Simple Guide to Setting Up a Photography Business Legally

This article includes about $20,000 of mistakes that I've made in the last 6 years of running my photography-centered business.  This article is also the result of hundreds of hours of trying to figure out the business, legal, and financial side of photography on my own.  So hopefully this will help!

But fortunately, I successfully waded through the red tape of starting my business 6 years ago and the business has processes for the legal and tax requirements that were so complicated at first.  Now I'm a licensed attorney, but run my photography business full-time.  So I'm in a unique position to walk you through all the steps you'll need to go through to get your photography business set up legally.

First and foremost, while I am an attorney, I'm not your attorney.  Laws regarding small business differ in each state and country, so you'll need to seek the advice of a licensed attorney in your own jurisdiction before making business decisions.  This is strictly legal education.

You'll need to walk through 5 steps to get legally set up as a photographer: (1) Decide on a name and check trademarks, (2) Create an LLC or stay as a sole proprietorship, (3) Get an EIN, (4) Set up your business finances, (5) Determine your tax strategy, and (6) Make a decision about insurance, and (7) Get some inexpensive photography contracts for just $15 total!!!!!!  Contracts will do more to protect you legally than ANYTHING ELSE!  That may all sound intimidating now, but as you'll see in the article, the truth is that 90% of photographers can run through this whole process in just 24 hours.  It's really not hard as long as you carefully follow the steps.  Don't worry.  I've never lost a patient.

photographer

Step 1: Choose a Business Name

Every photography business has a name, even if it's as simple as “Jim Harmer Photography” (that's how I started out).  Just pick something.

If you pick your own name, you're free and clear.  Don't worry about the rest of this.  If there's already someone with a business named “Jim Harmer Photography”, they just have to deal with it because I always have the rights to my own name.  There was a court case where someone with the last name McDonald opened a restaurant named McDonald's, but not THAT McDonald's.  He won.  The court ruled that you always have the right to your own name.

If you choose anything other than your own name, you have to take a couple extra steps.  These are the steps I had to follow when I made “Improve Photography” after graduating from the simple “Jim Harmer Photography.”  As an example, let's say I select something corny like “Still Frames of the Mind Photography.”  Cute.

I need to make sure that someone else does not have trademark rights over that name.  I can find out in two ways.  The first step is to check USPTO.gov and perform a TESS trademark search.  It works like a normal search engine.  Just choose “basic word mark search” and then type in the proposed name of your business and hit “search.” When I do that, I see that the lame name I've chosen brings back no results.  That's a good thing!

But that doesn't mean I can use the name.  I also need to see if any other businesses are named something confusingly similar.  For example, what if there is a “Still Frames of the Mind VIDEOgraphy”?  That could confuse customers about which business they are hiring.  So I'll do a few searches with similar names to make sure.

If you find someone with the same name or a confusingly similar name, it's really best to just not use the name and avoid problems down the road.  You may be able to still use the name if you are geographically separated, do a different type of business, etc.  But it's best to just move on and choose something different.

If there are no matches in TESS, then we need to use Google.  Do the same thing, searching for other businesses with the same name.  If there are, it's really best to just avoid it.  Just because they haven't REGISTERED their trademark doesn't mean they don't HAVE a trademark.  Trademarks are earned through use–not registration.  Registration simply adds another layer of protection.

llc

Step 2: LLC vs Sole Proprietorship

Time to protect your assets.  This is where things can get complicated if you let them, but it really shouldn't.  We need to decide if you want to separate your business from your personal assets.  The benefit of doing so is that it will protect your house, cars, and personal bank account from some lawsuits.

The truth is that most photographers don't need to go through the work of creating an LLC.  The risk of a photographer being sued is actually quite low, and the dollar amounts of such suits would usually keep it in small claims court anyway.  However, if you're in a special situation, an LLC is certainly a good idea.

An LLC is the most popular form of separate entity that separates personal and business responsibilities and assets.  A sole proprietorship simply means a person who does business.  If you don't register an LLC, you're automatically a sole proprietorship.

Which law suits would it protect you from?  Let's hit on a few examples.

  • You have a contract with a client to shoot their wedding, but you're in a car accident on the way there and miss the ceremony.  The client can't get your personal assets.
  • You're shooting a wedding and a light stand tips over on a guest and does her harm.  Your LLC won't protect you at all because the guest did not contract with your business.  The guest is just a person YOU harmed.  Your LLC is useless.
  • You are having a bad day and do a terrible job taking wedding photos.  The couple can't sue you personally-only the business with whom they signed the contract.  The contract was breached.
  • You don't collect sales tax for your photography jobs and the state sales tax commission audits you.  Your LLC does nothing.  The IRS will get your personal assets without skipping a beat.
  • A same-sex couple calls you and you feel your religious beliefs prohibit you from adding to the celebration of their wedding by photographing it.  They are mad and say if you don't photograph their wedding, they'll sue.  Your LLC will do nothing to stop a human rights suit, but it could deter some other suits.  (Side note: I'm NOT advocating one side or the other on this issue.  It's just an example of something that photographers have been sued over lately.)

So as you can see, having an LLC is an excellent way to protect you from SOME but not ALL law suits.

In general, get an LLC if you…

  • Own a home and have significant equity, or have other major assets that you don't want to risk (cars, boats, bank accounts)
  • Will participate in higher-dollar photography endeavors (doing shoots that earn over $4,000)
  • Will photograph celebrities (celebrities are law suit MAGNETS!)
  • Do commercial photography (some businesses are very litigious)
  • Have a low tolerance for risk (Like I do.  I like the security of an LLC.)

You probably don't need an LLC if you…

  • Don't have much money in your personal account and don't have significant assets
  • Will photograph part time
  • Expect to earn under $80k in your photography business
  • Won't participate in higher-risk shoots worth more money or for higher-risk clients

For many of you, the “no LLC” option is the simplest and probably the best.  You can always switch to an LLC later if your business grows.  If you don't want to make an LLC, you still need to do some work.  You need to register a DBA with your secretary of state.  A DBA just means “Doing Business As.”  It usually only costs $25 and is a simple one-page form where you say that “Jim Harmer” is doing business as “Jim Harmer Photography” or “Improve Photography” or whatever business name I chose.  It's dead simple.  Just google the name of your state and “secretary of state”  there will be a simple form you fill out and mail with a $25 check and you're set.

