Do I Need an LLC for a Photography Business?

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There are many aspects to creating a successful photography business. Your legal structure is one of them. Many photographers start their business as a sole proprietorship. This business structure is the simplest form. The business owner operates their business under their name or registers a DBA “doing business as” business name. There is minimal record keeping. However, the main drawback to a sole proprietorship is that the business owner is personally liable for business debts and lawsuits. A business entity such as a limited liability company (LLC) is a legal entity that separates your personal assets from your business activities.

What Is an LLC?

An LLC is a hybrid business structure that offers the tax flexibility of a sole proprietorship or partnership but provides liability protection similar to a C-corp or S-corp. LLCs are popular business entities because they are easy to set up and maintain, low-cost, and offer many benefits to small business owners.

The business owner of the LLC is the manager-member, or they can appoint someone else as the manager.

Five Advantages of an LLC for a Photography Business

1. Protection of Personal Assets

The primary reason for creating an LLC for your photography business is to protect your personal assets from lawsuits, claims, and debts from your business. If someone were to sue you for a personal injury (i.e., someone fell tripping over your equipment at a wedding), they can only go after your business assets. Your house, money, and personal assets are protected. You do not have personal liability for your business operations.

2. Flexible Tax Structure

Because the LLC is similar to a sole proprietorship for tax purposes, you can include your business income on your personal state and federal income tax returns. By doing this, you avoid double taxation of paying a personal income tax and corporate income tax.

3. Protecting Your Brand

Your business name is your brand and reputation. When you form an LLC, you register your business name with the state. Once you register your business name as an LLC, no one else can use that name. A sole proprietor could reserve the name with the Secretary of State, but they would have to renew periodically. An LLC makes that name yours.

4. Professional Image

When marketing your photography services, having a business name and LLC ending conveys a sense that you have an established business, even if you have a new business. Who would someone have more confidence hiring, Sandra Smith or Amazing Images Photography, LLC? Drafting your photography contracts with your LLC name demonstrates that you are a legal entity.

5. Better Business Management

With an LLC, it is easier to keep your separate business activities from your personal ones. Because your bookkeeping will show only business income and expenses, it will be easier to file your tax returns for your business. You can still include your business income or loss on your personal tax return.

How To Form an LLC for Your Business

Creating an LLC is relatively simple. You file Articles of Organization with your Secretary of State’s office along with a filing fee. In your articles, you list your business name, your business address, and the name and address of the registered agent. You must also complete a Business Owners Information Report (BOIR), which is a new federal requirement.

Five Steps To Take after Forming an LLC

After you form your LLC, you will want to do the following:

1. Draft an Operating Agreement

An operating agreement spells out the rights and responsibilities of the members, how the LLC is managed, and how to share profits and losses. Even if you are a single-member LLC, an operating agreement may be helpful for your business. Some states even require you to have one. There are many templates you can find to model your own operating agreement.

2. Get an Employer Identification Number (EIN)

An EIN is an identification number for your business, similar to a Social Security Number, but for your LLC. You can use this number to open bank and credit card accounts and set up tax accounts. It is easy to apply online for an EIN with the IRS.

3. Open a Business Bank Account

An important step to keep your business finances separate from your personal ones is to set up a bank account in the name of your LLC. Only deposit business income into and pay business expenses from your company account. To open an account, you will need to show the bank your LLC articles of organization or certificate of LLC formation, the LLC’s EIN, and an operating agreement for the LLC.

4. Apply for a Business License

Check to see if your state or local governments require a business license for you to operate a photography business. The business license may be for general services. Your city or town may have other requirements if, for example, you have a photography studio open to the public.

5. Look into Business Insurance

An LLC business structure protects your personal assets. Business insurance provides liability protections for your business. You should check out business liability insurance policies and compare quotes and coverage.

So, if you are looking to protect your personal assets from your expanding portrait or wedding photography business, you want to choose the right legal structure. While a sole proprietorship is simple, you have more advantages with an LLC in terms of liability protection, tax flexibility, brand protection, and a professional image.