It’s definitely not the fun stuff. It pales in comparison to the powerful high that comes from shooting a birth. You love the work, you are building a strong clientele and things are going exactly how you want…you love the power of owning your own business! …until you get a notice from the IRS that you are being audited! Nothing will kill your business joy faster than a hefty penalty for failing to collect and submit sales tax, or not having a license! Setting up your company so that is lawful and legitimate isn’t the most exciting part of our job but it builds a strong foundation to grow your company and makes your work more respectable and sustainable.
When you start taking money from clients for the work you provide is exactly the time when you should also take on the great responsibility of making sure your business is following all the legal requirements for your area.
I’ve compiled a list of things that a photographer should do to be a legal, legitimate business. While the specifics will vary widely from place to place, most of them can be summed up with one sentence:
This is one area where ignorance is not bliss, nor does it work as a legal defense if you get caught.
- Find out if you need a business license. This varies from place to place, but generally business licensing is handled on the city and/or county level. Don’t trust the word of someone on the internet who tells you “In (whatever state or country) you don’t need one.” or “Because my income is hobby income according to the IRS, I don’t need one.” Pick up the phone, call your local city or county government. Describe what you do and ask if you need a license for that. It is your responsibility to check with your local government. If you need one, get one!
- Find out what the sales tax regulations are in your state or province. Again, you’ll need to pick up the phone and make some calls to be sure you have correct info for your area. Some states (like the one where I live) tax both session fees and the prices of product. Others have different rules. Some states require you to have a sales tax license (different from a business license) before you can collect any sales tax from customers. When you travel around to various places of birth, know how you should handle sales tax. (If I am based in Salt Lake County, and do a birth in Summit County, which county’s rate do I pay?) If you’re lucky, your state will have an info sheet for you. For example, here is Indiana’s.
- Report your income and pay income taxes on it. Keep in mind that since you are (probably) set up as self-employed, you’ll be responsible for the regular income tax AND the self-employment tax . The specifics vary by country and also by the type of business you are. Remember the effort to get it right will be much less than the stress and effort of an audit!
- Find out if you need to file a DBA (stands for “Doing Business As”), a Fictitious Name or register your business name. Again, the legalities on this vary from place to place, so you’ll need to find out from a local resource what you need to do. Don’t assume that because it is your real name you are OK. In many places, you can use your real name without registering your business name. Sometimes you can add “Photography” on the end and not need to register, but some places (like PEI, Canada) specify that you can’t use any other words without registering. So find out your local laws! This is something you’ll want to do as soon as you can, because you want to ensure that no one else is using the same name. You also wouldn’t want to invest in a domain name, a logo, printing business cards, etc. only to find out someone else has registered this name out from under you!
- Create sustainable pricing. This is key to making any business work. While you’re not breaking the law if you don’t do this one, you will go out of business. Offering sessions and super discounted rates may get people in the door but will not help you create the reputation you want. You’ll get a reputation as “the cheap one” and that is a tough label to get rid of once you have it. How you price your services is part of your brand identity. Do you want to be known as the discount barn of photographers? This is especially important for birth photography. Long hours, complicated child care situations and the on-call lifestyle deserve fair pay. If you need to build a portfolio, I would suggest working with friends and relatives rather than undercutting professionals that have paved the way. You can read more of my thoughts on pricing here.
- Have a good, legal contract. Working without one is just plain stupid. Even with friends and family. ESPECIALLY with friends and family! If I had a dollar for every time I’d heard a photographer complain about a disagreement with a client that could have been easily resolved with a contract, I could buy a D800!
Good to dos:
- Consider how to structure your business. You can legally operate without creating a business that exists separate from you, but it may not be such a great idea. If you don’t form an official business, there isn’t any legal distinction between your business and you. This means that if you get sued, you could lose what is owned by the business AND your home, car, etc.
- Open a bank account in your business name. Run all finances through the business. This is also an important step in making sure the personal and business are separate. You can put a lot of money and effort into establishing an LLC, but depositing a check from a client into your personal account co-mingles the money and can be used to invalidate that separation. Why go to all the work of creating a business, and then ruin it by paying your electric bill from the business account?
- Insurance! You’ll want insurance to cover the loss/damage of your gear. You’ll also want liability insurance to cover the stuff that could come up. Make sure you have coverage for things like a corrupted card/crashed computer that might make it impossible for you to deliver the photos from this once-in-a-lifetime, no-way-to-reshoot event.
- Get a professional website. One that represents you well, and is not a freebie. A Facebook page can be a great marketing tool, but it is not a replacement for a real web site. Nothing says “Not a real business!” than a URL that includes “wix.com”, “blogspot.com” or “WordPress.com” (And please, please, no music!)
While it can seem overwhelming, there are some great (often free!) resources available for small businesses. If you live in the USA, a great place to start is the Small Business Administration. Don’t try to rationalize yourself out of following the law. It’s not worth it.