If you decide you want an LLC, then you have a tiny bit more complexity, but it's not too bad.  Google the name of your state and “secretary of state” and you'll find a simple form for registering an LLC.  It usually costs about $100.  It's really quite simple.  The only “insider trick” you should know about is that on the line that asks for the purpose of your business, just write “To earn money.”  The reason is that if you're ever sued, you want it to be crystal clear that you don't ONLY do portraits, for example.  If you write something too narrow, the plaintiff may argue that your business is just a pass-through account and that you were engaging in other business endeavors.  If the purpose of the company is simply “To earn money” then you can do whatever you want with the company.

File the form and your $100 with the secretary of state and you'll be on your way.  In Idaho, this is a simple 2-week turnaround.

The only thing you'll need to do long-term is once a year you'll have to fill out a little card they email you about saying that you're still in business.  It takes about 5 seconds per year.

Also, I should add that the LLC is hardly the only option for asset protection.  There are many others, but for 99% of you reading this, the LLC will be the right choice.  If your business is bringing in loads of money, you'll definitely want to talk with an accountant.

money2

Step 3: Get an EIN

Not everyone needs an EIN.  It's really just for a specific set of issues in dealing with the IRS, but I find that it's tough to do a lot of business endeavors without one.  When you get insurance, sign up with a credit card payment processor, or set up a bank account, they'll want an EIN.

It takes about 5 minutes.  Just go here and fill out the simple form and you'll get your EIN.  It's free.  Save it somewhere you can find it.  You'll need it pretty regularly.

money

Step 4: Separate Your Finances

Whether you choose to set up an LLC or not, you need to separate your personal finances from your business finances.  If you are going to set up an LLC, then this is also necessary to get your protection as a separate entity, but even as a sole proprietor this is a necessary step to keep your books in order for the IRS.

Go to a bank and set up a bank account for your business.  You'll need your LLC documents and EIN if you went that route.  If you're a sole proprietorship then just the DBA will be all you need.

Absolutely every single penny your business earns needs to be put in the business bank account.  Every single penny you spend on business items needs to come from that same bank account.  Never, ever, ever use your business account to buy a personal item.  Ever.  Ever!

If you mess up the above rule, your LLC is COMPLETELY USELESS!  If you set up a separate LLC and business bank account, but just use the business card any time you're out of money in your personal account, your LLC is destroyed.  Anyone who sues you can “pierce the corporate veil” and get your personal assets.  If you are a sole proprietorship and you violate the rule above, then you've set yourself up for a NIGHTMARE of an audit when you try to show the IRS your books.  Everything is much easier if you keep these two things separate.

Wondering what you can justifiably make a business expense?  Anything that you buy that has a substantial business purpose and is ordinary and necessary in your field.  Photography workshops, buying new camera gear, purchasing props, and paying models are all examples of good business expenses.  But there are others that can really help out as well.

A business expense means you'll get to deduct the purchase from your taxes.  So if I earn $40,000 in my photography business and my tax rate is 25%, and I have $10,000 in expenses, then the 25% tax rate is only applied to the $30,000 in net profit.  So basically, whenever you buy something on the business account rather than your personal account, you're getting it at a 25% off sale.  That's fantastic if you would have bought the item anyway, but it never makes sense to buy something just because it'll be a tax deduction.

Now you need to decide how much money your business will pay you.  

If you are an LLC, it's really best to set a consistent monthly salary and not change it.  For example, you may put $500 of your personal money in the bank account to get it started.  Then you do some work and earn about $1,000 per month.  You may choose to set your salary to whatever you want as long as the business has that much to pay you.  At the beginning, it may be as tiny as $100 per month.  Don't worry, you can always change it later.  Just keep it consistent each month.  If you get to December and see that you've only taken a tiny amount out of the business and you have a lot of retained earnings (money left in a business account), you can give yourself a special yearly distribution to your personal account.  You pay yourself by simply writing yourself a check from the business account to your personal account each month.

If you are a sole proprietorship, then you can really take money out whenever you please.  The business IS you, so you don't have to be as careful.  But when you want to use the money in the business, write a check from the business account to your personal account.  Then buy whatever you want out of your personal account.  That way it's still clear what is a business expense and what is a personal expense.  You'll need that for tax accounting.

The last step here is to meticulously track every single mile you drive as a photographer.  Going to the mountains to take pictures?  Write off the miles!  Driving to a coffee shop to meet up with a potential client?  Write it off.  Driving to one of my free photography workshops?  Write it off!  Just keep a simple ledger that says where you started, where you went, how many miles, and why you went there.  Then, at the end of each quarter, write yourself a check from the business to your personal account for the cost of the miles (56.5 cents per mile).  Buy your gas, car, and all car maintenance with your personal account and then we do these reimbursements.  I've never seen a car that actually costs 56.5 cents per mile to operate, so you actually MAKE money when you go on a photography road trip.

Not keeping track of my miles very well has cost me several thousands of dollars over the last few years.  Don't make the same mistake.

sales-tax

Step 5: Register to Pay State Sales Tax

This is the #1 most-skipped step by photographers, and it's the one that comes with the biggest penalties if you mess this one up.  Fines for failure to pay sales tax can be HUGE, and photographers are great targets for the state sales tax commission because photographers rarely understand how sales tax works.  Every photographer needs to do this step–even if you are just a sole proprietorship.

Most people know that products are subject to sales tax, but services are not.  That's a general rule, but it has a host of exceptions.  Photography is almost always one of them.  You may think you are providing a service by taking pictures for someone, but most sales tax commissions say you're selling a product.

This gets extremely tricky!  Each state deals with the sales tax question differently.  For example, some states may allow you to itemize your services so you collect sales tax for the print sales but not for the act of going to do some of the shooting, etc.  It's a state-by-state issue.  Your best bet is to talk directly to your state sales tax commission and just ask.  They are usually cautious about giving legal advice, but they'll usually show you what to do.

My suggestion: If you aren't sure what to collect sales tax on, just collect sales tax on everything you do.  I've never met a sales tax commission who got upset about being overpaid.

