Is It Really a Photography Business?

K Soze wrote in post #18832718
Nice list. Good luck proving any of them either way. With minimal effort you can have a bad business that will allow you a fair amount of deductions. You will still be negative in cash flow to get those deductions, but they will be legitimate.

What the IRS would like is for you to be a good business person, (and pay taxes to support them) there is no law that says you can't be a bad business person and that your business needs to operate in the black. Those guidelines are bureaucratic BS. The irony is if you become a fantastic business you don't pay any taxes.

If you have real expectations of success as a business, the IRS will allow deductions with net loss (negative cash flow)
But if you are NOT judged to have valid expectations of profitability as a business, the IRS may rule that photography is 'only a hobby'...and you can offset any income produced to be net zero (you can write off deductions only to the level of any generated income)

Tom Reichner wrote in post #18833705
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I don't understand your thinking here.

The fantastic small businesses that I know of pay a lot of taxes, because they generate a significant net profit. . If it's a fantastic business, that means that income significantly exceeds expenses, which results in a significant tax liability. . At least that's how it works here in the United States.

Would you please expound on your statement, so that I can understand what you mean?

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I used to file schedule Cs for my wife's real estate and my Invisicord/photography work, and that cost us alot in taxes, not just adding to our income tax, but in self employment taxes.

We have since filed an LLC, and that has saved us thousands in taxes because now some of the profits of the LLC is considered payroll or owner disbursements and those are only taxed as normal income rates, and then the remainder that is left is taxed with self employment and normal income rates.

There is a financial point where you switch from a schedule C to a separate LLC. Also, if you do anything for money, even a single wedding, you want the coverage of an LLC. The only liabilities then are gear filed under the LLC and any funds in the accounts. This frees up your house, cars, and family assets.

TeamSpeed wrote in post #18877622
There is a financial point where you switch from a schedule C to a separate LLC. Also, if you do anything for money, even a single wedding, you want the coverage of an LLC. The only liabilities then are gear filed under the LLC and any funds in the accounts. This frees up your house, cars, and family assets.

Depending on state laws...

...generally, being an LLC protects from contract liability (which could include errors and omissions), but not from fraud or negligence. Many states will "pierce the veil" in a heartbeat for fraud or negligence liability and go after personal assets anyway.