How to start a photography business
Taxing options For Photographers
Contents:
Introduction | Taxes | Business Types | Hobby | Sole Proprietorship | What Is A Write-Off? | The Advantages and Disadvantages of a Sole Proprietorship | Partnership | LLC — Limited Liability Company | Corporation | Double Taxation | Limited Liability | Tax Forms | Sales Tax
“If I make money at photography, do I have to declare it on a tax form?” (Answer: Yes) "If I sell a photo, do I have to start a business?” (Answer: No) "Can I write off my camera?” (Answer: Possibly, If it is a necessary and ordinary expense) |
Disclaimer: I am not a lawyer and this is not legal advice. Use at your own risk. The following is my opinion but it may be wrong, misleading or inaccurate — do not rely on anything written here. Laws vary by province and change over time. If you know of an error, please let me know. If you have a legal question, please consult a lawyer.
Introduction
First of all, congratulations! you’re making money at photography, that’s impressive. Now that you are (to some degree) professional, you get the pleasure of considering one of the two things in life that you can’t avoid: taxes.
Taxes
The one thing all governments are good at doing is funding themselves. So whenever you make some income, the taxman is very keen to know about it.
All income has to be reported, even that $10 from licensing images on a microstock site. But the amount of tax you pay depends upon how you’re operating your business. Presumably, you want to minimize the amount of tax you pay, so you can save money by choosing an optimum business type.
Business Types
The main types of business (in the U.S.) are:
- Hobby: What your work is called when you don’t have an established business.
- Sole Proprietorship: A business owned by a single individual (or a husband and wife who file join income taxes) who receives all profits.
- Partnership: A business owned by two or more persons who are liable as co-owners of the business for profit.
- Limited Liability Company (LLC): A business owned by one of more people who have limited liability. (Not available everywhere.)
- Corporation: A business owned by an independent legal and tax entity which remains intact even If its Officers and Directors change.
Which is best for you? How you structure your business affects:
- How much tax you pay.
- How much expenses you can “write off.”
- How much paperwork you do.
- How much You’ll be exposed should you go bankrupt or get sued.
Simple approaches such as a sole proprietorship and partnership have minimal tax and paperwork involved, but your personal assets are at risk should things go bad. You can protect (or “limit”) your personal assets by forming a separate, “limited” company with a corporation. However, the trade-off is double taxation and more paperwork. (An interesting mix of all three is an LLC.)
For example, I started as a hobby, became a sole proprietor for several years, then incorporated the business as a corporation, to protect my house and family from liability. Most individual photographers operate as sole proprietors, as the taxes and paperwork are easier and there aren’t major assets in photography.
Hobby
You don’t need to officially establish a business. In this case, in tax terms, you operate your photography as a “hobby.” This is how most people start. There’s no additional paperwork required — checks are written direct to you (payable to “Joe Bloggs”) and any income is declared on your personal income tax return, under the line “Other income.” (Consult a tax preparer or tax software for this.)
You can even write-off some expenses, even if they’re more than your income and you make a loss. The expenses must be ordinary and necessary. You report this on Schedule C of a 1040 tax form.
However, if you have more than a few payments — recurring revenue — then you need a business license. For this, you need to establish a sole proprietorship.
Sole Proprietorship
Most photography businesses are “sole proprietorships.” This is where one person (you, on your own) operates for profit. You can have a real business name, a business bank account, and employ people. It’s a great place to start — if you’re unsure which business type is for you, then this is the business type for you.
The laws to start a sole proprietorship depend upon where you live. Being in California, I had to comply with several state, county and city laws.
First, I had to file a “fictitious name.” This is the legal name of the business (anything other than your last name). It’s also known as a trade name or “DBA", for “doing business as.” My business name was “PhotoSecrets Publishing,” so I was “Andrew Hudson DBA PhotoSecrets Publishing.” (You can’t use “Inc.”, “Corp.”, “LLC", those are legal terms for other business types.)
I went to a county building, researched to make sure there was not already another business with that name, then filed some paperwork, paid a small fee, and had to advertise the name in a local paper for three weeks.
Once the name was official, I had to get a city business license (another small fee) and confirm that my business address (my rented condo) was zoned for that type of activity. (I also applied for a state Seller’s Permit/Resale Number, in order to sell books and collect sales tax.)
With the business name official, I could open a separate bank account for the business, and thereby cash checks made payable to “PhotoSecrets Publishing.” Now I was in business.
Come tax time, I used the business bank account to total up my income and expenses (not much and a lot, respectively). Then I filled in an attachment to my 1040 tax form called a Schedule C. (This is a key advantage over a corporation — I was taxed once then, whereas now that I’ve incorporated, I face double taxation).
I made a loss that first year, which was great, because I was able to write-off a new camera and computer and get a refund on my income taxes! (I had worked the first three months of the year in a “real” job with income tax automatically deducted.)
What Is A Write-Off?
A “write-off” is the main financial benefit of starting a business — it allows you to reduce the amount you pay in taxes. You can “write-off” the cost of any ordinary and necessary expenses, such as your camera equipment, travel, telephone, and other business costs. These expenses are deducted from your “gross” income to show a lower “net” income. With a lower “net” income comes lower tax payments.
For example, say you earn $1,000 from photography. As an individual, at an (imaginary) fixed tax-rate of 25%, you’d have to pay $250 in taxes. But with a business, you could deduct the cost of your $800 camera (if the expense was necessary to create the income) to show a net income of $200. ($1,000 — $800=$200.) Now you pay $50 (25% of $200) in taxes rather than $250 — a savings of $200. You can even make a loss and get a tax credit. For example, say your travel costs were $600. That gives you a net loss of $400 ($1,000 — $800 — $600=-$400). Now you get a tax credit of $100 (25% of $400). You can apply that credit against income tax from another job, or against income tax in the future, to reduce your tax bill by $100. (This is only an example — the cost of cameras and other long-lasting equipment may need to be “depreciated” over several years.)
You don’t need to make a profit to get a write-off. You can make a loss as long as your loss is in line with the losses of similiar businesses and you can demonstrate that you’re attempting to make a profit.
Only ordinary and necessary expenses are permitted — you can’t write off a new Mercedes or summer vacation. Consult the IRS and a local tax preparer for more information.
The Advantages Of A Sole Proprietorship
- Simple — This is the easiest business type to establish and file taxes for.
- Single Taxation — you avoid the double taxation of a corporation.
- Sole Ownership — You don’t have to report to or justify youself to anyone else.
The Disadvantages Of A Sole Proprietorship
- Unlimited Exposure — Your personal assets can be seized in a lawsuit and by business creditors.
- Hard To Borrow — A loan for the business is really just a personal loan.
- Sole Ownership — You can’t own the company with a friend or get funding from a partner, and if you die the business may disolve.
For the first one, you need a corporation; for the last one, you can have a partnership.
Partnership
This is similar to a sole proprietorship but with more than one owner. You can get funding from someone else, work with a friend, and divide responsibilities based on your strengths. As with any mix of friendship and money, It’s worthwhile having a written agreement, in case things go sour.
There are two types of partnership: general and limited. With a general partnership, all partners are nominally equal and have their personal assets exposed. With a limited partnership, at least one partner (presumably you, the photographer) has their personal assets exposed but you can get funding from “silent” partners, whose exposure is limited only to the amount they invest in the business. This is good if you have a rich uncle or supporter — someone who is willing to give you money in return for ownership and profit participation, but (understandably) wants to protect their personal assets. Forms need to submitted to identify the exact role and liability of each partner.
Some states allow LLPs — limited liability partnerships — where all partners are protected, but this is more for law firms not photography ventures.
LLC — Limited Liability Company
This is a hybrid sole-proprietorship / partnership / corporation. Permitted in some states, an LLC mixes:
- The taxation advantages of a sole-prorietorship (single taxation and personal tax rates);
- The funding and trust advantages of a partnership (multiple owners are permitted; if you die the business will continue to exist with the other owners); and
- The limited liability of a corporation (your personal assets are protected).
