Deciding on the legal structure for your photography business can be confusing if this is your first business. Many new business owners assume sole proprietorship is the way to go and sometimes they are right. 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 to consider for your business: sole proprietorship, general partnership, limited partnership, Limited Liability Company (LLC), S Corp. and C Corp.
Sole Proprietorship and Partnerships
The most common type for a home based business is the sole proprietorship. It is the easiest to manage and easiest to handle in terms of taxes for the one man show doing everything himself. The major drawback however, is that 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, all liabilities are also split between both partners.
LLC’s and Corporations
There are several different types of corporations and for the small business owner one of the biggest benefits is the protection from personal liability. For most studios a C Corporation is by far complete overkill. 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. Both provide one level of tax and also provide that layer of protection from personal liability. However, with an S Corp you gain the added benefit of a tax savings on your 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.
*Please remember, we are not attorneys or legal advisers. ALWAYS contact your own attorney and accountant before making any legal decisions about your business.
