iridium7777
Established
so i've registered an llc with my state and got the work oder # and business filing #.
i have a couple questions:
1) do i need to register something at the federal level?
2) i am expecting some startup costs, is it best that i try to open a new credit card for this llc so all the bills would be at one place?
3) how long can an llc operate without a significant positive income? my first year i expect to run at a loss due to startup costs.
4) from the tax perspective, a smaller <5k annually llc, should i be filing the forms myself or is it better to go to h&r block or something?
i'm sorry i didn't know which section to put this into, but i'm sure there must be someone here that runs a photography llc and i would appreciate some answers/tips.
thanks in advance.
i have a couple questions:
1) do i need to register something at the federal level?
2) i am expecting some startup costs, is it best that i try to open a new credit card for this llc so all the bills would be at one place?
3) how long can an llc operate without a significant positive income? my first year i expect to run at a loss due to startup costs.
4) from the tax perspective, a smaller <5k annually llc, should i be filing the forms myself or is it better to go to h&r block or something?
i'm sorry i didn't know which section to put this into, but i'm sure there must be someone here that runs a photography llc and i would appreciate some answers/tips.
thanks in advance.
bmattock
Veteran
Not unless you have employees and require a federal employer ID number.
All that is required is that you keep your business and personal funds separate. If you can do that without incurring the additional expense of a business credit card, you're fine.
I presume you mean how long can you run at a loss and still take the loss as a business expense on your taxes? Otherwise, you can run a loss forever if you like - but you eat the loss.
There is no set time. People will tell you that there is, but they are mistaken. The IRS has 'general guidelines' that have tended to make accountants believe that 3 years is a good rough estimate, but there is no definite time. The IRS is the final arbiter - the business must be run 'for profit'. If the IRS determine it is not a going concern for profit, it will reclassify your business as a hobby and disallow your losses.
A question no one can answer for you. Nor should they try.
Get this book, now:
http://www.amazon.com/Self-employed...=sr_1_1?ie=UTF8&s=books&qid=1237474358&sr=8-1
Self-employed Tax Solutions, 2nd: Quick, Simple, Money-Saving, Audit-Proof Tax and Recordkeeping Basics for the Independent Professional by June Walker.
It is inexensive, it is informative, and it is written in clear and understandable english - business accounting for self-employed people like writers, photographers, and other artists. Explains what is and is not a business expense, explains that you don't need most of the 'things' you think you need (LLC, for example), and makes it all very simple.
Most of the reviews of this book are for the previous edition, so search Amazon for the 'old' one and read the positive comments if you doubt the value of this book.
Good luck!
iridium7777
Established
thank you very much for your response.
rogue_designer
Reciprocity Failure
well said and covered Bill.
And good reco on the book. I also recommend this one:
Starting your career as a Freelance Photographer
Also covers strategies for marketing and business development, with some good tips on the finances end of it.
Good luck!
And good reco on the book. I also recommend this one:
Starting your career as a Freelance Photographer
Also covers strategies for marketing and business development, with some good tips on the finances end of it.
Good luck!
bob338
Well-known
be careful to keep your personal and business finances separate. my accountant has told me several times that everything regarding LLCs is still pretty much a gray area because a lot of people are using them as tax shelters for hobby businesses. it hasn't been contested in the courts enough to be as firmly established as a real corporation tax-wise.
he also told me to be sure to have 'LLC' following the name of the business on any correspondence or business cards. i think it's actually a law, but noone seems to do it.
the book suggested above looks great for taxes, but the NOLO series of small business books might give you a broader outline for starting and running a small business.
as far as accounting goes, you can probably handle the day to day stuff, but definitely get a professional to do your year end state and federal taxes, it's worth every penny. those generic tax places are staffed by low wage seasonal employees that will not go to bat for you if you get audited.
and if you get a resale license from your state, you don't have to pay sales tax on anything you might resell to your customers, including film!
