How much to pay "associates"

[sbressler]

Hi, I'm a college student and have a photo business at school. We're planning on bringing on a few prospects to shoot for us and I wondered what you all thought about how much they should be paid. I've been thinking 35% for referring new clients (one-time) and 25% for shooting the job, but I wonder if these numbers feel way off.

Also, from a tax/ease-of-hiring standpoint (if you know anything along those lines), should they be independent contractors or could they actually be employees? Just so you know, this company is not incorporated or anything much official, but it's been working out fine.

Let me know what you all think. Thanks!

[Alleh]

Sorry I don't understand what your business is...

[griptape]

To shoot for you to do what? What is your end product? You haven't said ANYTHING about your business that could help anyone make an informed decision about employees.

[Patrick]

If you hire 'employees' you have taxes, unemployment, and workman's compensation issues to deal with. You get the benefits of tax deductions but unless you're making a lot of money, I'd hire them as contract labor.

[griptape]

Just so you know, this company is not incorporated or anything much official, but it's been working out fine.

And by the way, that's not called a company, that's called a club.

[Patrick]

And by the way, that's not called a company, that's called a club.

lol :lol:

[hypertech]

Its not a club, its probably a partnership. Operating a partnership without an agreement is an invitation for problems.

If you are successful enough to need employees/contractors, it is probably time to get some professional business planning advice.

[Duncan Frenz]

Its not a club, its probably a partnership. Operating a partnership without an agreement is an invitation for problems.

If you are successful enough to need employees/contractors, it is probably time to get some professional business planning advice.

And a secret 'handshake'...

[sbressler]

If you hire 'employees' you have taxes, unemployment, and workman's compensation issues to deal with. You get the benefits of tax deductions but unless you're making a lot of money, I'd hire them as contract labor.
Thank you, Patrick, for your helpful response.

It is indeed a partnership and we have decided that we don't need a partnership agreement (and thus need for a legal consult) at this time. We are making less than $10k a year. We want to bring on a few other students who we know are good photographers so that we can get new clients and expand. We are wondering what is the best way to do this.

An accountant with whom I spoke said that keeping everything as informal as possible would be best, hiring them as independent contractors and just telling them what their "commission" will be. We would, of course, need to send them a 1099 at the end of the year.

Your thoughts?

[thebishopp]

being an independant contactor myself I would say hiring them as IC's is much easier than as paid employees. you avoid a whole lot of unneccesary headaches by doing so. your accountant is right about it being easier to deal with independant contractors. I just read noticed the part about "informatlity". That part is wrong. You will still need good contracts for your ICs which identify who owns copyright as well as responsibilities of the IC on any particular job.

[Patrick]

Personally, I would form an LLC with your partners stating who owns what percent of the business. Get everything in writing so you can avoid possible problems in the future.

Nothing drives a wedge between friends like business, religion and politics.

Good luck.

[hypertech]

No offense, but your accountant is an idiot. You need to sit down and write out how the money is to be handled in the case a dispute comes up. You don't want informal agreements with your contractors, you want contracts. You need to specify what they must do to be paid. You also need to specify what copyrights you are taking in exchange for paying them. Remember that if you don't specify it is a work for hire, they own the copyright even though you paid them.

A partnership is also quite possibly the worst corporate form for you to have. What happens if one of your partners falls on somebody at a shoot and causes injury? They can come after your personal assets and garnish your future wages. If you are working with other people and you need workers (contractors or employees), you need liability protection. I don't know the exact specifics of your situation, but an s corp or an LLC is probably the next thing you need to do right after finding someone who can give you good business advice.

[Karl Johnston]

Thank you, Patrick, for your helpful response.

It is indeed a partnership and we have decided that we don't need a partnership agreement (and thus need for a legal consult) at this time.

We are making less than $10k a year. We want to bring on a few other students who we know are good photographers so that we can get new clients and expand. We are wondering what is the best way to do this.

Your thoughts?

Fold the company, continue doing photography and on the side persue a career in baking because your masters at cooking up recipes for disaster.