You can have a one-person LLC, so this is a good step up from a sole proprietorship.
Corporation
A corporation is a separate business entity. You can own it outright, or with other shareholders, but the business stands alone. The business can borrow money (as a business loan not a personal loan) and, if the business gets sued or goes bankrupt, your personal assets are separate and protected (mostly — you can still get sued personally for illegal activity).
My business is a corporation (called, since I sell mostly my photo tour books, “Photo Tour Books, Inc.”). I’m the sole shareholder and I fill all the director and officer roles.
The main drawbacks of a corporation are the additional paperwork, costs, and taxation. I have to pay myself from the business, so I mail myself a check and pay all the taxes such as unemployment and medicare (actually I hire a service to do that, so there’s another cost). The business tax paperwork is more complicated than (and in addition to) the personal tax paperwork, so I pay a tax accountant. And then there’s the dreaded double taxation.
Double Taxation
Since a corporation is a separate entity, the business itself is taxed in addition to your personal taxes. For example, when I sell some PhotoSecrets Books, the income goes first to the business — where it is taxed — then to me as a paycheck — where it is taxed again. The same income gets taxed twice!
This double taxation is quite frustrating and a significant reason not to have a corporation. However, due to different tax rates, it can be beneficial for revenues over a certain threshold and in other situations. A local tax attorney could help advise you.
Limited Liability
The great attraction of a corporation for photographers, is the ability to protect your personal assets. Your liability is limited to the assets of the business and you can protect your house, personal car, savings, pension, spouse’s wealth, kids’ inheritance, and other personal wealth.
Every day in business, you risk being sued by someone or losing money and having creditors come after you. With a sole proprietorship and a partnership, you and your business are one and your personal assets are on the line. With a corporation and (in some configurations) an LLC, the business is an entity separate from you. There’s a “corporate veil” between your assets and the business.
However, there are two instances where you are still at risk. If you mix your personal and business activity, money and/or assets, a creditor can show that the corporation is not separate from you and can “pierce the veil” to reach your personal assets. If you do something beyond the scope of the business (such as something illegal), then you can be sued personally.
Tax Forms
As a successful business owner, you’re going to learn all about delightful tax forms. Here’s a primer:
Basic U.S. Federal Tax Forms
- 1040: Form 1040 is the standard personal income tax form. If you’re just starting your photography hobby and have received one or two payments, then You’ll probably declare them on your annual 1040 as “Other Income.”
- Schedule C: If you’re getting multiple or recurring income, want to write-off some expenses, or operating as a sole proprietorship, You’ll need to file an addendum to your 1040 called a Schedule C. This is a tax form for your business, asking for income and expenses in order to calculate your net income or loss, which is carried over as a line item to the 1040.
- 1099: How does the tax man know that you’re operating a business? Because your income is reported by the company paying you. For any payments over $600, payees are required to report the transaction to the IRS on Form 1099-MISC. (For more, read Independent Contractors).
- W-9: To complete a Form 1099, any company paying you over $600 will need you to complete a Form W-9. Whenever I get a new client, they often ask me to sign a W-9 before I can get paid, so I keep a signed form ready to fax to any company that requests it. A W-9 simply asks for your name as declared on your income tax return and your Taxpayer Identification Number (TIN).
- TIN: (Taxpayer Identification Number). If you’re just starting out and operating as a hobby or sole proprietorship with no employees or other complications, then your TIN is your Social Security Number (SSN). An SSN has nine digits, in the form xxx-xx-xxxx.
- EIN: (Employer Identification Number). This is a separate Taxpayer Identification Number required for anything more complicated than a basic sole proprietorship. You’ll need an EIN if you have employees, are a resident alien, or have a partnership, LLC, or corporation. An EID has nine digits, in the form xx-xxxxxxx.
- SS-4: To apply for an EIN, use Form SS-4.
There may be state, city and other forms. For more information, consult the IRS or a local tax accountant/specialist.
Sales Tax
In the U.S., there is no federal sales tax but some states and cities levy it. California, for example, has a sales tax, so — since I operate a business there — I have to collect and pay sales tax on any tangible items I sell within the state. (Books delivered out of state, books sold to a wholesaler, and stock photos delivered electronically are not taxed). I had to get a s eller’s permit and, each year, I fill in a Sales and Use Tax Return with the state Board of Equalization.
Note that sales tax is a tax on the seller, not the buyer, even though (in the U.S., not in Europe) the amount is usually added to the bill. Thus, the onus is on you know about and pay the tax.
Sales tax varies by region — country, state, and even city — so consult local help.
Comments
Reply by Anonymous
December 27, 2017
This was a very helpful post. Thanks.
Reply by Jerod Beeson
December 9, 2016
Thanks for the informative and concisely comprehensive information! I would love any insight you have on my unique situation. My wife is a travel nurse and I am starting an aerial (drone) photography business. Our home is in Oklahoma, but we will be living for about 3 months each in 4 or 5 different states this year. I’m struggling to figure out if I need to apply for an LLC in each state, or acquire a seller’s permit, simply register, pay tax to each state, etc. Any thoughts?
Reply by Jay
October 6, 2016
As a freshly graduated college student with my bachelors in photography, I am eager to make my business legit!
However I am finding all kinds of different things people are saying to do and I am not sure where to start.
I was leaning to an LLC until I read your article which made Sole Prop seem better, however I have a different situation:
I am the only photographer for my business, however I have my BFF as an assistant. I only give her a small portion of profit, but because I pay her do I need to do an LLC?
I see it is an $800 tax fee each year, but I only make less than 8k a year....
so I am confused which would be best?
Thanks for the great article!!
Reply by Andrew Hudson, PhotoSecrets
November 15, 2016
Hi Jay,
Start as a sole proprietorship. This is the easiest and cheapest way to get into business. Do business under your own name, and record your taxable income and expenses on a Schedule C, which is an addendum to a standard 1040 tax return. Your BFF is not an “employee” so you don‘t need to set yourself up as an employer. Just write a check to your BFF for the individual, per-project work she performs as an “independent contractor.”
Good luck!
(Note, I am not an accountant or an attorney, and this is not financial or legal advice.)
Reply by Anonymous
September 27, 2016
Andrew--this was so simple and informative. Thank you for taking the time to share all of your knowledge. Much appreciated!!
Reply by Andrew Hudson, PhotoSecrets
November 15, 2016
Glad you like it. Thanks for the kind words.
Reply by Anonymous
July 11, 2016
Great article, was very helpful.
I’ve been taking pictures just as a hobby and never sold or charged for anything. I’d like to start doing this for income as a business. If I understand this correctly, I am operating as a sole-proprietorship and would register a ficticious name since I go by my first initial last initial Photography, but my FB page is first initial last name photography. I took some photos for athletic pictures last year for some of the athletes as requested by their parents and just gave them digital copies of the pictures. However, if I were to get prints from an online printing company, I would need to charge sales tax correct. Then I would need to just have checks made out to me and keep a portion of that for taxes should I need to pay anything and and report all monies I received as additional income when I file my taxes.
I am also aware that I will need to check about getting a business license and sellers permit for the local city I am in, does that cover state or just the city I reside/do business in?
I just want to make sure I’m doing this right so I don’t get into any kind of trouble, so as long as I report the money and pay any taxes I might owe, I’m good. I live in MO.
Reply by Andrew Hudson, PhotoSecrets
September 2, 2016
Yes, you are doing this right.
Yes, you are operating as a sole proprietorship, and you need to register a fictitious business name for A Lastname Photography. That will allow you to open a business checking account under your business name so you can deposit your checks.
Yes, you need to collect sales tax when selling tangible property such as prints. Yes, to do that you need to get a Sales Tax License. In your state of Missouri (MO) the link is dor.mo.gov/business/sales/. The license is from the state and it also covers the local city your live in (the sale tax rate varies depending upon city — you submit sales tax to the state and they pass a portion to the city).