good luck.
bob
he also told me to be sure to have 'LLC' following the name of the business on any correspondence or business cards. i think it's actually a law, but noone seems to do it.
the book suggested above looks great for taxes, but the NOLO series of small business books might give you a broader outline for starting and running a small business.
as far as accounting goes, you can probably handle the day to day stuff, but definitely get a professional to do your year end state and federal taxes, it's worth every penny. those generic tax places are staffed by low wage seasonal employees that will not go to bat for you if you get audited.
and if you get a resale license from your state, you don't have to pay sales tax on anything you might resell to your customers, including film!
good luck.
bob
jke
Well-known
I would strongly recommend developing a working relationship with a tax accountant familiar with tax law that applies specifically to your position. There is a lot any smart person can do themselves, but having an ongoing working relationship with a sharp tax accountant comes in very handy, especially if you get audited. The IRS will listen to a good tax accountants when they won't listen to an individual, and you can concentrate on building your business rather than defending your life's work. Look for one who works with small businesses, self-employed people, artists, photographers, etc. vs. accountants who work with individuals, preferably certified tax accountant with local knowledge & track record, not someone in a national chain of tax preparers who may or may not be around next year.
bmattock
Veteran
I hate to disagree with your accountant, but that's not even close to factual.
LLC means limited liability corporation. They're stylish. Your LLC status has nothing to do with how the IRS views your business when you file your taxes, but rather whether you should file a Schedule C with your personal taxes or if your corporation must file its own taxes. The purpose of a corporation is to shield you from liability - and an LLC is a simple way for a single person to have some of the advantages of a corporation without having a lot of the overhead.
The IRS does not disclose the manner by which it decides if a business is a 'for-profit going concern' or a 'hobby'. However, their practice over the years tends to show that if you show losses for three consecutive years out of five, your business may be classified as a hobby by the IRS and your losses disallowed (including those from previous years). There is no hard-and-fast rule about this, though, and some attorneys have managed to win cases proving that a business was 'for profit' even if it lost money for 20 years straight. However, the burden is on you to prove it, not for the IRS to disprove it.
I have never heard of that. But of course you want to use your business name on your business correspondence and contracts. It just makes sense.
But you have to collect sales tax, and submit quarterly sales tax collection reports, along with the sales taxes you've collected. You even have to file if the tax collected is zero in most states. It's a pain. Unless you anticipate reselling merchandise or if labor is taxable in your state, I'd forget about it.
rogue_designer
Reciprocity Failure
regardling LLC laws - they vary wildly state to state. When I had mine in Indiana, my recollection (and forgive me, I'm neither accountant or attorney) was that they were treated as Limited partnerships (filing schedule K taxes). But that was not the case in Illinois where they are treated under many of the same rules that C-corporations were.
Your attorney and accountant will give you better advice. If you don't have one or the other. You should.
Your attorney and accountant will give you better advice. If you don't have one or the other. You should.
bob338
Well-known
somehow i knew you would know everything...
bmattock
Veteran
I ran a sideline photography business for several years. Not wanting to run afoul of tax laws, I went out and educated myself beforehand - hence, the book recommendation.
I also have a number of undergrad law classes and post-graduate work in commerce and contract law, since I was bidding jobs to the federal government for a number of years.
I tend to find out all I can about any field of endeavor in which I am interested. Doesn't everyone?
bob338
Well-known
i run a real for-profit business and found the NOLO books to be great for ME. i didn't say anything negative about your recommendation, i just added mine to it. and i don't want run afoul of any laws either, that's why i have an accountant and a lawyer.
i don't have any degrees or training in anything other than picture framing, and i've done business with the state of california and the federal government for close to 20 years.
i can understand your obsessive nature regarding what you're interested in, but isn't it smarter to bring in a professional for something as important(and dull) as taxes? why waste time learning the tax code when you can use that time learning how to make more money? i pay my accountant about $300 to do my personal and business taxes. if i ever get audited, he's going to deal with it, not me. i think it's worth every penny.
bob
bmattock
Veteran
The book I recommended actually advocates just that - not bothering with an LLC unless there is some compelling reason you can't just be a sole proprietorship - and even then you can take checks, etc, in a business name if you file a DBA (in most jurisdictions).