I really am not trying to be rude, but that business plan is lunacy. Absolute lunacy. I came from a company with a partnership like yours', the figures were far higher, however, but here's some advice from my experiences:

Don't call it a company, just become independent photographers and offer your independent skills. Not only will you enjoy it more, you'll be kings of your business and won't have to consult every figure with each other. If anything, register your own business names and go about it like that. Work with each other, but don't be partners...don't even call yourselves partners..especially without a formal agreement.

Don't bring in help if your making less than 10k a year; you cannot afford it, you can't even afford yourselves. I wouldn't even consider contracting until your both making at least 30k + a year Definitely need to get rid of the accountant your going to.

Instead; shoot with friends, invite them along, tell them they can get experience by shooting along your flank and you can pay them a little bit for their time or they can invest their time (if its worth it for them) to be an intern to you.

Bringing in new people into a two man operation thats making less than a taxable income per year? I'm sorry but that's lunacy, I hope your not in school for business :lol: (just kidding, sorry).

A legally binding obligation such as a partnership that involves money, liability and credit should never be without legal consult.

[sbressler]

Fold the company, continue doing photography and on the side persue a career in baking because your masters at cooking up recipes for disaster.

I really am not trying to be rude, but that business plan is lunacy. Absolute lunacy. I came from a company with a partnership like yours', the figures were far higher, however, but here's some advice from my experiences:

Don't call it a company, just become independent photographers and offer your independent skills. Not only will you enjoy it more, you'll be kings of your business and won't have to consult every figure with each other. If anything, register your own business names and go about it like that. Work with each other, but don't be partners...don't even call yourselves partners..especially without a formal agreement.

Don't bring in help if your making less than 10k a year; you cannot afford it, you can't even afford yourselves. I wouldn't even consider contracting until your both making at least 30k + a year Definitely need to get rid of the accountant your going to.

Instead; shoot with friends, invite them along, tell them they can get experience by shooting along your flank and you can pay them a little bit for their time or they can invest their time (if its worth it for them) to be an intern to you.

Bringing in new people into a two man operation thats making less than a taxable income per year? I'm sorry but that's lunacy, I hope your not in school for business :lol: (just kidding, sorry).

A legally binding obligation such as a partnership that involves money, liability and credit should never be without legal consult.
Our operation will likely dissolve in a year when we graduate. You really think that steps are needed to formalize our partnership for just that time?

Also, why shouldn't we bring anyone in unless we're making >$30k? We'd bring in people that want to shoot, let them find jobs, and we'd offer to sell them through the infrastructure we already have set up (online gallery, etc.). They would make a cut. Why does it matter what we're making before we should consider doing this?

I understand you think my accountant and I are idiots, and I'm trying to take it as constructive criticism, so please do tell me why you think this will all fail miserably. Thanks.

[Karl Johnston]

Our operation will likely dissolve in a year when we graduate. You really think that steps are needed to formalize our partnership for just that time?

Absolutely. What if he decides about halfway through the year that he no longer wants to do business with you and he takes over the direction of the company, does his own thing, takes money, makes rules, sets different prices, steals your work, cuts you off of jobs, fills out expenses in the company name and then leaves it up to you to handle?

Also, why shouldn't we bring anyone in unless we're making >$30k?

Because you can't even afford yourselves or have the management knowledge of how to properly hire someone, contract, commission, part-time, casual, full-time, what have you. There's tax to consider too, and its too complicated to hire staff right out as your getting started up - start slow, small, then hire as you need.

We'd bring in people that want to shoot, let them find jobs, and we'd offer to sell them through the infrastructure we already have set up (online gallery, etc.). They would make a cut. Why does it matter what we're making before we should consider doing this?
Same answer as above.
I understand you think my accountant and I are idiots, and I'm trying to take it as constructive criticism, so please do tell me why you think this will all fail miserably. Thanks.

No problem, it was meant to be constructive. I tend to come off as overly blunt sometimes, though, sometimes I need to to get the point across. I think it's a great idea, however, hiring help and taking on more than you can offer, more than you can support, more than you are ready to support or have the experience to support; is a bad idea. That's 90% of how businesses fail..they move too fast and they "invest in" crap they don't need to invest in just starting up.

Forget accountant, you guys aren't making enough money for one of them. What you need instead is a book-keeper that will help you manage your finances..accountants are expensive, a book-keeper can help you get started up and give you a crash course in how to organize your finances.