Good luck!
Reply by JC
April 15, 2016
Hi, great resource!
Thanks so much for all your advice.
Just wondering, did you incorporate as an S Corp or C Corp?
Thanks
JC
Reply by Andrew Hudson, PhotoSecrets
June 7, 2016
An S Corp.
Reply by Anonymous
April 14, 2016
Hi,
Great article. I have a few questions for you. Photography has been my hobby since I got my first camera in 1998. My eye has developed over the years and I am finally ready to start my company on a part-time basis for now. I am looking into starting a sole proprietorship in NY. I have done research on business names and so far the name I want to use is not in the NY State database. I am going to sell my photos online. I plan on creating my photo gallery website. I will frame the photos upon request. Does that fall under a permit to sell/manufacture material? Will I need additional license along with (1) Business License, (2) Sales and Federal Tax Licenses? How do I go about getting my company name patent? I am concerned about the exposure to my personal assets. Is there any business insurance that I can purchase that will protect my personal assets?
Reply by Andrew Hudson, PhotoSecrets
June 7, 2016
Hi.
Congratulations on starting your business.
1. Does that fall under a permit to sell/manufacture material?
Probably yes. Generally sales tax is incurred on tangible property, and prints with frames are tangible property.
2. Will I need additional license...
The two licenses are probably enough. Since you are using a particular business name (that is presumably not your own personal name), you would probably need to get a Fictitious Business Name before getting your business license.
3. How do I go about getting my company name patent?
You cannot patent a company name — a patent is for an invention, not a name. You probably mean trademark. To apply, see USPTO.gov. Note that this costs money and a lawyer is useful, so you probably do not want to do this initially. You can wait a while and get your business name established first.
4. Is there any business insurance that I can purchase that will protect my personal assets?
You could look around for personal insurance, which might offer general liability coverage. However, watch our for exclusions due to business. Talk to an insurance representative for advice. There is probably not a true business insurance available to you, since you are legally not a business. That would require you setting up a separate legal business entity (such as a corporation) which would take time and effort. Contact a local attorney for specific advice.
Reply by Anonymous
February 26, 2016
Good read and definitely helpful.
I have a quick question regarding use of the W-9. I am definitely in the ’hobby’ category right now and will probably be for a long time, but I have a friend who works for a company that wants a photographer for one of their product events (short event, $500) and they asked me if I was interested. They also asked for a W-9 to be filled out. Since I don’t have an actual business and don’t have any more events for this year scheduled at this point when tax time comes around for our family next year will we have to do anything different or just file whatever I get paid under the ‘additional income’ section of the tax return?
Reply by Andrew Hudson, PhotoSecrets
March 14, 2016
Hi.
The W-9 is a standard form. You just supply your name, address and tax ID (your social security number). Companies are required to send a 1099-MISC form for non-employee compensation over $600.
I believe that you do not have to do anything else and just file whatever you get paid as additional income on your tax return.
Reply by Lanea Smith
February 20, 2016
Thanks so much for this post.
Although I still have a lot to look into for my state laws (Colorado) I do plan on using this year as a Hobby. Hopefully by the end of this year I will have a better plan for my business and also be able decide if it can thrive in my town. I have a few questions I would like to ask.
I am in college. I am working towards two certificates in photography. I am using FAFSA and Loans to pay for college and supplies (i.e. camera, Adobe products, and lighting kit) I have also bought a used camera from a pawn shop. I want to do about 15-20 paid shoots this year (low cost like $50-$100) for a little extra income and to see where I stand in a town full of photographers. I would like to know if I need to make this a business with that kind of income or can I just add it to "other" in my personal taxes?
My next question is when I earn my certificates, are any of the costs for school and equipment able to be claimed in my taxes? I also plan on purchasing a building (shed) to make into a studio on the rental property I live at. Is that tax deductible?
I am sure I have a million other questions, so who can I go to locally to get a better explanation for my city, county, and state rules and regulations?
Sincerely, Lanea Smith
Reply by Andrew Hudson, PhotoSecrets
March 14, 2016
Hi Lanea.
1. These are two different things. For reporting business income, you can just add it to your personal taxes. A business license, however, is a separate issue, usually a state law for the “privilege” of conducting business. I do not know if Colorado requires a business license for photography. “Prints are taxable” (source) so you may need a sales tax permit.
2. Reasonable expenses can be claimed on your taxes. This may include your camera equipment and business use of a rented property. School tuition might not be a claimable expense.
3. Consult a local tax attorney for specific information.
Good luck!
Reply by Anonymous
January 27, 2016
Hi, Andrew!
Your post is the most understandable one I’ve read on this, but I’m still a little unsure of how to go about my taxes this year.
I live in California, and this year, I decided to move beyond “hobby” photography to getting paid more for portraits.
I spent almost $4,000 in upgrading equipment/software/website, but only did two shoots (as I started close to the end of the 2015 year, and spent a few months studying and using my new equipment). I did not make a profit for 2014-2015 tax year, so should I file any sort of paperwork? Can I still put my expenses on my taxes for this past tax year? I had no additional income for the tax year, being a stay-at-home mom, with my boyfriend making all of our income.
Reply by Andrew Hudson, PhotoSecrets
January 27, 2016
Hi. Congratulations on getting your two photo shoots!
If your total gross was less than $4,000, and you self-employment was a loss, I believe that you do not have to file a federal return. (Intuit says that a single person under 65 must file if gross income is at least $11,850, or self-employment net income (i.e. profit) was at least $400).
However, you could choose to file a federal tax return, and thereby record your $4,000 in expenses (and business loss), which may get you a tax credit.
Note that I am not an accountant and this is not financial advice. Consult a local tax accountant, or try a tax service such as TurboTax by Intuit.
Reply by Savannah
January 23, 2016
Thank you so much for sharing! This is my first official year of business. I have a question of income tax .. Let’s say I get paid $2000 for a wedding. I take out sales tax, cost of the album to be made, and cost of paying a second shooter -- do I take out income tax on the entirety of the session, or just what I am being paid as profit? Thanks again Andrew!
Savannah
Reply by Andrew Hudson, PhotoSecrets
January 25, 2016
Hi Savannah,
You take income tax out of your profit (your net income,=revenue - expenses).
At tax time in the U.S., a hobby/sole-proprietor photographer will use Schedule C - Profit or Loss From Business (part of a standard 1040 form). You list all your revenue in Part I, and all your expenses in Part II. Then you subtract expenses from revenue to get your Net Profit (or Loss).
On the main 1040 form, this Net Profit (now called Business Income) is added to (or, in the case of a loss, deducted from) any other income (such as wages, pensions, etc.) to make your Total Income. After deductions, this total amount becomes your Taxable Income. You pay income tax on that Taxable Income.
I am not an accountant and this is not financial advice. For specific information, consult a tax accountant.
Reply by Karen Poelmann
October 20, 2015
Great information. I am from the Netherlands and was a professional photographer for 9 yrs there. Since we moved to California I want to continue my business here. Something is unclear to me:
I went to the city hall in Saratoga today and I got my Saratoga business licence tax certificate. I had to fill in the business licence form and they asked me about my photography. I do weddings, family, business headshots, etc. I registred for a sole proprietor but that is stated nowhere? Also I am hesitating about getting my clients over to my house for my IPS (in person sales). They will look at a big screen to order their pics. They asked me if my business manufactured things in the house. No, of course, but I do sell frames, canvases albums etc. (for where I will apply for a sellers permit). Am I doing everything good? And what do I do with my business name? I have to register that as well?
Thanks,
Reply by Andrew Hudson, PhotoSecrets
January 11, 2016
Hi Karen,
Thank you for your comment. I should rewrite this article to answer your questions.
Good job getting your business license.
Sole proprietor: By getting a license under your personal name, you are showing that you are a sole proprietorship (as opposed to a separate business entity). So you do not need to do anything more there.