To pay sales tax, you have to first register with the state.  Google your state sales tax commission and there will be directions on how to get a Sales Tax ID and how the process works in your state.  It's really not hard.

Some states don't have any sales tax, but most states charge about 6%.  So you'll need to update your pricing page with a little asterisk and a note that says “All sales subject to state sales tax.”  Then when you get payment from the client, add 6% to the price.

At the end of each quarter (usually), you'll see how much sales tax you collected and you'll pay it to your state sales tax commission.

taxes-for-photographers

Step 6: Taxes, Taxes Taxes!

When you work a day job, your employer withholds tax for you and pays it on your behalf.  Now that you're self-employed (even part-time), you have to do this for yourself with the income your business earns.  This is true whether you are an LLC or a sole proprietorship.

Each quarter, you need to total the amount of money you've earned and pay quarterly taxes to both your state and the federal government separately.  Just to make it tricky, the government doesn't do this on the typical ends-of-quarter.  You'll pay on April 15, June 15, September 15, and January 15 of each year.  Here's what you do: total the amount of money you earned since the last payment.  Take about 25% of that amount (or whatever the tax rate is–differs for everyone) and pay it to the IRS.  You'll also withhold for your state.  Usually this is about 5 to 8%.  Go to the IRS website and print out a voucher.  It's just a little half-sheet of paper that you mail along with your check at the end of each quarter.

All taxes except sales tax are paid through your personal account–NOT the business account.  An LLC is a pass-through entity, so you pay the tax personally.  A sole-proprietorship is just YOU doing business, so pay your taxes from your personal account.  Eventually this can become difficult to manage your personal finances to have enough in there to pay the quarterlies.  You can set up your company so, in addition to your monthly distribution (salary), you also get a quarterly distribution from the business to your personal account that just so happens to be the exact amount of tax you owe.

If you pay the correct amount in quarterly taxes throughout the year, you won't have any additional tax bill at the end of the year.  But if you get your quarterlies wrong, you could end up with a whopper of a tax bill!  It's better to over-pay and get money back than to under-pay and end up with a big bill.

If your business is on track to earn about $80,000 in the course of a year, you absolutely positively need to go see a CPA immediately!  It's very likely that you'll want to change your corporate tax election to be an S-corp.  You stay an LLC for liability reasons and your business name is still the same, but for tax purposes you are treated as an S-corp.  This can save you a STARTLING amount of money on taxes because you'll avoid self-employment tax, but it also means more fees to your financial advisor and more complexity.  Only do this if you're earning around the $80,000 mark.  Some CPAs will want to talk everyone into doing this so they can rack up more fees.

I made the mistake of trying to save money by not hiring a CPA until it was too late.  I lost about $13,000 in taxes between two years that I could have saved if I'd made the switch to an s-corp sooner.  But I saved a whopping $200 by not getting a CPA!  Ug.

For all the little "oops" moments in life... there's insurance :-)

For all the little “oops” moments in life… there's insurance 🙂

Step 7: Insurance

You don't need insurance to be a legitimate business, and I'm not aware of any states that require photographers to hold insurance.  However, it can be a smart business decision depending on your situation.

There are two different types of insurance that most photographers should consider: liability insurance and equipment insurance.  Just visit any insurance broker and they can walk you through both of them.

My general take on equipment insurance is not to get it, IF you are in a financial position to buy new gear if yours gets broken or stolen.  For example, if someone broke into my home today and stole my computer, Drobos, laptops, and cameras, it would really stink.  It'd cost a lot of money.  But I'm in a very comfortable financial position and could just go out and buy replacements tomorrow.

However, if I were just starting out my business and the same thing happened–I'd be up a creek.  I wouldn't have the money to replace the equipment necessary for my business, so I'd have to close my doors.  My business would be done with.  So get insurance if this is your situation!

The reason I don't recommend equipment insurance if you have the money to replace your gear is because it'll save you money.  The insurance companies are smart.  They figure out the chances of you losing your gear and the cost of replacement, and then they add some margin in there for them to make money.  By not buying the insurance, you take on the risk yourself so you can keep the margin.  But if you aren't in a good financial position, then get the insurance.

Liability insurance is probably not necessary for most photographers.  It covers a lot of the errors and omissions that could come up in the situations we described above.  However, you have to think about what the real risk is.  If you have an LLC and you mess up someone's wedding photos and get sued, the only amount they can sue you for is the amount your business has.  For most photographers, that's only a few thousand in equipment and retained earnings.  The risk is very low, so don't pay hundreds of dollars a year to transfer that risk to an insurance company.

However, if you have far more substantial income and assets in your business, then business insurance would be an extremely smart move.

contract

Step 8: Everything Goes In Writing!

Never, ever accept a shoot without having a written contract between you and the client.  Also, get a substantial initial payment before you agree to book the shoot.  Noticed how I called it an “initial payment” and not a “deposit” or “downpayment?”  That's very significant.

In most states, if a client contracts with a photographer to do a shoot and pays a deposit, and then the client later cancels the shoot for any reason, they are entitled to get the deposit back.  But if you write in your contract that it is an “initial payment” and specifically say that the payment is to reserve the time slot in your schedule and that you will turn down other clients who try to book the same time slot, then you can keep the money if the wedding gets called off or if the client cancels the shoot.  I love it when shoots are canceled because I get free money 🙂

You'll also need model releases for when you photograph someone and want to use their images to advertise your business, or to sell their images to a company.

The good news is that I'll take care of all the contracts you'll need.  I've already written them for you and I'll sell them to you for just $15.  Yep, just $15 🙂  Download them here.  I spent dozens of hours writing them (I'm an attorney), but I make them really inexpensive because I want every photographer to have access to good contracts.  If you were to come to me as a legal client, I'd charge you $250 PER CONTRACT, and the $15 bundle I'm selling has several contracts in it.  You're welcome.

There is NOTHING you can do in setting up a photography business that will protect you better than having a simple contract with every single client!!!  If you ever have any issue with your photography business, I guarantee the first thing out of your lawyer's mouth will be “Please tell me you had a contract!”  It's such a simple thing to do, and will provide you a lot of peace by knowing you're doing things right.

