What is the Best Business Structure For Your Photography Business?
Everyone dreams of turning their hobby into a career. And if photography is yours, then you’re in luck! The industry is one of the most lucrative business ventures. Those with experience can charge anywhere from $75 to $250 per hour. For those entering the industry, a photography business costs around $10,000 to get it started, which means you need to keep this in mind when working out how much to charge.
But starting your business isn’t as simple as picking up a camera and taking on your first client. You need to register it first. This requires choosing a legal structure. Here are the best business structures for a photography business.
A sole proprietorship is the cheapest and easiest structure to form. After all, you’ll only need the three standard requirements: an employer identification number, local tax registration certificate, and a local permit to sell your photography services. For tax purposes, a sole proprietorship owner and their business are treated as one entity. This means that all profits are listed under your name, allowing you to file all your taxes under “personal income.” Depending on how much you make, this could be anywhere between 10% to 37%. As a new business your tax will likely range between 10% to 15%. Sole proprietors only pay one type of tax, granting them the lowest tax rate in all the structures.
If you’re starting your photography business with another person, then you’re looking at a partnership. In terms of requirements and benefits, sole proprietorships and partnerships share most of them. The key difference is that you split the profits. Both profits go to your personal income, which you’ll have to file taxes for separately. You don’t need a formal agreement to start a partnership, but it helps to draft one so you can set clear boundaries between you and your partner.
Additionally, to be able to claim expenses and reduce taxes, partnerships need to send in form 1065, the US Return of Partnership Income document, every year. This will declare your business’ profits, losses, deductions, and other details.
Finally, there’s a limited liability company (LLC.) While it has more requirements compared to the two structures above, forming an LLC for a photography business will provide you with liability protection. An LLC separates your personal and business assets. If the company goes into court because of a client issue, for instance, you won’t be obligated to use your own money to pay for any fees. Plus, it has all the tax benefits of a corporation without the rigid structure. You can choose to pay yourself on the company payroll, avoiding the hassle of self-employment taxes. To start an LLC, you need all the requirements of a sole proprietorship, with the addition of an operating agreement and a registered agent.
Fees and requirements sometimes differ per state, but the basic benefits are all the same. Therefore, the “best” business structure all depends on who you’re starting your business with, the tax structure you choose, and the business benefits you want to obtain.
Check out our post on the best business ideas for aspiring photographers to discover your niche.