Manufacturer: Cities like to know if you are manufacturing products on site, but you are not so that is fine.
Sellers permit: This is a state permit. Apply at California State Board of Equalization.
Business name: Without doing anything, you can operate under your own name, and accept checks addressed to you. That is a good way to start. To get a more abstract business name (such as Saratoga Photography), you would need to file for a “fictitious business name” with the city. So you do not need to register for a business name at this time.
Reply by L Wriser
October 14, 2015
Hello, I am a hobby photographer who is interested in shooting events and weddings and offering only digital image transfers as well as a sitting fee. Would I need a business license if it is under my name or only if I had a different name for the photography? In California.
Reply by Andrew Hudson, PhotoSecrets
January 12, 2016
You probably need a business license. In California, each city and/or county has its own rules for a business license, so check the Internet for where you live. I live in San Diego where a business license is required for any form of business.
The name of your business does not affect the business license.
Reply by Anonymous
September 27, 2015
Hi Andrew,
Great article! I want to start a small business like a marketplace for images where user can sell their work to a buyer. How can I get those licensing terms/statements in place for a seller and buyer with a limitations of their usage? For example, a seller once uploads his/her image will not be liable to ask/sue once his image is is market for commercial use. The rules should be upfront for any user before he uploads his image. Also a buyer cannot use an editorial usage image for commercial purpose and vice versa. Guide me if you know something about it. There are sites like Shutterstock, twenty20 who are into such businesses and how do they get these rules in place.
Reply by Andrew Hudson, PhotoSecrets
January 12, 2016
Hi.
This sounds like too big a project to tackle.
There are many legal issues with buying and selling photos. As you note, Shutterstock and others have rules in place, and their terms of use and license agreements are long legal documents. I imagine they get these rules by paying many lawyers!
There are already over 100 microstock companies and I would not recommend jumping into that market.
Reply by Anonymous
September 26, 2015
I was wondering if you had any advice regarding listing partners as part of your business (sole proprietorship). My husband is an engineer and we are wondering what would be better for tax purposes. We assume that having him listed as half the business will result in a greater tax break (refund on his income tax) assuming there will be no profit in the first year. But on the other hand, if he’s not listed, if someone were to sue me, they would only be able to go for half of what we are worth. Or does it not matter whether he is listed as part of the business as we file joint taxes?
Thank you!
Reply by Andrew Hudson, PhotoSecrets
January 12, 2016
Hi.
I am not an accountant and this is not financial advice.
You are probably fine as you are, and likely do not need to do anything.
Currently you are running your business as an extension of your marriage. That is fine. As in your marriage, you are equal partners (and equally liable), and you file your combined income as one, on your joint taxes. It does not matter how you list yourselves, or who does the work between you — everything ends up on the one tax filing.
You are already probably getting the best tax situation (assuming business income <$200k) so stay as you are.
I am not a lawyer but I believe that, if someone were to sue you, they can go after your joint assets since you are married, regardless of any partners listing. If you have significant assets to protect, you could consider forming a separate legal business entity. But that incurs more tax obligations and paperwork and is probably not recommended unless your business really takes off.
For specific advice, contact a local accountant and/or attorney.
Reply by JD
August 31, 2015
Hi Andrew Hudson.
Perfect info which I am looking for. A few questions:
1. Photography is my hobby and I make $3000-4000/year from local events and family portrait. Normally giving ads in Groupon to get customers.
In this case, do I have to make Sole Proprietorship company? Can I just mention this extra income along with my regular job income tax? If yes, can I show expense which I made for photography like camera, lights, computer. etc. in my regular income tax? or I have to have company first?
Thanks,
Jd
Reply by Andrew Hudson, PhotoSecrets
January 12, 2016
Hi JD,
My apologies that my article was unclear, I should rewrite it.
You are fine. For tax purposes you already are a sole proprietorship, as you are making regular money under your own name. So yes, you just declare your income on your personal tax forms, and deduct any reasonable business expenses such as a camera, lights, computer, etc. The U.S. federal tax return has a Schedule C to declare personal business income and expenses.
Reply by Monica
August 26, 2015
Thank you for this awesome article!
I’ve read your article and almost all the questions and answers and I think now I understand how to start a business in photography but I still have few questions:
- we moved to SD, CA about a year ago and my understanding that i have to pay $52 to fill out a business license which is the same thing as business tax form, is that correct?
- I noticed that people are becoming worse at trying to earn money that they don’t deserve by suing people, so I was thinking of filling an LLC to protect my family income/assets and such. Would that be considered crazy especially since that I don’t think I’ll make more than $1,000 this year?
- I went on the SD city website and they showed too many permits under LLC (do you know which ones I should fill?
- we already have someone that does the taxes for our household, would they charge way more (> $200) to file an LLC?
- people mentioned charging sales tax and you said that in CA we’ve to charge on any tangible item we sell, do you know how? Is there a certain formula to be used? A form? What if I sell a photo album as part of a wedding package, do I still need to charge sale tax?
- if I had my business as a hobby, would I still be able to write a contract?
- is it a problem that I started my photography Facebook page several years ago without having filled any license permit (in a different state) and didn’t really make money out of this hobby then?
Thank You so much,
Monica
Reply by Andrew Hudson, PhotoSecrets
January 12, 2016
Hi Monica. Thanks for your seven questions!
1. Yes, a business license is also known as a business tax form or business tax certificate.
2. Yes, that would be considered crazy. Just don’t do things that people would want to sue you over. An LLC can shield your personal assets by making your business a separate legal entity, but it requires more paperwork and money. When starting a one-person photography business, it is not typically not worth the extra hassle and expense of forming an LLC. Consult an accountant for specific advice.
3. See above. You don’t need to start with an LLC, so just get a personal business license. For San Diego, make a customer account then start your Business Tax Online Application.
4. Yes, see above. Setting up an LLC and doing annual taxes could cost > $1,000.
5. In California, sales tax is done by the state. You will need a “seller’s permit” which you can get from the California State Board of Equalization.
5b. The formula for sales tax depends upon where the sale occurs. See California City and County Sales and Use Tax Rates. Once a year (in July) you submit an online form showing your sales and taxes.
5c: Yes a form. Online. At BOE.ca.gov.
5d: Yes. I believe that, a package that includes anything tangible is taxable.
6. Yes. The contract is between you (as a person) and your client.
7. No. Cities don’t care about Facebook, they just care about money!
Note that I am not a lawyer or an accountant and this is not legal or financial advice. Consult an accountant for specific advice.
Reply by Sommerlilja
August 25, 2015
Hi Andrew,
Currently I am attending school at the Art Institute for Photography. I have done photo shoots for people (friends and family) but I did not charge them. It was more of a learning process for me. I have created a FB business site with my last name and photography because I do want to earn some extra $$ once I get more clients. How do I go about registering my photography name. I am from ND btw.
Reply by Andrew Hudson, PhotoSecrets
January 12, 2016
Hi.
Congratulations on a great start.
You are fine as you are, you do not need to register a photography name. You can run your business as you, and get checks paid to you.
You can register a name if you want to.
Facebook: If you want to register a business name on Facebook, you can set up another account with your desired company name (if it is available). Get 25 likes then you can have www.facebook.com/YourBusinessName. This is free.
Domain: You can buy a domain name. Go to a website hosting company such as GoDaddy.com and pick an available name. Domains typically go for $10 per year.
Bank account: This requires a few steps. An abstract business name such as “Great ND Photography” is called a “fictitious business name”. First, depending upon your city/county/state, you probably have to register that name. This may require posting a notice in a local newspaper. Once the name is registered, you can take the paperwork to a bank and get a business bank account under that name. Then you can accept and make payments under your business name.
Reply by Anonymous
August 5, 2015
Very informative...thank you.
Also, thank you for those you asked questions...I learned a lot!