Maintaining an LLC

Just setting up your LLC is only part of the battle.  If you don't maintain your LLC, it will be worth nothing.  The most important thing you can do is to keep your personal and business finances separate, but we've already discussed that.

The next steps are for more advanced users.  First, you'll want to keep corporate minutes.  Once or twice a year, sit down with your spouse and a Google Doc and just have a meeting about the business.  Write down your plans for the next year, review your financial position, etc.  Some states allow you to file those minutes with the state, but at least take the minutes and keep them.  It makes it look more like a legitimate business.

Next, you'll probably want to file Articles of Organization.  This is the large document that explains exactly what's going on in your business.  This is VITAL if you have a business partner, but still important even if you don't because it makes the business look more legitimate.  You can find cheap and easy forms for doing this on any of the inexpensive legal forms websites.

Last, you have to be clear that your business is an LLC and not a sole proprietorship or you'll be subject to something called “undisclosed principal liability.”  Undisclosed principal liability is where a client does not know that he or she is working with a company, but thinks it is a sole proprietorship and since the company didn't tell the client it was a company, the client can sue the individual business owner personally.

Here's an example of when you'd see that.  You are at a community event and someone comes up to you and starts chatting about their daughter's wedding.  You say you're a photographer and agree to the price and date.  You shoot the wedding and they aren't happy.  They sue you personally.  You say “Wait!  I'm an LLC!  You can't sue me personally!  You can only sue Stolen Moments In Time Photography LLC!”  Since there was never a point in your interaction that you said you were Stolen Moments of Time Photography LLC, they can still sue you personally.

The easiest way to solve undisclosed principal liability issues is to GET A GOOD CONTRACT!  By simply stating it in the contract, you're set!  Also, put on your business cards and on the footer of your website the full legal name with the LLC.  You don't have to put LLC in your logo if you don't want to (it looks ugly).  Just make sure that everyone will see that at some point before they sign the contract, or that they could find that out with reasonable effort.

Conclusion

We've been through a lot of information, but if you just go step-by-step you can have this done in just a few hours.  It really isn't hard.

While all of the things in this article are important to do, NOTHING is as important as simply having a good contract between you and the client.  99% of law suits would never happen if the photographer and the client had a clear contract, and you have no excuse because I wrote all 7 of the most common photography contracts for you and am selling them for just $15.

Your business is set up with all of the legal details perfectly in place.  Now it's time to shoot some pictures!

 

Comments

  1. What a comprehensive and helpful article! Thank you. I know I will be referencing this often.

    1. Author

      @Lori – Glad you enjoyed it! I think this is the longest blog post I’ve ever written. It’s almost an ebook!

  2. Wow Jim, the timing on this post literally couldn’t be better. Thank you! Here are a couple follow up questions, but feel free to say: Get an accountant/lawyer/etc!
    – I’m guessing I’m not alone in this scenario: I may or may not make a profit, but there is some income from my photography hobby. Does setting up a business still make sense? For example, I’m a hobbyist (doing mostly landscape photography), and I sell a few prints here and there. I also get about 1 request/month for a simple portrait sessions (babies, families etc). While I’m not shooting specifically to make a profit (and usually don’t, after the cost of gear/trips/etc!), there is some cash flow. Thoughts?
    – While you suggest using a CPA for more substantial businesses, do you recommend quickbooks or anything else for “small time” photographers?

    1. Author

      @Jordan – I’m not your lawyer, but this is what I’d personally do in that type of situation.

      Get a separate bank account and put all business through that account. Track your miles and reimburse yourself for miles. Take gear purchases from that account. Pay yourself a tiny salary from that account ONLY if you earn more from your shoots than you are spending on photo stuff.

      At the end of the year, use TurboTax and put in the info from that bank account as self-employed “Sole proprietorship” income.

      Done. I wouldn’t even worry with keeping a quickbooks account or anything unless you’re starting to earn over $10k per year. Since everything is going through that separate business account, it’d be easy to put together an accounting of what happened in a year later (if you get audited).

      1. Thanks again Jim. Great, great, great info. One more follow-up: Just to be clear, in your scenario, would you suggest doing this (“Get a separate bank account and put all business…” etc) after registering for a DBA and getting an EIN etc., or is all that relatively unnecessary for this type scenario?

        Definitely won’t consider you my lawyer, but this is the perfect jumping off for my own continued research!

      2. Jim
        Thanks for this insightful and easy to read article. I have been “on the ledge” the past few years as to how to best account for my photography earnings. I earn about $2000 to $4000 a year on selling a print or note cards here and there.

        I have never tracked expenses, but I have tried to pay tax and got burned by doing it wrong. Perhaps this story can help inform those who make only a few thousand like I do. A couple years ago I made $2000 for a sale (after paying for canvas wrap prints the profit was more like $500). I entered it as MISC income–thinking I was doing the right thing by having this income taxed. The IRS then asked for another couple forms for a self-employed business –which resulted in another check going to the IRS. A couple months later I was asked to send yet another form related to this sale (Uncollected Social Security and Medicare Tax on Wages) with a request to send yet more money to the IRS–with salt in the wound by having to pay more money in interest on this form for the time between April 15 and when I actually sent this last form in.

        In the end I am unsure I made much profit at all.

        I do this as a hobby, but sell some items when people make a request to me. I want to do it correctly, but it always has seemed so complicated. So, thanks again for this article that explains things in a more clear way!

  3. Jim, what are some good insurance companies that specialize in photo insurance? I’ve been looking for a while but don’t even really know what I’m looking for!

  4. Jim, concerning the keeping bank accounts seperation and not using the business account for personal expenses, would there be any difference if your LLC is set up as a pass through?

  5. I think you might want to double check what liability insurance covers. In my policy liability is for damages and/or injuries that are the fault of the business. Someone falls on your steps and breaks an arm, liability covers that.
    My Errors and Omissions insurance covers loss of images, or job performance issues as mentioned above.
    As a small portrait photographer I would operate without E & O, but not without liability.

    1. Author

      @Michelle – If I trip on your broken steps and sue you, YES your homeowner’s policy will likely cover it. But they only cover it up to a certain point. And there is NOTHING keeping the plaintiff from coming after YOU PERSONALLY for whatever they don’t get from insurance.

