Are you a photographer looking to start your own business? Congratulations! You’re about to embark on a wild and rewarding journey. But before you jump in headfirst, it’s important that you understand the different types of business entities for photographers and which one is right for you.
In this blog post, we’ll explore the differences between sole proprietorships and LLCs as business types for photographers and provide guidance on which is best for starting a photography business. And no worries if you’re in business already – either you’ll get some reassurance that you’re on the right path, or you’ll find clarity on where your business should be.
Sole Proprietorship
What it is and what it means for you and your business
A sole proprietorship is the simplest type of business structure available. It’s free to form, easy to set up, and requires no ongoing paperwork or filing fees. As its name suggests, a sole proprietorship is owned by one person—you—and you alone are responsible for all decisions related to the business. It also means that any profits made from your business are taxed as part of your personal income tax return.
The downside of running a sole proprietorship is that it doesn’t offer any legal protection against creditors or lawsuits. If someone sues your photography business, they can come after your personal assets if there aren’t enough assets in the business itself to cover the claim. This can be a major risk for photographers who have invested considerable money into their equipment or other resources needed for their craft. Also, it’s not just equipment – your personal assets (home, car, property, investments, savings, etc.) can also be at risk if a major (albeit unlikely) legal issue requires financial restitution.
Limited Liability Corporation (LLC)
When to consider moving to an LLC and why
An LLC (or Limited Liability Company) offers more legal protections than a sole proprietorship while still providing some flexibility in terms of taxes and ownership structure. With an LLC, members are not personally liable for debts and liabilities incurred by the company. Instead, only the assets owned by the LLC (business) are liable. There is also less paperwork involved with forming an LLC than with other structures like corporations or partnerships.
The downside is that it costs more upfront to form an LLC than it does to form a sole proprietorship, usually around $100-200 depending on where you live. There may be ongoing fees associated with maintaining an LLC as well. However, depending on your specific needs as a photographer, these extra costs may be worth it in order to protect yourself from potential legal liability down the road.
Let’s Review & While Your at it, Download this CheatSheet!
Starting your own photography business can be both exciting and overwhelming at the same time! Before taking the plunge, make sure you understand all of your options regarding how to set up shop legally. Sole proprietorships are quick and easy but don’t offer much in terms of legal protection; on the other hand, LLCs cost more upfront but provide additional layers of security should something go wrong down the road.
My advice: Start as a sole proprietor, Move to an LLC When net worth >$1 mil
For me, once my family’s assets approached one million dollars, the stress and anxiety kicked in and I decided it was time to move my business from a sole proprietorship to an LLC. I didn’t want to risk my family’s personal assets (like the house we just paid off thanks to my photography business – woop woop!) because of an upset client suing me (which, although unlikely, has happened to other photographers). So for me, the peace of mind that an LLC gave me, it was worth the extra costs and effort it took.
Whichever route you choose, make sure you do your research so you can get started off on solid footing! Good luck, and reach out if you have more questions or any personal stories to add. We’d love to hear from you!
Kara xo
If you’re looking for answers like this for all your photography business needs, look no further than The Open Book Club, my one-of-a-kind group coaching program where we break down all the decisions you need to make for your business into bite-size pieces with education, live coaching, tech calls, done-for-you templates, email swipe files, and so much more.
Get on the waitlist today for priority access to secure your seat when doors open in February. Course will run March-May 2023 and will cover everything you need to make sure your photography business is set up correctly, how to brand your business from your logo and colors down to your brand voice, and the most important (and often intimidating!) piece of your business success story – your website.
If any of these topics cause you any uncertainty in your business – join me in The Open Book Club to find the clarity and confidence you’ve been looking for.
P.S Have you had a chance to read our blog post on Ideal Clients?