Reply by Anonymous
August 4, 2015
Great Article. Helped me a lot. I am just starting out. I am only taking a session a month or so. I have a wedding next year. From what you have answered above, it seems I can do this as a hobby on my taxes since it’s an on the side once in a while thing. Checks are written out to me. I do have a contract though that has my first name and last initial with photography at the end just to cover myself. Should I put in for a sole proprietorship? Can I keep doing what I am doing? I am in Pennsylvania. I just saw that I should be charging sales tax. I think anyway. Do I get a license then? Do I have to pay for that? Would I still be charging a sales tax being that I am filing this as a hobby?
Reply by Andrew Hudson, PhotoSecrets
January 13, 2016
Should I put in for a sole proprietorship? No. You already are a sole proprietorship, there is no paperwork.
Can I keep doing what I am doing? Yes.
Do I get a license then? Yes. You can apply online at PABizOnline.com.
Do I have to pay for that? I do not know but it seems to be free.
Would I still be charging a sales tax being that I am filing this as a hobby? Yes. Government wants their money!
Reply by Anonymous
June 29, 2015
Plenty of information but I still have a couple questions. My boyfriend and I were asked to take photos at a wedding for a relative, which eventually led us to the idea of making our own little business. We have been taking photos as a hobby for about a year and a half but never thought of selling our photos or having a business, until now. We are not thinking about making the business big or anything, just the two of us. Small and keeping it simple. Before we start handing out business cards or selling our photos what are the first steps that we should do before doing anything else? Do you recommend opeing a business account? Anything would be greatly appreciated. Oh and I live in LA County (CA) and my boyfriend lives in San Bernardino County (CA). Would that make a difference in anything, since we live in different areas?????
Reply by Andrew Hudson, PhotoSecrets
January 13, 2016
I am not a lawyer or accountant and this is not legal or financial advice.
Talk to an accountant. It may be best to be separate, for example, one takes a job and hires the other as a subcontractor. This would probably simplify your taxes and responsibilities (you could file income taxes on a personal filing). A true partnership may require creating a separate legal entity, which would be unnecessarily complicated and expensive at this time.
1. Business license. This applies for each of you. See if the city you live in requires a business license.
“Nearly all businesses doing business in the City of Los Angeles must register with the Office of Finance. Most new businesses are exempt from paying business taxes for the first three years of operation (although the business owner still must register with the Office of Finance).”
— The City of Los Angeles
2. Partnership agreement
In case your business grows more than your relationship, make a simple, written understanding of your arrangement and how you can end it. E.g., “We agree that all costs and revenues are split 50/50, and either party can dissolve the business at any time in which case balances must be paid within 30 days.” I just made that up. Something to state your expectations is a good idea.
3. Seller’ permit.
This allows you to sell tangible property (such as prints, CDs), and collect sales tax. See California State Board of Equalization.
4. Bank account.
Talk to your bank and see if you can get a joint account. Make sure all the money flows in and out of that account. E.g., if you buy a camera, write a check from you to the joint account, then buy the camera from the joint account. That way, each of you can see what is happening money-wise. A good way to maintain a relationship is to avoid distrust over money.
Talk to an accountant and/or an attorney for specific advice.
Reply by Dene' Cobb
June 8, 2015
Such a great article! Taxes and Business are so confusing to me though. I live in Oregon, I just started doing Wedding Photography this year (5 clients so, less than 2,000 in income- all which went into new equipment, etc) I’m wanting to turn it into a thriving business but my issue is #1- all business bank accounts require 5,000 to open, which I have $100 to my business name at the moment, lol. My second issue is if I can’t open a business bank account, than is it just a hobby? I do believe in Oregon there are no business licenses or permits required for a Photographer and I do business under my Real Name, so I don’t need a DBA. Any advice you can give would be so greatly appreciated! - Dene’ Cobb
Reply by Andrew Hudson, PhotoSecrets
June 9, 2015
Hi Dene’,
I doubt that “all business bank accounts require 5,000 to open.” My bank in California seems to be very keen to open new accounts, and I think they’ll take $100 as the first deposit. Moreover, you don’t need a business account if you are doing business under your real name, as you can deposit checks into your personal account.
“Hobby” is just a tax term, to describe a business that is part of your personal taxes.
My advice would be to stop being worried about the “business bank account” and “hobby” issues as they do not affect you. Continue with your wedding photography — that seems to be going well.
Note that I am not a lawyer or accountant and this is not legal or financial advice. Contact a local attorney or accountant for specific information.
Best wishes,
Andrew
Reply by Joan Olga
May 7, 2015
Hi Andrew! I am in CA. I have just started photography as a hobby...a few people are wanting to book sessions with me and I am going to charge them. (Nothing crazy $$) I don’t know how to go about this at all. Do I need all these licenses and DBA, etc. I am so confused! I am just doing this to earn a couple bucks and trying to keep it as simple as possible. Look forward to hearing from you!
Reply by Andrew Hudson, PhotoSecrets
May 19, 2015
Hi Joan,
Congratulations!
Probably yes for license, and probably no for DBA.
For a license, check with your city/county. In San Diego, for example, a business license (called a certificate) is required to conduct business.
All businesses operating in the City of San Diego are required to obtain a Business Tax Certificate. This includes home-based Businesses.
San Diego County
A DBA is not required if you are taking money under your own name — if clients pay you in cash or by check payable to “Joan Olga”. A “Doing Business As” (DBA) (also known as a FBN for Fictitious Business Name) is for non-personal names such as “Great California Shots” which is probably not the case for you.
Reply by Anonymous
March 15, 2015
Great article - and so easy to understand! I’ve been a family photog (I give a CD) for a few years. I’ve never registered my business, but I’ve always used an accountant to report and pay for all my taxes. Do I still need to register with my state? Also, my photog name is my last name with photography added to it. I bought the name online, will they allow me to keep it if I need to register and become a business? Thanks so much for all your help!
Reply by Andrew Hudson, PhotoSecrets
May 29, 2015
Registering a business is a local issue. Ask your accountant. Or go online and see if your city or county requires a business license. If so, it’s likely to be a simple application with a low annual fee. You can still keep the domain name.
For state tax purposes, your accountant is presumably declaring your business as a “hobby” as part of your personal taxes. That is fine and recommended -- there is no requirement to declare your personal business as a separate business entity.
Reply by Anonymous
February 26, 2015
I have just recently started taking portrait photography in my area. Mainly going to communities and centers. I only do a couple sessions a month and making very little income from this venture. I do not file taxes as my only other income is social security. Do I need a business license for every city, town, county that I photograph in?
Reply by Andrew Hudson, PhotoSecrets
March 6, 2015
Hi,
There are two issues here: business license, and taxes.
Business license: This depends upon where you live. Some cities/counties require a business license and others do not. Do an online search for your city/state.
Taxes: Income from photography is like most other types of income — the government wants a slice. In the U.S., you will probably need to file a federal tax return if you are “self-employed with earnings of more than $400.”
Best wishes,
Andrew
Reply by Anonymous
February 23, 2015
Thinking about selling photos as a hobby. You say this can be done if you have only a few payments. What is a few? What is the cutoff number before you need to get a business license. Thank you!
Reply by Andrew Hudson, PhotoSecrets
March 6, 2015
Hi,
A business license depends upon where you live. Some cities/counties require a business license and others do not. Do an online search for your city/state. Where I live, in San Diego, a business license is required; but in Texas for example a business license is not required.
There is usually not a revenue cut-off — if a business license is required it is usually required for all businesses regardless of income.
Reply by Anonymous
February 23, 2015
I do photography for local youth sports leagues. I don’t make a lot but would say around 3000 a year. Can I just claim this on my 1040 at the end of the year or do I need to go another route?
Reply by Andrew Hudson, PhotoSecrets
March 6, 2015
Yes. Income from a photography hobby can generally be reported on a 1040, possibly using a Schedule C for business income.
Reply by Anonymous
February 11, 2015
Hi Andrew, nice to stumbled into this article.
