.
This means that your personal assets will be kept separate from your business. If your business is liable for a debt or obligation, your personal assets won’t get involved.
2. Choose how you want to be taxed. Do you want to be taxed as a corporation or file it under your personal taxes? It’s up to you because you have the option.
As a single-member LLC, you can file IRS Form 8832 to be taxed as a corporation, or use Form Schedule C to record your profit and loss on your personal taxes (Source: Internal Revenue Service).
3. Easy to grow. If your business grows and you find another photographer that you want to run the business with, you can easily switch from a single-member LLC to multiple members or a partnership.
4. The formation is simple. Although the specifics depend on your state, it’s common to get an Employer Identification Number (EIN) from the IRS, register with your state’s Department of Revenue, and Secretary of State.
5. Tax benefits. All of your business expenses and mileage to photoshoots are tax-deductible. Make sure you keep your bookkeeping separate so that it’s easy to track.
How to get started
According to the IRS, each state has different regulations, so you’ll have to check with your state’s process for starting an LLC.
In most cases, the following steps are what you’ll take to set up your business as an LLC:
- Choose a name.
- Run it through the USPTO Trademark Search to make sure no one has trademarked it.
- Get an operating agreement. It can be simple, just talk about your business, your role, and how it’ll be managed.
- File as an LLC with your state’s Department of Revenue and Secretary of State, which you’ll also receive a Unified Business Identifier (UBI).
- Get an Employer Identification Number (EIN) from the IRS.
- Open a business bank account.
- Make money and file your taxes.
Frequently asked questions
Yes, you can have multiple names. You can either set up DBA’s, which stands for Doing Business As or set up new LLC’s.
If you’re going to take photography serious and want to make a living with it then it’s worth it.
In most cases, photography is considered a service business. Consult with a lawyer or tax professional for the specifics.
Choosing to be an LLC for your photography business is a great way to protect your personal assets, have legal separation, and look more professional.
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Featured image courtesy of Unsplash.