After years of pursuing photography as an avid amateur photographer, I decided to ultimately take the plunge and come to be a professional. I already owned all the valuable camera bodies, lenses, flashes and other varied equipment, and having my own business meant hereafter photography purchases would be tax-deductible. A smart decision, right?
The short answer, for me at least, was "yes." The long answer, however, was, "It depends on how much time you want to spend running colse to and researching the requirements."
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Fortunately for you, I've done it already in North Carolina and am willing to share the results (for this state, at least!).
For the purposes of this article, I'm assuming the following things are true:
1. You will be operating this business in the state of North Carolina.
2. You already have the photography expertise to qualify as a pro photographer (that's another narrative all by itself).
3. You've done the valuable investigate to settle whether you have the time, energy, inherent buyer base, and business plan to ensure your new investment succeeds (again, this topic is another narrative on its own).
The first step was determining what kind of business entity to be. After doing much investigate online, I was a bit confused, until a Cpa explained it to me: there is a disagreement between your Legal status and your Tax status. She recommended that my photography business be an Llc (limited liability company), but file taxes as a sole proprietor.
As with all the separate options, there are positives and negatives to each option. Llc status would protect me from personal liability in the event of a lawsuit, which was foremost to me. The paperwork is very easy to get ready and submit, which is also good because I wanted to take care of all things myself.
Filing taxes as a sole proprietor would be very simple: just attach a agenda C to my personal tax return each year. Although this filing status is easy enough, sole proprietors pay a slightly higher tax rate than S-Corporations.
Filing as an S-Corp, however, means more paperwork and filing quarterly taxes instead of a agenda C with my each year return. I wasn't curious in that much paperwork, so sole proprietor status is fine with me. If and when my business starts production so much money that I'm curious in a lower tax rate, I can all the time turn my status to an S-Corp.
Now that I've thought about my legal status and tax status, I had to file for my Llc with the state of North Carolina. This involves sending a check for 5 to the Secretary of State, along with Articles of Organization, which can be downloaded and filled out from their web page.
It takes about 7-10 days for your status to come back confirmed, although if you contain a note and your e-mail address, they will e-mail it to you which will save a few days.
The state of North Carolina considers photographers to be one of those lucky professions that wish a State Privilege License. This is an each year license granted to the person, not the business, so if you end up working for a separate photography business in the future, you don't need to get a second license that year. A privilege license is 0, from the North Carolina earnings Office. This must be done in person, but the earnings agency has offices all over the state, so there's probably one in a city near you.
While I was there, I also received a State Tax Id. This is (fortunately) free, and it will come in handy because armed with this foremost number, I will no longer need to pay sales tax when purchasing items for my business (assuming I'm purchasing from a North Carolina vendor; obviously you don't pay sales tax at all when purchasing from an out-of-state vendor, such as when I buy lenses online).
The cordial and helpful Nc earnings worker explained to me that two forms will need to be mailed into the Nc earnings Office each quarter. One is a form explaining what your revenues for the quarter were and how much tax you charged your clients. You will need to contain a check for the tax amount. The other form shows what equipment you purchased for your business that quarter and didn't pay tax on. You will need to contain a check for 1% of the total (hey, at least it's lower than paying the full retail tax on your purchases). This includes all things from cameras and lenses to printers, computers, paper, ink cartridges, etc.
Charging my clients sales tax is a bit confusing in North Carolina. The law is not clear, and lawsuits that have been argued in state court have conflicting results. It appears that you do not need to charge sales tax on services such as session fees, Unless the client ends up purchasing prints from the session. Of policy you all the time hope and assume the client will purchase prints, but you never know for sure. To be safe, you should go ahead and charge them sales tax on the session fees up front, assuming they will buy prints.
You all the time need to charge sales tax for tangible goods sold. So any prints, albums, or other products that you sell to your clients must all the time contain sales tax.
The tax rate that applies depends on where the client took possession of the goods. If the client lives in Gaston County and asks me to mail her the prints, the Gaston County rate applies. If the bride decides to swing by my house in Charlotte to pick them up personally, the Mecklenburg County rate applies.
Tax was by far the most involved part of the business-formation process. Fortunately the employees at the Nc earnings office were very helpful, and gave me any "cheat sheets," sample forms, and (best of all) their phone numbers for me to call with questions.
If you want your Nc State Tax Id to be in your business' name, instead of your own name, you will need a employer Identification number from the Irs. I was initially confused by this, because I wasn't planning on employing anything other than myself, but as it turns out, the employer Identification number has nothing to do with employing anyone. Luckily it was free and handled positively over the phone while I waited in the lobby of the state earnings office.
Now there's the matter of where you live. I'm a resident of Charlotte, so I'm in Mecklenburg County. Fortunately, Mecklenburg County recognizes the State Privilege License, so I wasn't required to get an additional County business license.
I was, however, required to get a original Home occupation Permit from the Zoning Office. This is a one-time permit that allows me to work from home. This is a lifetime permit; however, it only applies to this single address. If I decided to move to a separate house in a few years, I will have to get a new permit. It cost 5.
Next, I needed a business checking account. I went right to Wachovia, since they already cope our personal bank accounts and I wanted all things in one place for convenience. Wachovia needed copies of my privilege license, my Ein, and my state tax Id, as well as the normal documents for a new list like my driver's license. In about a week, I had received my check card and checks for the account. This is highly recommended by the Cpa I visited, in order to keep business and personal expenses separate.
The final thing I needed was business insurance. This is recommended in addition to any homeowner or umbrella liability coverage you may already have. It's not too high-priced (less than 0 per year) so go ahead and get it. Any guarnatee agent will be able to go over the options with you. business guarnatee will not only cover your equipment in the event any of those high-priced lenses or cameras get damaged, but will also help in case a guest trips over one of your lightstands at a wedding, for example.
A few side notes: if your business is an Llc, you are legally required to have the initials "Llc" or the words "Limited Liability Company" in your business name. This makes it clear to all customers and inherent customers that you are an Llc. Also, if you do not keep your business and personal expenses separate, you lose the safety of an Llc (meaning your personal assets are vulnerable in the event of a lawsuit). Do Not Risk This -- keep all things well documented and separate!
Best of luck with your new business venture! I advise visiting the North Carolina State business improvement website and calling their hotline; they gave me a lot of tips the Cpa didn't mention, and it was free to boot! Fortunately there is a lot of hold out there for population starting their own businesses. It's free, and these population know what they're talking about -- please take benefit of it!
How to Start a Home Photography enterprise in North Carolina