      If my light stand falls over and hits someone on the head, the LLC does nothing for me. The plaintiff can sue both the LLC AND you individually. Your insurance MAY cover negligence such as that, but it doesn’t mean I can’t go after you individually for anything over and above the insurance.

  6. The part about using your own name, will that work even if it’s Bob’s photos and the guys name is Robert, but has gone by Bob his entire life?

    1. Author

      @Tony – Can’t say that I’ve seen a case with those specific facts, but I would venture a guess that you’d be just fine.

    1. Author

      @Rick – Thank you for saying that! Very nice of you to take the time to say thanks.

  7. Thank you Jim,
    Awesome article, really answered many questions that I’ve had. I have wanted to start putting some of my photos for sale and one day just might. Still a hobby that gives me a good reason to do something productive outside. The whole contract scenarios were quite interesting and probably the reason that I love landscape photography. (Mother nature always looks good and never complains if you don’t get the shot you were hoping for, just keeps giving you more chances to get it right).
    Thanks also for letting all of us pick your brain through the tutorials and other things such as the presets each year, it really helps all of us wannabe photographers.
    Cheers,

  8. How does the IRS prevent hobbyists who want near gear from starting a business that will never be profitable and writing the expenses off as business losses?

    1. Author

      @Paul – If I’m a hobbyist and I make no money from photography, writing off an expense will do nothing for you. Yes, you can write it off, but write it off what? There’s no income. You can’t write off your photo gear against your day job income–only the self-employed income from your photography.

      A write off just means you don’t have to pay tax on as much income because you deduct your expenses from your income before you decide how much tax is owed. And the expenses from your side business don’t count against your ordinary income.

  9. This article could not have come at a better time! I was JUST discussing all of this with my husband a few hours ago, and have been researching not all of this for months! And here it all is, in one simple, easy to understand article. THANK YOU!!

  10. Thank you so much for this article! You have no idea how long I’ve been stuck in one place, overwhelmed & dreading the initial legal set up for my future business! This is exactly the clarity I needed to finally get things moving along! Feeling motivated!

  11. Thank you so much for writing this article…I just did my first paid shoot over the weekend, and this was exactly what I needed to know. Cheers!

  12. Your article prompted me to actually read the laws in my state regarding sales tax. I had heard from a professional photographer that she only has to pay sales tax if a tangible product was delivered. My reading makes me disagree with that.

    “Film developing and photo finishing” are miscellaneous business services that are subject to sales tax in my state. I realize you are not a lawyer in my jurisdiction (and I am a lawyer in my jurisdiction), but I would guess the state tax commission (and a court) would find that post-processing a digital photo is equivalent to photo finishing, and that would mean sales tax should be collected even if delivering only digital files. Your opinion?

    1. Author

      @Tim – If it’s anything like Idaho, you collect sales tax even for digital files.

      Either way, it’s WAY better to collect it than think you have an arguable position and hope you can fight your way through an audit. IRS and state tax commissions are RELENTLESS!

  13. Hi Jim, thanks for another great article. I will be referring to this from time to time. I did have a question, a while ago you did a blog on starting up a website. I cannot seem to find it. Is it still available and if so how can I access it? Thanks for all the great information, love your site and have taken a couple of courses and loved them too.

  14. Jim, thanks for the great article…this is invaluable information and couldn’t come at a better time. I just bought your contracts but I have a quick question. I’m doing a gallery showing for the month of December at a local art gallery. Would you recommend a contract for that type of situation?

    Thanks again!!

    1. Author

      @Torrey Voigt – Most galleries will have a contract that you’ll sign.

      1. Yes Jim, that would make sense. I was thinking along the lines of protecting my assets while in their possession. I’m sure I’ll be protected under their insurance. Thanks!

  15. I am sitting here appalled by the amount of stuff there is. As a college student, I want to start up my photography business legally. Which all of these helped out quite a bit, yet with all this information it makes me a bit scared. Should I hold off on a few years, before jumping into this? Or should I go in head first.

    1. Author

      @Charles – I too am appalled that our government has created such a complicated system for a small business, and with such high taxes. No wonder our economy is struggling!

      But should you wait to start a business? Well, it’s up to you. Do you want to wait years to be self employed, start to build a client base, and set your own hours? Probably not. So the answer to your question is to start with step one and GET GOING!

      I’m so glad I started my business when I did, or else I probably would never have done it.

      1. @Jim Thank you for the response, I shall start with step one. I wish I could visit your workshops, but college is a priority. Do you have your workshops possibly on a stream or video for viewing after it’s been done?

  16. Thank you so much for taking the time to write this article and share your insights, this is very timely for me. Do you have any advice on how would I handle a situation where I am exchanging services instead of money? Thank you.

  17. Thanks so much for this Jim! I just recently started by business( SP with a DBA ) and cannot figure out what to do about opening a business account. Right now I have just a couple hundred dollars that I’ve received in income but much more than that in expenses that I’ve spent in that time, and looking at the next few months all I see are expenses and not income. I’m trying to be responsible about what I spend for this business, but a lot of it i see as worthwhile investments that may take a year or more to pay off since I’m so short on time outside my main job currently for the work that I need to do for photography.

    Should I still start a business bank account if I don’t have enough income to keep up with my expenses? How would I handle depositing my personal money into the business account to cover those expenses, cause I really don’t want that to count as income.

    Thanks so much!

  18. During your first year in business set aside at least twiceas much as you think you’re going to need for taxes. I’m a freelancer myself and I know a lot of freelancers and not a one of us has ever calculated our tax liability correctly the first couple years. Everybody underestimates.

  19. This is one of the last steps for helping me to regard myself as a professional Photographer. I have taken many courses to get where I am but this is definately what I need to close the gap. Thank you.

  20. Thanks for the article. Just finished setting up my business last week after reading this. It made everything simple and easy. Between this and getting the contracts you made this whole process much easier.

  21. I am a hobby photographer at this time. I’m trying to decide On a name and saw if you use your own name you don’t need to worry as much. Could you just use your first name or do you need the last to qualify as ownership?