I don't think your an idiot, I think the prospect of thinking about hiring "associates"...speaking of which, that's the wrong term. What your looking for is "staff."

I wish you luck but I think you should start slower and feel it out, test things, network, build up your client base, get your names out there and more known, develop relationships within your state and with other local pro-photographers that have experience, rather than inviting a medley of other college kids in on your business.. but hey it's your business. I sure as hell wouldn't make that move though :lol:

Hope that wasn't too blunt..that was me being polite :( sorry if you were offendded.


^^^^

[sspellman]

sbressler-

The accountant that you spoke to is just not giving you professional and informed advice. Your business lacks a basic structure for tracking income and expenses. For example-how are you going to issue a 1099 without an accounting system? How can you pay an independant contractor when you have no shared expenses/account? What tax ID do you provide on W-2s and how do you split income? Who is going to pay for the costs of a personal accident or even equipment theft/damage?

If your business does not exist, you are not ready to hire any type of employee. Even if your business is temporary, the government requires clear tracking of income and expenses for tax records. A DBA, partnership agreement, checking account, Tax ID, insurance, and tax preparer/accountant are all basic to operating even a small business.

Good Luck-
Scott

[sfaust]

I would be looking for new accountant as well, they are giving bad advice based on all the accountings I've dealt with in the past.

Changes of having those shooting for you regarded by the IRS as independent contractors is pretty slim since they wouldn't fall under the normal guidelines they use. Thus, you could find yourself in a position a year or so down the road being liable for back wages, workers compensation insurance, back taxes, and all the penalties and fines that go with it. It's happened over and over again to small business and photographers. Learn from there mistakes.

Who is going to handle the money, track and pay the commissions, collect, file, and pay the sales taxes on those sales? Who is responsible for the liability insurance, and you MUST have this if you don't want to be held personally liable for yours, or their mistakes.

What about workers compensation insurance for the sub-contracts or IC's. You need that as well by law. Either you, or they, need to have coverage. If they don't, you will be held responsible.

And who will be responsible should the IRS decide your IC arrangement is an attempt to avoid following the labor laws, and where will the money come from to cover back wages? Someone will be responsible, and it could be you.

If you don't have some sort of a partnership or business structure, it could all fall on your shoulders. It would suck to make $30K as a whole, only to later personally have to shell out $53K in back wages, tax penalties, fines, and legal fees. It's not worth it in the end to do take shortcuts, the risk is too high.

IMO, you would be better off doing your own thing, let them do theirs, and working some sort of a referral or commission arrangement were you get paid for referrals or lead generation. At least you would be a self contained business, and not responsible or legally required to deal with all the issues of hiring employees or independent contractors, and won't be held accountable for actions by anyone either than yourself.

[Alleh]

Yeah sorry you bring in 10k a year between 2 people and you need employees?

[basroil]

Some things that people seem to be forgetting is that he said this is a part time business of students. I think that treating it as a full time business might be overdoing it on the profitability region, though advice on the minimum requirements should be of some help. I agree that formality is needed, but does anyone actually know what the minimum requirements are?

[TroyRaymond]

In a similar situation I had with my sign shop. I hired an IC for overflow work at my location, after about 9 months he sky rocketed the bills and I got rid of him only to (all of a sudden) not have any jobs. After about two years I found out he had copied all of my customers information, all of the job files (graphic/vector/photograph), contacted them to let them know I was going out of business and he was taking over. Took several years to recover. This was only brought to my attention by a former customer asking me when I started up business again.

This former IC has now had 10 different business names in 10 years. His latest place of business disappeared after only a few months when previous customers found out where he was located and tried to collect their original deposits. Many for thousands of dollars with no product/service in return.

The unimaginable can and will happen if business continues so casually.

The business described seems to be becoming successful and I doubt after graduation you'll just walk away from your current customers. Someone will decide to take over. Will you be willing to start from scratch?

Troy

[Billo78]

I don't understand your business model, these budding photographers come to you, bring their own clients, but only keep 35% of the fees while you take a 65% cut just for letting them use your online galleries and ordering system?

Have I missed something?

Why would anyone take up that offer?