Starting a photography business is equal parts exciting and challenging. One of the most difficult (and least exciting) parts is navigating the legal and tax requirements that come with owning your own business.
This process sometimes feels so overwhelming that it discourages people from becoming business owners. But it’s much more manageable than it sounds! We broke the legal mumbo jumbo into simple steps to make trademarks, LLCs, EINS, and taxes as painless as possible.
Before we dive in, a quick disclaimer: We aren’t lawyers or accountants. We’re happy to share helpful information, but this is not a substitute for professional advice!
The first step in making your business official is naming it. Your business will need a name for many of the remaining steps on this list, like registering an LLC or getting an EIN. Beyond the bureaucratic alphabet soup, you need a name to brand and market your business.
Choose a name that makes it easy for consumers to understand your services and brand, like [Your Name] Photography. Search online for other businesses with the same name or names that are overly similar. You don’t want to confuse potential clients.
To ensure the name is ownable, conduct a trademark search. If your business name will be your own name (the one on your birth certificate), you can skip this step. You always have the right to use your own name.
Next, think about how you will structure your business. For small photography businesses, the three main options are:
Put simply, a sole proprietorship is a person who does business. If you don’t set up an LLC, your business will automatically default to a sole proprietorship.
Unless you are doing business in your own name, you’ll still need to register a DBA (Doing Business As) with your secretary of state. Typically, you complete a brief application online and pay a filing fee of $5-$100.
Forming a limited liability company (LLC) separates your personal assets from your business. It provides more protection than a sole proprietorship, but it takes more work.
When you have an LLC, assets like your personal bank account, cars, and house are protected from some lawsuits.
What do we mean by some lawsuits? If the lawsuit is related to a business contract, your personal assets are protected under an LLC. So, if a client sues because they feel you didn’t honor the terms of a contract, they can’t get your personal assets.
Your LLC will not protect your assets in other cases, like if you don’t pay your taxes or if a passerby trips and falls over your equipment.
The process to register your business as an LLC varies slightly by state. It generally involves filing Articles of Organization with your secretary of state, paying a fee of $50-$125, and creating an operating agreement. You must also pay a yearly fee, which can be pricey in some states.
There are two other business structures, known as S corporations (S-corps) and C corporations (C-corps). However, these options are the most complicated —think shareholder requirements and annual reports— and the costliest.
On the plus side, corporations offer the strongest protection from personal liability. Corporations are legal entities that are separate from their owners. They can be a good choice for higher risk businesses and businesses that need to raise money, plan to “go public,” or want to eventually be acquired.
C-corp is the default status for a corporation. They pay income tax on their profits and are sometimes taxed twice: first when the company makes a profit, and for a second time when dividends are paid to shareholders.
Alternatively, S corporations are designed to avoid double taxation. They allow profits— and some losses— to be passed directly through owners’ personal income without paying corporate tax rates. Some states don’t recognize S corps and will still treat the business like a C corp.
In almost all cases, there’s no need to structure a small business as a corporation. Unless your business relies on outside investors, it’s unreasonable to navigate a complex business structure and mountains of paperwork, as well as potentially paying high corporate taxes.
Both sole proprietorships and LLCs have their advantages. Sole proprietorships are easy and inexpensive to maintain. LLCs, while more complicated and costly, give you more protection and lend credibility to your business. Ultimately, it’s up to you to decide which structure best meets your needs.
In general, a sole proprietorship is a safe bet if you don’t have significant assets, don’t expect to earn more than $80,000 from your business, and don’t work on higher-risk shoots worth more money. If your business grows, you can always switch to an LLC later.
You should invest in an LLC if you have major assets, your business is highly profitable, and you work on higher-risk shoots or with higher-risk clients, such as businesses or celebrities.
If you’re a sole proprietor, you can skip this step. If you go the LLC route, you will need an EIN (employer identification number) for the IRS.
Luckily, this process is fast, easy, and free. Simply apply online with the IRS. When your application is complete, you’ll receive your EIN immediately. Download, save, and print your EIN confirmation for your records.
No matter how you structure your business, it’s essential to keep your personal finances separate from your business finances. This will help you track your expenses and earnings and keep your books in order for the IRS. And if you have an LLC, it ensures the protection of your personal assets.
So, start by setting up a business bank account. You will need the DBA if you’re a sole proprietorship, or your LLC documents and EIN if you’re an LLC. Then, make sure every cent your business earns goes into the business account. Every cent you spend on your business should also come out of the business account. You’ll get to deduct these purchases from your taxes.
To pay yourself, simply write a check from the business account to your personal account. If you have an LLC, it’s best to keep the amount consistent each month. As your business becomes more profitable, you can give yourself an annual bonus or a raise.
In some states, you must pay state sales tax. Not paying sales taxes can result in massive penalties, so don’t skip this step!
To pay sales tax, you need to register with your state sales tax commission. On their website, they will have directions on how the process works in your state and how to get your state sales tax ID.
Each state deals with sales tax differently, and some states don’t have sales tax at all. Consulting with an accountant in your state can be tremendously helpful. When you have someone on your side who knows the ins-and-outs of business tax law, you’ll have peace of mind knowing that you’re doing everything correctly. And a good accountant will often save you more money than they cost!
Since you no longer have an employer withholding your tax, it’s up to you to pay taxes on the income your business earns.
You must pay quarterly taxes to both your state and the federal government. These payments are due in April, June, September, and January of each year. Estimating how much to pay each quarter is tricky. The IRS has a worksheet for this purpose, but again, the best strategy is to consult with an accountant.
If you handle your quarterly payments correctly, you won’t have to pay additional taxes at the end of the year. But if you underpay, you could end up with a big bill. It’s always better to overpay and get a tax refund than to underpay and pay much more later.
For more information, check out our handy guide to tax season for photographers.
Lastly, have a written contract for every shoot. Having a simple contract with every client is one of the best steps you can take to protect your photography business. You don’t need to write up a new contract every time. Instead, have a contract template that you customize for each shoot.
Your contract should include:
Some photographers worry that contracts are too formal or cold and will turn off clients. In reality, contracts build trust by telling your clients exactly what to expect. When you treat your photography as what it is— a business —clients will only respect you more.
If you’re someone who has a hard time telling people “no,” it’s also helpful to allow your contract to play the bad guy. If a disagreement arises, you can simply say, “Per the contract, this is what we agreed to.”
As always, your best bet is to consult with a professional. Have a lawyer either write or review your contract template to ensure it provides adequate protection and is legally binding.
Before we wrap up, check out how easy Picsello makes it to manage all of the bits and pieces of your business together in one place!
You Can Start Your Photography Business with the Right Legal Structure!
If you feel overwhelmed by the legal requirements of owning a business, rest assured that you can do this! Picsello has tons of resources to support you, and qualified professionals like accountants and lawyers can guide you through the process. When you tackle one step at a time, it’s far more manageable than you think.
The best part is that you only have to legally set up your business once! After that, it’s all about keeping your finances organized, paying your taxes each quarter, and the fun part: doing what you love.