Do I need to be a business?

Sorry in advance--this is a really basic question, I think.

Anyway, I am starting to get people who own businesses ask me to do photo shoots for pay. Friends of friends and such. Actually, I have two coming up next month. Now, I don't even know that I want to start a second or third career...but I want to do the photography

So, do I have to start a business with tax id, separate checking account and all of that to accept payment? If they are paying me from business accounts, then they will be using that on their tax forms, so I have to claim the income, too, right? I have always been salaried...never had a business so I don't really know what is required for very small photography jobs

Thanks!

www.parttimephoto.com - A great source. Its going to depend on your state, I believe.

In Canada, I don't need a tax ID or start collecting taxes until I hit $30,000 income, then I must do that. As for income, every bit paid to me must be reported as income for tax purposes. You'll have to do some local research.

April, a tax ID could be as simple as your SS number for reporting purposes (getting paid) Generally if you don't have a business tax ID you use a social on your W-9 you give the person paying you. You don't have to have a business checking account, but why wouldn't you? It separates the money and insulated your personal finances. And yes, any money you make should be reported.

BTW, you will want to contact your insurance agent and insure your equipment with a business policy as well.

It's definitely different by state. Typically, the information you need is located at your state's SOS site.

Hopefully these can get you started:

https://www.colorado.g​ov/colorado-doing-business/
http://www.sos.state.c​o.us …usiness/busines​sHome.html

If you are wanting to operate a business and collect a profit, you need to follow the laws for businesses. You'll need to register your business and file taxes accordingly.

jra wrote in post #15532147
If you are wanting to operate a business and collect a profit, you need to follow the laws for businesses. You'll need to register your business and file taxes accordingly.

Besides possible local business licenses that may apply, being a sole proprietor only requires filing state and local taxes under your social number. Is that correct?

If anything, liability insurance is mandatory, along with valid legal wavers.

My answer would be a question I guess: How often do you plan to do this?

All the questions you ask are good questions but you've gotten the proper answers to them already so I'd like to get you to think about something you have not thought about yet.

Right now you've been shoot for friends, and you are moving into the friends of friends which is a very nice way of saying people you don't know. So lets imagine one of these businesses is a tanning salon and in the process of shooting these photos you you knock over a cup of water that spills into the internals of the Tan Master 6000 which is a $15,000 unit. Let's also imagine that he's an average American, that means there is an average chance that he would expect you to cover the cost of repairs/replacement. Are you prepared to be responsible personally for that?

The one thing you can do by owning a business and properly insuring that business is separate your business liability from your personal liability. So if you are planning to do this a lot I'd invest in the business to separate my business and personal interests.

Here's the thing: Whether you have a "business" or not, if you are getting paid to produce a product or provide a service, the IRS regards it as taxable income, and some states may also consider it subject to sales tax.

Now you can pay income tax on every dime you receive if you like, but it makes sense to create a "business" of some form so you can legally deduct the expenses associated with producing that income and only pay taxes on the net profit. Generally you will do this with Schedule C, Profit or Loss from Business, which is filed with your IRS-1040.

Good, solid, correct answers to the rest of your questions will come only from an accountant. Find one near you who handles a lot of part-time businesses. He/she will also provide a lot of guidance and be worth more to you than the cost involved.

Wallace River wrote in post #15531702
In Canada, I don't need a tax ID or start collecting taxes until I hit $30,000 income, then I must do that. As for income, every bit paid to me must be reported as income for tax purposes. You'll have to do some local research.

thanks for the Canadian perspective, I was wondering about that also

Wow. You guys very quickly (and kindly, I might add) gave me a healthy dose of reality. I admit, I was flattered to be asked to do these jobs and I knew I could do a very good job for the work that the clients wanted. And the idea of a small business was attractive and one that I had been thinking about a little bit. But, I admit it: I said 'yes' too quickly.

Curtis N wrote in post #15533658
Here's the thing: Whether you have a "business" or not, if you are getting paid to produce a product or provide a service, the IRS regards it as taxable income, and some states may also consider it subject to sales tax.

Good, solid, correct answers to the rest of your questions will come only from an accountant. Find one near you who handles a lot of part-time businesses. He/she will also provide a lot of guidance and be worth more to you than the cost involved.

I would absolutely want to set this potential business up correctly...and let the IRS have their share . I just wasn't sure how much had to be done to report a taxable income. It sounds like the best way is to set it up as a 'official' business with all of the paperwork that goes with that...

Addiction2k wrote in post #15533186
I'd like to get you to think about something you have not thought about yet.

The one thing you can do by owning a business and properly insuring that business is separate your business liability from your personal liability. So if you are planning to do this a lot I'd invest in the business to separate my business and personal interests.

