I am looking at forming an LLC for my photography business using LegalZoom.com and wondering if anyone has ideas or suggestions regarding this move. Is it a good strategy in terms of being able to write off equipment and expenses or is it not worth the trouble? Any ideas or advice is appreciated.
Joel, is buisness that good now.
You can write off business equipment and expenses as a sole proprietor. Just use a schedule C and name your business. The purpose of a LLC is just as the name implies. “Limited Liability”, it affords you some liability protection similar to incorporating. In some states the tax laws may vary on how you have to file. It is possible that you may end up with unnecessary tax paper work. I think you need to research that part through your state.
I've done this for other businesses and am a lawyer by training. While LLC rules vary by state, it is easier and often "better" to form a small business as an LLC rather than a corporation or s corporation. A key consideration is whether you will be the only employee of the business. If so, LLC is the answer. You can form what's called a single member LLC and all business income "passes through" to your personal tax return on a schedule C (you will need to elect this option at formation). Clean and easy. As a single member LLC, you don't need to create an operating agreement (which is pretty much necessary for a multi-member LLC and is a pain to draft; read: lawyer fees etc.).
Once you form an LLC, generally all you need to do is file an annual report form with the state (which is simple; it's just a revenue generator for the state) and do your bookkeeping properly.
But remember: you can write off photography expenses only to the extent you have income from photography work. And if you have income, you'll have to check IRS rules about depreciation of capital equipment, which is the lion's share of your likely expenses. These rules will limit how much of any expense you can deduct in any one year. Finally, IRS rules get kind of sticky with "mixed use" expenses (ie, you use the equipment for both personal and business uses). These are questions for an accountant, but they're KEY to determining whether this makes sense or not.
Generally I tell people to stay away from legal document websites, but a single member LLC is very simple. What's the cost?
I'd talk to an accountant before moving forward. Let me know if you have more questions!
Brian
Indeed this is the easiest option, and photography isn't really a business that's prone to lawsuits. It's really a question of risk tolerance. But this is the good ole litigious USA... If you're serious about the business, I'd take advantage of the legal protections of an LLC.Originally Posted by HDNitehawk
I am curious what the cost is for an LLC?
I have a state of Texas tax number. I write off business equipment and expenses each year. I also have to collect state sales tax and pay the state each year. Also have to claim my equipement and pay property tax on it. Being a small part time business the property tax is not much of a burden just the paperwork.
Mark
For an LLC there are entity formation costs and annual costs (not considering tax matters). Entity formation on your own without a legal form site probably runs around $100 depending on the state. Annual reporting fees are usually around $25 or so. That's it for LLC costs. Do a google search for you state's department of corporations. The names vary greatly but it's usually a division of the secretary of state's office. Here's Texas': http://www.sos.state.tx.us/corp/index.shtml
Thanks for the quick info....the total cost through LegalZoom for a basic package is around $300.00
It would be a single member LLC taxed as an S corporation. My accountant agrees that it would be a tax advantage in that equipment can be depreciated over time.
I have not made much money so far but I do have some income from photography now and will probably have some ongoing income although not a great amount. On the other hand the tax write off could be substantial considering everything I have accumulated in that last few years.
It looks like it could be well worth the effort even though there will be ongoing expenses and paperwork to keep up with.
$300 isn't bad. I'd go for it. The ongoing cost and burden of having an LLC is not too significant. The big issue is taxation, and you seem to have that covered.
Before LLC's became popular, I formed a corporation with the state. I did all the research myself and bought the forms at someplace like Office Depot. I think you can do this very easily yourself, less than $300 if you really worked at it. The continual paper work for a corporation was kind of a pain.
At present I have a consulting business and I operate as a sole proprietor. I try to avoid additional paper work if I can.
I think before you do you should consider the extra paper work considerations. The LLC will protect you but only to a certain extent, will it be worth it. I know you have a fine collection of bird photos, if this is the sole income generator I can't see where an LLC would afford you much protection or be needed. However if you are shooting weddings, or taking on contract work it might be a wise idea. I would weigh your income and exposure to the extra paper work to see if it is worth it for you.
Good advice, exactly what I am doing....trying to weigh the alternatives.
I am not doing weddings (yet) but there are some portrait and sporting event opportunities for me and I am open minded to all sorts of possibilities so I want to be prepared.
I am leaning toward the LLC and will decide soon as I have a contract to produce 20-30 large prints in the next 2 months.
Posting Permissions
Reply With Quote