I have a question, I run 2 business, 1 is photography, the other one is buy and selling goods on ebay.
Can I combined both together as Sole P. or do I need to make 2 separate filling?
Reply by Andrew Hudson, PhotoSecrets
March 6, 2015
Hi,
If you do both things under your own name, you can combine both as a hobby/sole-proprietorship and file one 1040 federal tax return, with your business income listed on a Schedule C.
Reply by Anonymous
February 6, 2015
Hi There! Great! Article! I have a couple questions though. I’m planning to move from hobby to sole proprietorship in California. I will register my DBA and will be primarily doing family and portrait type shoots at clients homes and other sites (ie. no studio or business location). The fee will include the session and digital images, no prints or products for now. Do I need a business license for this type of thing? How about sales tax?
Any advice is appreciated!!
Reply by Andrew Hudson, PhotoSecrets
March 6, 2015
Hi,
Business license: This depends on where you live. Some cities in California require a business license, but some unincorporated areas do not. Do an online search for your city/county. A business license is not expensive: in San Diego the cost is currently $52 per year.
Sales tax: You need a seller’s permit for California if you sell tangible property, including digital images on a tangible medium such as a CD or flash memory. If you ONLY provide photographs over the Internet, then you do not need a seller’s permit.
“Charges for photographs you electronically transfer to your customers’ computers by modem or direct download are generally not taxable. However, if you also provide the customer with a physical copy of the photograph such as a print transparency or an electronic copy on a digital storage medium (yours or the customer’s), your entire sale is taxable.”
— CA Pub 68 (sales tax for photographers in California)
“If you do a photo shoot for a customer but the only product you provide is an electronically transferred digital image, your [service] charges would not be taxable.”
— CA Pub 68 (sales tax for photographers in California)
Reply by Anonymous
January 28, 2015
Hi Andrew.
The problem I am having is a little different. I am a resident of Texas but currently live in another state due to my husband being in the military. We will keep Texas our home state because that is where we plan to live after the military life is over. Do I need to obtain a sole proprietorship in each state? I’m looking for a way to be able to hold sessions in both states but still be legal.
Reply by Andrew Hudson, PhotoSecrets
January 29, 2015
Hi Texas-bound,
You don’t need to “obtain” a sole proprietorship, you just start conducting business and (unless you set up some other business structure) you are automatically a sole proprietorship. Taxes for a sole proprietorship get filed on your personal taxes (using an additional form, Schedule C for U.S. federal taxes).
If you will be using your own name for the business, and not selling services or tangible products, then I believe you do not need to file anything in Texas.
If you want to use a name other than your own (e.g. “Best Photography”), then you will need to record that with the city/county using a DBA (“doing business as”; called in Texas “Assumed Name”). You can do that online for a nominal fee.
If you will be conducting regular business in Texas and selling services and/or tangible products (such as prints), then you will need a Sales Tax Permit. You can do that online here.
For the state you currently live in, do an online search for “seller‘s permit” in your state, and “business license” in your city/county.
This is not legal advice; I am not a lawyer or accountant; contact a local professional for specific advice.
Good luck,
Andrew
Reply by Anonymous
January 23, 2015
Hi Andrew
I have an LLC but haven’t done worked under it yet. I am employed freelance made maybe $1000 under legal name and SS#. I think I will get 1099. Should I be doing this freelance under LLC? Also bought a lot of equipment, can I claim it and under what title LLC or personal?
Reply by Andrew Hudson, PhotoSecrets
January 27, 2015
Hi,
Do you really have an LLC? What you describe can be more simply done as a sole proprietorship. An LLC is a separate legal entity, and makes taxes more complex. If you set up an LLC for a photography business, then your photography work should be filed under the LLC, and profits from the LLC then flow into your personal tax return. Consult a local accountant to understand if and why you have an LLC and what role it plays here.
Best wishes,
Andrew
Reply by Anonymous
January 19, 2015
I ran my photography business for 10+ years (sole proprietorship). I moved out of state the end of 2013. I filed fed taxes for 2013 - schedule C. As I suspected, I did not continue the business in my new state. Instead I took a new job working for a company. Therefore no income or expenses for my photo business in 2014. Do I have to file anything to indicate it’s closed? I know I have to report as closed to the state to end sales tax filings. What about federal notices? Thanks
Reply by Andrew Hudson, PhotoSecrets
January 27, 2015
Hi,
No. As a sole proprietorship, you generally do not have to file anything with the IRS to indicate that the business is closed. The business was revenue, and now it isn’t, end of story.
It sounds like you did not have a local business license. But if you did, then when you get the annual bill, just write back that the business is closed.
For specific advice, consult a local accountant and/or attorney.
Best wishes,
Andrew
Reply by Anonymous
January 16, 2015
I’m just starting my own photography business need help on how to get it started. I’m the only one taking photos no one else will be.
Reply by Angel
January 12, 2015
Starting a freelance business in Texas.
Do I need a license, permit, or complete an assumed name form?
Do i need an EIN number if i’m acting as a sole proprietor?
If i only give them the digital files and no physical prints, do i need to charge sales tax?
How much does an LLC cost compared to a sole proprietorship?
If i go to different cities (and don’t have a physical business location) to take pictures for individuals, do i need to have a permit in each city or state that i go to?
Reply by Andrew Hudson, PhotoSecrets
January 27, 2015
Hi Angel,
Good questions. Note that I am not a lawyer or accountant and this is not legal advice.
1. License.
I believe that Texas does not require a business license/permit for a simple sole proprietorship. There may be local restrictions — check with your city and county.
An Assumed Business Name (known generally as a “DBA” name for “doing business as”) is not required in Texas for a sole proprietorship if you are using your own name for the business. For example, if customers pay you by writing a check to your name, e.g. “Bob Smith”. If however you want a more abstract name (e.g. “Texas Photos”) then you would need to register the DBA name with the County Clerk’s office.
2. EIN.
No, as a sole proprietorship, you don’t need an EIN. An Employer Identification Number is needed if you set up your business as a separate legal entity — such as a corporation, which can employ people. In this case you’d file two sets of taxes: a personal set under your Social Security number, and a business set under the Employer Identification Number. But in your case, as a sole proprietorship, your business is part of you and gets filed as part of your personal taxes.
3. Sales tax on digital prints.
No, you do not need to charge sales tax on digital files. Sales tax is a state issue, and in Texas it is for “tangible” property (such as physical prints), but not non-tangible property such as digital files. However, you do need to charge sales tax for “taxable services”, and taking pictures of individuals is probably a taxable service. The application is simple and can be done online.
4. An LLC costs significantly more. DonÆt go this route unless you have a specific reasons to do so. In California (I don’t know about Texas), a corporation has to pay a minimum tax of $800 per year, even if the business made no money (or a loss). And the added complexity of an LLC can lead you to hire an accountant to do the taxes, so that could be another $800. In contrast, the taxes for a sole proprietorship can be a simple matter of recording revenue and expenses on a form, which you could conceivably do yourself.
5. Generally, states don’t require business permits for visiting location photographers if the business is infrequent and not regular or permanent.
For specific advice, contact a local accountant and/or attorney.
Good luck,
Andrew
Reply by Anonymous
December 13, 2014
What kind of permits/licenses would you need to open a photography business?
Reply by Andrew Hudson, PhotoSecrets
January 26, 2015
Hi,
Permits/licenses are a local issue, so do an online search for your city/county/state about business licenses. Many urban places require a business license for any form of business, but it’s usually easy to request and a nominal annual fee. For stock photography, that’s probably all you need.
If you are doing studio photography and having people come round your house/studio, you may need zoning approval for that. If you are going to sell (or resell) tangible products, you may need a seller’s permit/license, possibly from the state, as they want to collect sales tax. This depends upon where you live.
You can usually learn about and get these things online yourself, but for more information talk to a local accountant.
Good luck!