  22. Or as a piggyback to Robin’s question, can it just be your first and middle name to qualify for ownership?

  23. Hi Jim, I just purchased your package of contracts. Thank you very much, I’ve been looking for such a package…

    My question: do you accept suggestions for amendments to future versions of your contracts? For example, the model release doesn’t include a waiver by a legal guardian for shooting kids (which I do frequently).

    Thanks,
    Tomi

  24. This was extremely helpful, thank you very much for the time you’ve taken to create this article and each form. I have been booked to shoot my first wedding on 6/25/16, and this will be my “To Do” checklist between now and then. Thanks again!

  25. Hi, I just purchased your $10.00 contract package and is it 25 separate contracts in total on 25 pages in total. I received 15 contracts in total. Good info here. How long have you been using these for your business? I like you wording but would also like to add a few additional paragraphs for my own purposes if I read this correctly I am ok to that? I will be starting my portrait business in a month or so and just want to make sure I’m on the right track. Thanks for sharing this.

  26. Question… I live in Virginia but my studio is in Maryland. I have not filed any paperwork yet so I am asking.. Should I file everything in Maryland being that is where my studio and office is or is it OK to just file in VA? Do I just apply sales tax in MD even if its a VA or DC resident? and last.. what about my personal income tax?

    I know I have to do more business research questions but these are just a few that have come up.

    Thanks

  27. Hi Jim,

    Didn’t you make a podcast about this? I looked many times and unfortunately I cannot find it. Would you mind sharing the link for it?

  28. Do all the same steps still need to be taken if you want to do it as a very limited part time business (more so an occasional quick buck to support and expensive hobby) and plan on making less than $5,000 a year?

  29. Valuable discussion , I loved the analysis , Does anyone know if my company might find a sample a form form to complete ?

  30. Hi Jim,
    I am a professional photographer in Connecticut and am interested in doing a Podcast through your Improve Photography affiliation. The concept is a show called “Photography in the Raw” and it would be me and another photographer Bill Morgan.
    We have a sample of a Podcast that I would love for you to hear. I know we need tweaking but think that we could add to your series of Podcasts. You can see my work at http://www.laschphoto.com and Bill Morgan is at http://www.billmorganmedia.com.
    You can reach me at the following:
    Steven Laschever
    Laschphoto
    (860) 953-6617
    info@laschphoto.com
    Facebook at laschphoto

    Thanks and thank you for great listening for many years.
    -Steve

  31. What happens if you make less than $5,000 part-time? Does this need to be filed?

  32. Jim,
    hello, again! I just put a question in the Q&A of your website then I saw the legal aspect here and realized I had read this! haha!! my question is insurance for venues. In New York, on Long Island at least, many venues what to know if the photographer has insurance. It comes up often. So, I am looking into solving this question once and for all.

    How can I insure to please the venue and relax them in the knowledge that I have coverage for my gear, for any falls of my gear on a patron’s head, things like this. I remember a podcast about it but I really just need the answer to this one section of insurance.

    I am sole proprietorship to protect my name as an event photographer, any insight would be helpful,

    thank you and I love the new portrait photography podcast the best!!!

    Lori

  33. Hi, Jim –

    Thank you for this comprehensive guide which I’ll start using immediately.

    What are you suggestions for someone like me who is a artist practicing multiple disciplines (drawing, painting, sculpture, floral installation, etc) who will also be doing freelance photography. I intend to also develop personal projects that are photo art essays for gallery sales and also take paying gigs. I have a business name in mind and want to professionally practice what I do under that name’s umbrella. What do you think about that? Thank you for your time in responding.

  34. Jim,

    I have one question and one correction. The correction is simple enough: the calendar has ticked over to 2016 and the IRS has updated the mileage rate for this year. Effective Jan. 1, 2016 the new rate is $0.54/mile. That drop can be mostly attributed to the lower gas prices. I don’t know if you were planning on updating this article as time goes on but if I get a vote I would say do it! This is a wonderful resource that will remain incredibly useful for years to come.

    My question: Why do you suggest consistent monthly salaries out of an LLC? Does this just help prevent questions from the IRS? Also, I’m assuming payments twice a month is the exact same thing as long as they remain constant.

    The only reason I ask is because I am in the process of helping my wife set up a company (by that I mean I am doing it for her). While we both may end up working under this company eventually, for the time being, she will be the main earner for it and her focus is on weddings (not exclusively but the vast majority). This puts most of the company earnings in a 7-8 month section of the year so if I set up a constant salary for her, the company account would have to carry a much larger balance during wedding season to essentially stockpile money for her salary during the off season to come out of. I don’t know that there are any major negatives to doing that, but there are definitely no positives for it. Is this something I will just have to live with?

    1. Author

      This article was written in 2015. It was correct when written.

      The consistent payments aren’t really for the IRS. That’s just so that if someone sues you and tries to get to your personal assets, you can show that you treated the business as a business, and not just a shell company for your personal bank account. In a real business, you can’t just take money out whenever you want. The boss would be ticked 🙂 To keep your personal liability, you have to treat a business with the same corporate formalities.

      That’s pretty tough to do with a very seasonal business. But you could set a summer salary and a winter salary or something like that. It’s not written in stone that it must always be the same amount every month no matter what, but that’s probably the easiest way for most people to follow corporate formalities. Just hold a meeting with your wife and write down notes. Set your salary for the year–even if that salary changes by season. Just keep it as consistent and business-like as you’d expect to see in a real business.

  35. Do you have an article where you discuss how to close an LLC or leave one if someone else is keeping the business?

  36. Thanks for the response Jim! That makes sense so I’ll probably just go consistent payments throughout the year.

    Also, I’m not saying the rate wasn’t originally correct for gas. I was really just saying that this article will still be really useful in 2016, 2017, 2018, etc. It may be worthwhile to just update that figure once a year for those who don’t think to go look up this year’s rate.

    Thank you so much for writing this though! It may seem strange since this really has nothing to do with composition, technique, or even gear selection, but this could honestly be the most valuable article I’ve ever read about photography. Keep up the great work!

  37. Thank you so much for this article. I have searched everywhere for information on the basic startup for a business. Unfortunately, I had no luck obtaining any of this information from fellow photographers. It’s like a big secrete. Thank you for letting me know that it’s not as scary as seems.