Thank you very much for this post, Addiction2k. It really stopped me in my tracks--and that is a very good thing. You are right...I hadn't thought about this at all. And one of the clients is a house remodeler that I was going to do both head shots and on-site work shots for her website. I can just see me backing into a ladder, crashing it down onto an expensive lighting fixture while tipping over a bucket of paint on new cherry floors

Canon_Lover wrote in post #15532632
If anything, liability insurance is mandatory, along with valid legal wavers.

mikeinctown wrote in post #15531784
BTW, you will want to contact your insurance agent and insure your equipment with a business policy as well.

It just shows you how naive I have been...I didn't even think of insurance, of any type...

JakAHearts wrote in post #15531697
www.parttimephoto.com - A great source. Its going to depend on your state, I believe.

After looking at this site for a few minutes, I can see that I need to spend a lot more time there...thanks for the link

aIpha wrote in post #15531954
It's definitely different by state. Typically, the information you need is located at your state's SOS site.

Hopefully these can get you started:

https://www.colorado.g​ov/colorado-doing-business/
http://www.sos.state.c​o.us …usiness/busines​sHome.html

More good links (except some of the sublinks in the first one didn't work!) But I can see that I have a lot of work to do...

Thank you all for taking the time to answer my post. All the answers have made me think and SLOW DOWN. After two or three months of research and asking the insurance/accountant questions, maybe I'll have the answers that I need to decide whether or not to go in the very small business route or not. It may not be worth it. Or, it may be

This thread has helped make a decision about the 2 commitments that I have already made. First, they were both small: headshots, product shots, and a location shoot. And the photos were only for websites, not any big advertising campaign. These are both small, one-person businesses, too. So, I am going to do them for free. Forget the whole business thing for a while. Please don't caution me about giving away my services...I think since I commited before I thought about it, I still want to go through with the shoots. Call it good experience...about a lot of things.

If your clients have products or services you could use, trade them out for your efforts.

That way, you still gain value from your work!

April wrote in post #15533985
.....

This thread has helped make a decision about the 2 commitments that I have already made. First, they were both small: headshots, product shots, and a location shoot. And the photos were only for websites, not any big advertising campaign. These are both small, one-person businesses, too. So, I am going to do them for free. Forget the whole business thing for a while. Please don't caution me about giving away my services...I think since I commited before I thought about it, I still want to go through with the shoots. Call it good experience...about a lot of things.

April,

I don't want to scare you, I just wanted you to go into this with eyes wide open is all. So keeping our eyes wide open approach let's look at it this way, doing it for free MAY not relieve you of your liability. It depends on the rules where you live. So if you are going to do it you may as well get paid for it.

With that in mind draft (or have someone draft) a contract. The contract can be very simple. You want to write into the contract:

- What the exact service is thats being provided (prints, digital etc)
- That each party will be releases the other from any liability for equipment, supplies and/or injury and bodily harm.

I incorporated both of these into my model release which also gives me the right to use the images in promotions. You don't sign the model release, I don't do your session. Simple as that, no bending and no adjustments to the model release period.

Simply put you won't be responsible if you knock paint on a cherry floor and she won't be responsible if she drops your camera into that bucket of paint.

After these two jobs take some time and think about if you want to do this for money, do you want to run a business and what your goals would be for that business. Any goals for a business are valid from working 4 hours a week just for the fun of it to wanting to make your first million. You should just be honest about what you actually want and what you are willing to do to get it.

Take a week or two and do some research on what it takes to have a business where you live. That means find out the rules, if any, from a federal, state, county, town and HOA perspective assuming you have an HOA. For me I need to file at least one piece of paper with each of those entities. Some cost money, some don't.

At the end of a week of thinking you'll know what it takes to at least dip your toe in the water and you'll know if its worth it to you.

And April I know all of this sounds daunting, but its not nearly as epic as it sounds. It doesn't take months, it doesn't even take weeks. I'm pretty sure now that you know the questions to ask you can get this information in one afternoon if you put one aside. It took me about 45 minutes total time to find out which agencies required something from me and to get insurance quotes.

And the insurance can be had for about $220 in Va, divided into payments, so its not expensive to get started. My total out of pocket to start in Va is $492 counting all paperwork needing filing and insurance. I've got a wedding I'm helping at tomorrow and two senior portraits Sunday that will more than cover that.

I didn't read all the posts so some of this (all) may be redundant.

In my state, transferring my freelance into a business was as simple as creating a DBA (Doing Business As). You get your own EIN number for taxes instead of using your SS number, you can do it online and it happens within a week. BUT, going this route is still connected to you as a person. If for any reason someone wants to sue, they can come after your personal assets. It's different than incorporating. For my video business, I didn't need to worry about the lawsuit aspect so I just went DBA. It makes you look more professional, sort-of separates you from the business and the tax breaks are unbeatable. Lunch? tax deductible. Equipment? tax deductible. Travel, phone, electricity, internet, home studio, etc? tax deductible.