Andrew
Reply by Julie Ann
December 10, 2014
Hi,
I just registered as an LLC and have questions regarding taxes. Since its the last month of 2014, can I write off any gear purchased this year (camera body, lens, etc) even if I didnt make any money because its so late in the year? Would they be considered start up costs? or do I wait until 2015 to claim them?
Oh, and can I file my business portion of the taxes with our household taxes? I file jointly with my spouse.
Thanks!
Reply by Andrew Hudson, PhotoSecrets
January 26, 2015
Hi Jule Ann,
Yes and yes. You can generally deduct any reasonable business expenses even if you didn’t make any money. And you can probably file those expenses on a Schedule C with your household taxes. Since you have an LLC, you may have to file separate taxes for the LLC business, so talk with an accountant to make the best decision.
Best wishes,
Andrew
Reply by Anonymous
December 2, 2014
Hi, this has been very helpful. I have been doing photography for about 8 yrs. trained and certified with sears. I decided to get back serious about it and freelanced for a company this summer. When my contract was up I decided to venture on my own. A local photographer noticed my photos and asked me to join her business as a partner. I have always admired her work so I am thrilled and honored to join her. However, I agreed to a trial basis to see how well we work together. I am noticing some tweeks that need to happen professionally. That will be simple. but don’t know what steps to make as far as partner wise. Do I need to be brought on with a 1099 or do we need file as a partnership, llc, or? Should we be charging sales tax off the prints we sell? Her sitting fee is $35 wich I believe is majorly undercutting herself and her worth. We have sold about $500 in prints alone in a 5 day period and have charged no tax? Is this legal? And won’t we be taxed on that? Also what is the percentage of profit that should be put back into the company before we get paid? There are so many factors and small details even down to keeping track of the sales and books that have been set aside due to her business taking off faster than she can handle. That is why she reached out for help. I know all these questions don’t go along the lines of this article but some advice on this matter before I dive in would be great! Also since I have came on at the end of the year (last week of nov.) should I claim to be freelancing for her? This ofcourse would be for both of our tax purpose? Does that make sense?
Reply by Andrew Hudson, PhotoSecrets
December 4, 2014
Hi,
Congratulations on making money from photography!
You should talk with an accountant. There are many issues here and you don’t want to ruin a good thing. A local accountant can create a business entity and advise on tax matters.
1. Do I need to be brought on with a 1099 or do we need file as a partnership, llc, or?
You need some business arrangement. Since this is a trial, you could start as an independent contractor to her business. (She hires you for certain jobs). That is the easiest approach, as you can file under your personal taxes and she does not have to change her business structure. For an equal arrangement, you would have to set up a partnership, but that involves paperwork. Consult an accountant, as you should have a written understanding of what happens if things go south.
2. Should we be charging sales tax off the prints we sell?
Probably. Sales tax is a local city/county/state issue, so see what your locale requires. For example, in California, sales tax is required for tangible items, such as prints.
3. We ... have charged no tax. Is this legal? And won’t we be taxed on that?
Yes and yes. If your area has sales tax, then the business is responsible for paying the tax, regardless of whether the customer was charged the tax. (Sales tax is for the privilege of selling).
4. What is the percentage of profit that should be put back into the company before we get paid?
That is up to the business owner. (Absent a partnership agreement, that is her and not you).
5. Should I claim to be freelancing for her? This of course would be for both of our tax purpose?
You are freelancing for her. Absent a partnership agreement, you are an individual working with a business entity, so you file your own taxes. But things can get complicated quickly (are you an employee? are you liable for debts or that sales tax?). You really need an accountant.
Hope you strike gold in 2015!
Reply by Chelsea
November 18, 2014
I just started a photography business, I’ve been doing as a hobby for years. I have a business license and everything but I haven’t been actively using it. Do I still have to file taxes even though I haven’t made anything this year?
Reply by Andrew Hudson, PhotoSecrets
November 19, 2014
Hi Chelsea,
A hobby business gets filed under your personal taxes (as additional income, possibly in Schedule C). You always have to file personal taxes, but if you did not make any revenue then there is nothing to declare as additional income.
Ask an accountant for specific advice.
Andrew
Reply by John
November 3, 2014
Hi Andrew, thank you for such great information. I am a retired police officer and recently retired teacher. I received a retirement and have always dreamed of having a photography business. Do I start my LLC first along with business accounts prior to purchasing my professional equipment?
Thanks so much.
John
Reply by Andrew Hudson, PhotoSecrets
November 3, 2014
Hi John,
Congratulations on a lifetime of public service!
No, you can buy your equipment now, before registering your business. An LLC is probably too advanced for you at this stage (advanced meaning complicated and expensive!); start with a simple sole-proprietorship business. Talk to an accountant for advice.
Check the website of the city/county/state you live in, to see what requirements there are for starting a business. They may want you to register your business before you conduct work. But you area probably safe to prepare beforehand, by buying equipment and researching the market. Save your receipts for tax time, as you may be able to deduct “reasonable” business expenses from your federal and/or state tax returns.
Good luck,
Andrew
Reply by Anonymous
October 8, 2014
Hi there! I’m making some money with photography, but not a lot (maybe $3000 in a year).
Can I just report the money earned, and not have a business license? Or do I still need a business license, even if I don’t make a lot?
Thanks.
Reply by Andrew Hudson, PhotoSecrets
October 9, 2014
Hi,
Business tax and business license sound like they should be related, but they’re not, they are independent of each other.
The tax people want a percentage of your income, but do not care if you have a business license. The license people don’t care about your income, they want an annual fee to know what’s going on in their area.
Depending on where you live, your state/county/city may require a business license, regardless of income. It’s usually a nominal amount, say $20 to $40 per year, and you might get a little certificate in return.
Do an online search for “business license <your city/county/state>” and see what is required.
Best wishes,
Andrew
Reply by David Matheson
September 30, 2014
Does a small business photography still need to pay taxes?
Reply by Andrew Hudson, PhotoSecrets
October 8, 2014
Hi David,
Yes. Unfortunately, the only things we cannot avoid are death and taxes.
If you have revenue, that should be declared on federal and state tax forms. Your locality may require a business license, a seller’s permit, and sales tax.
Andrew
Reply by Enq
September 29, 2014
How does one make money off photography?
I am thinking of starting my own business and taking an intro to business class, but I am not sure in what, exactly.
Reply by Andrew Hudson, PhotoSecrets
October 8, 2014
Hi,
The easiest way to make money off photography is microstock. Sign up with Shutterstock, Dreamstime, or Fotolia and submit some photos. In one day, you could be “in business”, without needing a class!
Andrew
Reply by Julie Schiller
September 18, 2014
A friend and I are considering starting a photography business together. So we would be a partnership. Both equal work and pay. Would we need a business license? Would we need a sellers permit? We don’t ever want to be a full fledged corporation. We would like to keep it as simple as possible and do it part time on the side of our current part time job. What would you recommend? Any advice? We live in TN.
Reply by Andrew Hudson, PhotoSecrets
October 8, 2014
Hi Julie,
Congratulations on choosing to start a business!
You are mixing two issues here: business license/permits and business type.
Regardless of who owns the business (one person, two people, a corporation, etc.), the business will need a business license. This is for the state of Tennessee; a second business license is required if the county/city has a business tax. Fees for business licenses are usually low (nominal), maybe $15 in TN. The business will also need a seller‘s permit (sales tax registration), to collect and remit sales tax annually.
As for the business type, anything more than one person needs some additional paperwork. As two people operating on a small scale, you can be a “partnership”, which is one rung up the business ladder from “sole proprietorship.” You will need to:
Good luck!
Andrew
Reply by Sandy Richter
March 18, 2014
My hobby has turned into somewhat of a small photography business for myself. My question is in regards to the ink and paper that I buy online that I don’t pay a sales tax on, but will become the photographs that I will sell to my customers, which I will charge a sales tax on. My question is do I have to pay a Use tax on the ink and paper? Or also envelopes that I bought and didn’t pay any sales tax when I bought them also on line that I will resell to the customer, do I pay a use tax on those as well?