  38. What a great article! I’ve been so nervous about taking the necessary steps to start my own business but this really helps lay everything out to easily understand. Thanks Jim for putting this together! So glad I came across Improve Photography!

  39. Thank you Jim,
    this is a great article and very helpful to me although I am a beginner photographer just a few months into the whole world of photography it is good to know that if I should ever start a photo business that this information is there and that I can buy your contracts for just $15.00 but I do have a quick question about those contracts… are they copyright free meaning that I can duplicate them over and over again with out paying an additional fee for them? Maybe that is implied but where as I untrained in the business world I thought that I would ask in case someone else needs to know that too. and maybe you spell that out with the contract kit if you do please forgive the question.Thanks Again for this article I really enjoyed it and found it very helpful! one more quick question … is it better to go ahead and eat the expense and go ahead and become an s corp so that you personally protected from having your personal finances are protected?
    Sincerely,
    Tom Sandlin

    1. Author

      Hey Tom. Good question. You can use the contracts as many times as you want in your own business. You just aren’t allowed to sell the contract itself, or give the contract out to other photographers who haven’t bought it. I want you to be free to use the contract as much as you want for as long as you want.

  40. Thanks Jim! I needed this information “dumbed down” for me. Your article really helped clarify a lot. Now…just to figure out how to keep myself organized and what items to bring to my accountant and when is the question! The tax part terrifies me the most.

  41. Hi Jim,
    Thank you so much for providing such great information!

    My wife and I are planning our move to the US from Germany in early 2017 and I really appreciate any help in starting our business there. She is a landscape photographer and I’m an expert in online marketing and we want to run a LLC covering all our services.

    I understand why we should have to pay a consistent monthly salary, but I have still two questions on it:

    – I don’t know how we can pay ourselves every month, so what options are if we need money in our private account and the business has enough? Being self-employed in Germany means I always can take private money from the business account which adds to my personal income
    – How will I be taxed: on the business income, on the personal income I received from my LLC or on both?

    Any help is really appreciated and I’m eager to read all other articles here on your site – and of course I’ll buy the contracts!

    Thank you very much!
    Heinz

  42. Hi Jim,

    Thank for helping us with such as simple contract to use. I just purchase 1 package from from this site but my question is does this contract apply in Australia as well, because I live in Australia and I am just in getting in to photography business. I have register my business name already and I have opened my business account as well. I am also working toward of creating my photography website and Facebook page. Please advise me if I need any other thing that are related with the Australian Government for this business.

    Thanks you

  43. I’m reading your third post when I should be asleep! I just love the info you have, thank you for the advise and I look forward to reading more! I’m a newbie in the photog business but I am having a blast learning and shooting…..I’ve begun to do portraits of people and knew before I hand over images or posted them I needed to research contracts! I see your contract package but photog friends also say I need to give them a copyright release? What is that exactly and do u have an example?
    Lastly any articles on lightroom, for some reason the camera portion has been much easier for me to learn and advance…. I’ve been attempting to shoot in manual since day one and revert to av or auto if I’m not quick enough…. anyway…. lightroom on the other hand overwhelms me haha!
    Thanks again!

  44. Where did my post go? I was waiting for a response but I don’t see it.

    When downloaded right after payment am I able to add my name to the contract? Can I remove items that are not for my small business.

    Also was manditory licenses are there for photographers in Texas? I see photographers do not need o be licensed in this state but there is tax.

    1. Author

      Yes, you can definitely add your name to the contract. It’s in a word doc.

  45. I have a question regarding the bank account issue. Our tax guy recommended we start a small business for tax purposes. So, I have filed for DBA with my county as husband and wife, but as for the separate account; we don’t currently have money coming in; its strictly going out in buy gear and donating time doing pictures for a small company. How can we go about handling the account issue, or do we just not worry about it for now?

  46. I just can’t thank you enough. I WILL be getting the contracts very very soon. This entire article has been a life saver and a huge money saver already. Half of it because you told me the things I DIDN’T need to waste my money on. Your entire website is wonderful. You clearly spend a lot of time helping people with some fantastic knowledge to back you up. Thank you again.

  47. @Jim I’m so glad I found this page. It’s so helpful and resourceful. I’m kind of in the same boat as @Jordan and am just starting out my hobby/business. I’ve had a few requests for shoots, but plan on only doing this part time. Would someone in this position still apply for a DBA, EIN, and set up to pay taxes quarterly? Or is it easier at this point to just include income and do taxes at the end of the year when filing? I’ve found various resources on this, but none of it is clear.

  48. I know I am late reading your article, but this was awesome information. Thank you for taking the time to put of this into print. I have been trying to find really good info to help me start up a part time photography business/hobby and this was perfect. Thanks for offering the releases so cheap! They will be one of the first things I do when I get started.
    I also got a chance to look at some of your photos they were amazing.

  49. Thanks Jim for taking the time to share your experiences along your journey. This is very useful information. Much appreciated!

  50. Thank you for all the advice! I truly had nowhere to begin and now I have a place to start for making my “hobby” legal. Cannot thank you enough.

  51. Hey Jim, I have listened to your podcast for several years and really appreciate it. I know you must have answered the question I have, could you direct me to where you have answered it? Here is the question: I have recently developed a good relationship with a Non-profit that needs photo work, and who like my work. They are asking about my rates, and I don’t know what to tell them. This is a good opportunity to finally start making money on my photography, I really support what they do, how do you decide fair rates?

    Thank you, Alex Newby

  52. how do you protect your work from other people trying to use your images?

  53. Thank you, Jim, for all the wonderful information. If I purchase your contracts, do I need to have an LLC to properly use them or can I use them as a hobbyist (without a separate bank account, etc)?

  54. I think this is the first time I’ve read an informative article all the way through (I’m a millennial, we usually just glance ;)). It was so informative, and I feel inclined to print it and use it as a bible. Thank you!

  55. Thank you so much for this article and the reasonably priced contracts! Other sites want such high prices for contracts that I can’t even afford to have them since my profit margin is like -4 right now. Thanks so much!!