I agree that liability means only personal liability - not immunity from civil lawsuits - good catch, thanks. Even a full-blown corporation may not completely protect an owner from personal liability - if malfeasance, criminal intent, etc, are shown in court. However, one of the traditional reasons given for incorporation is the personal liability shield.
It should go without saying that engaging in commercial photography as a business requires liability insurance - something that people can get reasonably through various professional organizations, such as WPPI, etc.
Also good point on the office space deduction - it's in the book I recommended as well. I never took an office space deduction - it's apparently a red flag for the IRS. Equipment is another story, but you must be clear on business and personal use and keep the separate.
People can take a loss forever if they want to have a hobby and still 'sell' their services - that's not a problem. The only problem is writing losses off your taxes. Then the IRS does care if you have a hobby or a 'for profit' going concern.
I agree that liability means only personal liability - not immunity from civil lawsuits - good catch, thanks. Even a full-blown corporation may not completely protect an owner from personal liability - if malfeasance, criminal intent, etc, are shown in court. However, one of the traditional reasons given for incorporation is the personal liability shield.
It should go without saying that engaging in commercial photography as a business requires liability insurance - something that people can get reasonably through various professional organizations, such as WPPI, etc.
Also good point on the office space deduction - it's in the book I recommended as well. I never took an office space deduction - it's apparently a red flag for the IRS. Equipment is another story, but you must be clear on business and personal use and keep the separate.
People can take a loss forever if they want to have a hobby and still 'sell' their services - that's not a problem. The only problem is writing losses off your taxes. Then the IRS does care if you have a hobby or a 'for profit' going concern.
bmattock
Veteran
I don't know anything about your NOLO books, so I didn't say anything about them. I commented about your accountant's advice, because it doesn't make sense to me.
And I've run several 'real' for-profit businesses in the past. I was an FFL dealer, I ran a used computer store, and the photography thing. Lots of work, and in the end, not what I wanted to keep doing. But I learned lots and had some fun along the way.
Do you know about set-asides for minority and veteran-owned businesses? Bidding on RFP's? Reading the Federal Register to learn about opportunities to do business with the federal government and how to dance to their tune to make sure your proposal is in compliance with their regulations? FAR and DFAR regulations for doing business with the feds?
I went back to college to learn about things that could help me do business better. No one has to do it - but it was useful for me.
Only if I can't do it adequately myself. I have no trouble paying for help when I do not understand a subject or find it uninteresting.
The two ways to make money are to earn more and to spend less. Time spent on either end of the equation can be time well-invested.
I pay a mechanic to work on my car. I therefore do not offer advice on how to rebuild transmissions. See how that works?
Benjamin Marks
Veteran
Just a word of caution here. There is a lot of information being offered and I think that some of the strategic advice is pretty good. Read whatever you think makes sense. However, you should buy an hour of a lawyer's time and an hour of an accountant's time and get answers from professionals licensed in your state about what level of liability protection an LLC can afford you and what is necessary to show that it is not simply an alter ego for you. There are corporate formalities that should be done right, too. It doesn't have to cost a lot, but in my opinion it is money well spent.
Ben Marks
Ben Marks
bmattock
Veteran
As a final bit of (unsolicited) advice for the OP, may I say that running a photography business is, oddly, a 'business' first and 'photography' second. Your talent is useful, but ultimately of less use than your business skills if you are trying to run a for-profit business and want it to succeed. It is my opinion that a person who is merely mediocre as a photographer but who has excellent marketing and business skills will do better than a great photographer who can't be bothered to run their business well.