Reply by Andrew Hudson, PhotoSecrets
March 20, 2014
SALES TAX
Hi Sandy,
Sales tax depends upon which state you are in. In California, a seller has to get a “seller’s permit” and submit a sales tax form once a year. On that form, I believe, you can deduct the sales tax you paid on items you resell with sales tax added. Bulk resellers can tell the supplier their permit number and not get charged sales tax on items for resale.
Best wishes,
Andrew
Reply by No Name
March 1, 2014
Thank you for this information! Very helpful, as I am trying to turn my hobby into a business.
Reply by Tundra
February 7, 2014
Hi Andrew. Thanks for the great information.
One question: If I purchased all of my photography gear years back and want to start a sole proprietorship, how can I write-off my existing equipment? Can I (as an individual) sell my business the gear priced at their current value?
Reply by Andrew Hudson, PhotoSecrets
March 20, 2014
PHOTOGRAPHY GEAR
Hi Tundra,
I believe that, in the year that you start your business, you can write off up to a certain amount ($5,000?) of the gear used in the business, even if it was purchased years ago. (Any excess amount can be amortized in future tax years). If you used your gear for personal use also, you could only write off the percentage that is business use. To write off gear, it must be reasonable and necessary to the business.
As for selling the gear to your business, you could do that if the business was a separate entity, such as a corporation or partnership. But, in your case, as a sole proprietorship, you and the business are one, so you can’t sell your gear to yourself.
I am not an accountant and this isn’t tax advice. Consult a local tax accountant for advice.
Andrew
Reply by Email
February 2, 2014
I have invested in equipment & working to get my business going (from hobby to business). This information has been helpful. Thank you!
Reply by Raevisionphoto@gmail.com
January 12, 2014
if we go sole prop. do we HAVE to charge tax to our sessions? i am in texas.
most other photogs have told me that since most trasactions are done through paypal, paypal just sends you the form themselves if you have exceeded $20,000 or made over 200 transactions. most clients in 2013 paid cash or check. i made a few thousand dollars but didnt start using paypal til october so as of now there is no tax form for me on paypal. should i just file a schedule c on my 1040 this year?
Reply by Andrew Hudson, PhotoSecrets
January 13, 2014
Hi. Sole prop and (sales) tax are different things.
As a sole proprietorship, if you get paid, you declare that as income on your income tax return. On a (U.S. Federal tax form) 1040, that is declared on Schedule C.
Charging tax on sessions is sales tax (not income tax), which depends on where you operate. For Texas, see tx.us for information.
The Paypal situation is, I think, income tax. People and corporations (such as Paypal) that pay you over $600 are required to submit a 1099 form to show the IRS how much they paid you.
Note I am not an accountant and this is not advice. Consult a local tax attorney for information.
Good luck!
Andrew
Reply by Adrienne
January 3, 2014
Thanks so much for the information! I’m still wondering which way to go. I am about to get my tax permit, but the last month of last year as a hobby I was taking photos and charged about $40 a session. Did 2 of them and also got paid for doing photos for my husbands business party (was paid a couple hundred). Since I haven’t done an application yet for permit, am I still able to file these earnings and things I purchased (new camera, etc) on taxes for 2013? Do I have to do an application if I’m going "hobby" for now? Should I go "hobby" for a while then Sole? Is LLC better than Sole? Thanks so much for your input!
Reply by Andrew Hudson, PhotoSecrets
January 6, 2014
Hi Adrienne:
I believe you can file your taxes (with the deductions for photography) without needing the permit. The permit is usually for collecting sales tax.
On a tax form, hobby and sole are usually declared in the same way, on a Schedule C form.
LLC gives you more protection but can cost most, so stick with hobby/sole until things get more serious.
Note, I am not a lawyer or an accountant, so consult a professional for advice.
Andrew
Reply by Yuli
August 27, 2013
This was veery helpful thanks!!!!
Reply by Rayna Miller
July 1, 2013
I want to thank you for writing this, I’ve learned a lot. I jut have a question. I am a photogrher, I have no tax id numer, DBA, or sellers permit. (I’m just startiing to get my hobby into a real business) so, it have to charge my clients taxes right? Do I charge taxes on session fee, or just on the prints and printing disc? (I’m assuming just the prints and PD bc those are tangible?) and when I charge them the taxes should I take that and put it in a separate account to pay off the taxes I owe? Im thinking of leaning toward being sole proprietorship, just to start out.
Thank you for reading!
Rayna
Reply by Andrew Hudson, PhotoSecrets
September 23, 2013
Hi Rayna:
Sales tax is a local issue, in the U.S. it is by the state. In California, for example, you need a seller’s permit so that you can collect sales tax. Tax laws are complicated; in California, tangible items are taxable (such as the prints and disc) but services (such as the session fee) might be non-taxable. Sole proprietorship is a good way to start.
Sounds like you should contact a local accountant for details.
Best wishes,
Andrew
Reply by Basil
March 25, 2013
There is one thing here that is slightly misleading, I believe- from what I understand, you can’t write off the full value of a camera in one year. It is what the IRS calls ’listed property’, and you can only write off the depreciation on the item.
Reply by Kathryn
March 25, 2013
Thank you! I was really wondering whether I should obtain an LLC and this answered a lot of questions.
Reply by Jennifer Pritchard
July 26, 2012
Thanks so much for the tax info, that really helps to see the differences and the pros/cons of each. I am in the hobby stage but have spent quite a bit on equipment, and have probably made about $500 or more so far in payments for just some basic photo shoots. It sounds as though it is time to think about upgrading from a Hobby to the next level. Do you have any pages/advice on other issues of starting a photography business aside from the tax part? Any other advice such as where to sign up for equipment insurance, etc. And if you are making a loss, such as I am right now since I have invested in all the equipment but don’t have as many customers, what is the best thing to do, upgrade to a sole proprietorship or stay as a hobby for a while longer? Is there any information on getting business loans successfully? (I would like to get my computer that was recently damaged replaced, and upgrade/buy my back up camera) I guess I am looking for even more info on starting a business, and the basic steps in order to do it so to speak. Like you should begin doing this, then move on to do this, apply for this at this time, purchase this insurance at this time, work on a business plan now (And this is what you should put in it_, etc. I know that’s a lot but you wrote this so well, I was hoping you had another section that elaborated even more, or even a step by step tutorial on starting a photo business.
Thanks so much, this was super easy to understand and I am looking forward to more information in the future!
Reply by Megan
July 9, 2012
THANK YOU! This was so helpful! I have been thinking seriously of starting to photograph more on a part time basis, but I didn’t really know what I would do about taxes! This was incredibly easy to understand.
Reply by Kirsten
June 27, 2012
This was amazing information! Thank you so much! Very helpful and clear.
Reply by Rachel
June 8, 2012
This is absolutely, hands down, the best resource I have found on starting a photography business. Thank you SO MUCH. This is EXACTLY what I was looking for. Thank you, thank you, thank you!
Reply by LH
May 3, 2012
Do you have to have a degree in photography before you can start your own buisness? Or, to sell your pictures even if it is done just as a hobby?
Reply by Andrew Hudson, PhotoSecrets
June 27, 2012
Hi LH. You do not need a degree, or anything else, except a camera. Yes you can sell pictures even if it is done just as a hobby.
Reply by PJ
April 10, 2012
Thanks for such a simplified version!!!
Reply by Trentton Ezell
March 31, 2012
GREAT INFORMATIVE INFO, THANKS A BUNCH.
Reply by Keenan
March 18, 2012
Great!
Reply by Cindy Colbert
January 26, 2012
Awesome, clear & understandable post in this confusing tax world. Thank You!
Reply by Aubrey
October 29, 2011
Thanks! It’s nice to have some guidance for my new photography business. :)