  56. I’m glad to have found this useful article! Thank you!
    One question- If I have clients from two different states, do I need to register the business and pay sales tax and income tax with both states? Do I need to add a foreign qualification for the secondary state?
    Thanks!

  57. Jim,
    Always a great help! I do have a question for you though. Let’s just say I have terrible credit (I really do) life has changed and I have had the photography business on my mind for a long time now. I have researched a lot of what takes to do this in Arizona, do you know what implications bad credit can have on my business? Does an LLC help with that at all? Can creditors potentially come after my business? The whole point of business at all is to become financially sound! That was more than one question. Thanks for your time and energy! You have taught me so much.

  58. Thanks Jim. This information is immensely helpful. I am a hobbyist at the moment but believe that I have reached adequate maturity in my photography to earn some money to support the hobby at least.

  59. Thank You Jim! I am taking a class on being an Entrepreneur and this week it was all about your legal entity. I was really torn about Sole Proprietorship because I didn’t want to make myself vulnerable to losing my house or cars. But I like the idea that I can start out as a Sole Proprietorship then switch to LLC when my business gets going and I am doing more business. Thank You not only helping me decide what to do for my business but also what I need to talk about for my homework. I look forward to the newsletters. Have a blessed day.

  60. Question-How do you record the money it costs to file your LLC with the state on your business account and bookkeeping if you have to pay that BEFORE you can actually go to the bank to set up your business account? Because that $100 or so has already come out of your personal account… just write a check paying yourself back out of your business account once it’s set up?

  61. Hi Jim. I just purchased the contracts (download). Thank you for the blog post and making these available.

    One specific and pertinent reason for my purchase is i’ve been booked for some event shoots coming up. As I’ve browsed the contracts, I don’t necessarily see how they apply as these aren’t wedding (events) but rather large conferences where I’m capturing performers and candids of the organizations members.

    In particular, I want to ensure that my rights to MY use of the images are clear as well as the rights of the client (organization) are spelled out.

    Any suggestions on which might be the best contract and, if necessary, how to modify to cover a non-wedding event?

  62. Thanks for all the info, this is the first helpful article I have been able to find! I have one question, my photography “business” is part time, and I don’t think I make even a grand per year off of it (I do alot of travel and charity work, so I really want to get a business account and write off some stuff). I want to file as a real business because I am in a position where I can finally financially expand, however I work full time with another employer. I have always used Turbotax and I saw you mention it in the comments here…am I able to use a program like TurboTax to file taxes with my soon-to-be business, AS WELL AS the forms my boss will send me? Can I use a program like this to file from two different incomes?

    Thanks!

  63. GREAT ARTICLE! I purchased the contracts and I’m so Glad I did. Anyone thinking about it, it’s worth it!

    just a side note for California people that want to do an LLC, there is a yearly $800 fee. ouch! I learned that the hard way when the bill came on my last business.

  64. As a photographer , I set up a social media site with my business and prices details nothing big time etc ,and I do get in maybe 2-3 sessions a month should I or do I need to make this legal as an official business. And also if I want to advertise or do occasional sale specials (such as specials for mother’s day or holidays) would I need to be a legal business in any of this. I do all types of photography but I do not do this full time . So I’m confused if I need to be legal I put my business out there and do make a little money here and there but I do not want to get in legal trouble.thank you

  65. Wow! Thank you so much for writing this article. I have been thinking about selling my photos for some time now, and have been hesitant because of the tax issue, so thank you, thank you! Your article gave me the answers I have been looking for, and could not find!!

  66. Thank you SO MUCH FOR THIS!! Information this detailed is not easy to come by. I set up an LLC prematurely 3 years ago, thinking it was the right move.. smh. After reading this you confirmed terminating my LLC and creating a Sole Prop for the time being is the right move.. I also never understood the Tax portion of quarterlies. I feel so much better now!

  67. Hi Jim,

    Is it OK to work as a DBA under an existing owned production company LLC or should they be separate?

    Thanks.

  68. Hello Jim,

    Thanks so much for this comprehensive article. I’m printing it out so I can take it all in. Thanks again!

  69. Hi Jim,
    Thank you for the very informative blog post and for the option to purchase contract templates. I purchased them and am very pleased with all of the contracts that you include for $15 (unheard of!). I have been dwelling on finding contracts or attempting to write my own. No more worrying about this! Thanks again!

  70. THANK YOU for this article! SO easy to follow and SO helpful. Seriously THANKS!

  71. Jim, are you saying the photographer collects sales tax from the photographer’s state of residence, or the state the shoot happened in, the state it is being bought in, etc…or where could I find that information?

  72. This information was very helpful!
    I do have a question about personal vs business accounts. My husband purchased quite a bit of photography equipment. Photography has been a hobby until recently. He has been asked to do some weddings this year but we have not set up anything for a business yet. So far we have purchased everything with personal funds. How can we separate this expense for the next tax season or is it too late?

  73. Jim, I wrote you in another section as well but I was wondering if you could answer me on Donations only photography. What if I don’t charge and just say I’ll except donation for my work? I really don’t want a big buisness and all. This is a side thing I do for fun! Should I still have contracts and licenses and all that?

  74. Thanks for writing this article. I’ve been on the fence about making the plunge into a photography business and this info is very helpful. I was wondering, how did you come up with the $56.50 per mile amount for mileage? Is this the standard amount or was this just an example you were using? Sorry if this question is a little silly.

  75. Thank you so much Jim for this article! I really have the confidence to go forth in creating my business now! I’m so excited to get started and I have you to thank!

  76. Thank you so much for his article Jim, it’s incredibly informative and helpful. I’m not in the business of photography (yet) – I’ve just been doing it for fun and posting some my photos on Facebook. Recently 2 people have offered to buy some of my photos which prompted me to wonder if I should develop a logo and “brand” them with “my stamp.” Additionally do I need to create a business/LLC/sole proprietorship in order to sell my photos? I work in the medical field and know nothing about business…but I’m learning. Thanks again for your article!

  77. Thank you for the valuable information. I am only shooting part time right now but as my customer base grows I want to make sure the business follows suit. I purchased your contracts and are a great resource. Do you have a standard
    property release? Not the Real Estate Contract but a property release that could be used for properties such as farms or barns in a landscape photo, etc.

Leave a Comment