tarting a business can be a daunting task that usually starts with the question “How do I begin?” If you are struggling to know what your first steps should be then you have come to the right place. We here at The Legal Paige have partnered with CloudSpot to answer your most burning legal questions!
When it comes to legally establishing a new photography business, where do you recommend photographers begin?
The first thing you will need to do is familiarize yourself with your Secretary of State’s website so you can register your business entity. Most states utilize their Secretary of State to process business registrations and licenses (some states use another department or division of their state government, such as Florida using its Division of Corporations). A big perk nowadays is that most of the necessary paperwork can be filled out entirely online, which is amazing for us small business owners! The first forms you need to fill out and file are a name reservation and, if you want to become a Limited Liability Company (LLC), the articles of organization (some states refer to this as a certificate of organization). Do not let the sound of these documents scare you; these are both simple forms that you can fill out yourself.
A name reservation is a form that allows you to call dibs on the name that you have selected for your business. A certificate of name reservation should not be confused with an assumed business name registration or a trademark registration. The certificate simply lets the state know what name you have chosen for your business. (*Note, in most states you DO NOT need to file a name reservation if you are concurrently filing a business entity formation, such as an LLC.)
The next step is to register your LLC. The articles of organization or certificate of formation tell your state the 411 on your business. You want to specify your business’ start date, if your LLC is manager-managed or member-managed, if it will exist in perpetuity, the name of your business, and the name and address of your registered address. If you have an operating agreement this would also be the time to upload that document. If you do not have an operating agreement, you should and our easy-to-use template is available here!
Once those two forms are filled out you will need to get an Employer Identification Number (EIN), Federal Employer Identification Number (FEIN), or Federal Tax Identification Number (FTIN) which you can get from IRS.gov at no charge. If you apply for these online the number will get automatically issued to you at the end of your application.
When you have obtained an EIN and registered your LLC in your state, you can open a business bank account. It is important to know that this bank account is for business use only. This means that there is no COMMINGLING or mixing of funds between your personal assets and the business assets! We want to make sure that all expenses and revenue are accounted for which means the separation of your business and personal income. This ultimately makes it easier for you to track business expenses (which may be able to be written off during tax season) and business profits.
Once you have completed your business registration with your state and have opened a business bank account, you will be an official business owner! 🎉
Last thing… Make sure to check with your local county for any necessary licenses and/or permits that are required for your specific business. You can do this by going to your county’s website or calling the clerk’s office.
What different business structures are available? Is there one you would recommend over the others?
When you are first starting up your business your first decision should be about your business structure. You will likely be choosing between being a sole proprietor or a Limited Liability Company (“LLC”) as these are the most common business entities for photographers. A sole proprietorship is easier to obtain but may have some scary long-term liability effects for the business owner. Some of the perks of being a sole proprietor are easier taxes and less paperwork in the registration process. The great thing about being a sole proprietor is that you don't have to file anything with the state to establish your business since it is an automatic status. Simply put, whenever you start *a business* it is automatically a sole proprietorship that is an extension of yourself for tax purposes; thus, you have to use your personal Social Security Number when filing your taxes and report all income made from your business on a Schedule C. However, a sole proprietorship is NOT an actual business entity—since it's just an extension of you as a person—which means it does not separate your assets and liabilities from the business. This means YOU can be personally liable for all debts, business costs, and judgments that your business may accrue. This can be a bit scary because a disgruntled customer can recover from you personally if something goes south with your services.
An LLC on the other hand involves a little more paperwork at the beginning but a lot more protection for you in the long run! An LLC protects you from business liabilities including debts, business costs, and judgments. This provides you some peace of mind that if something happens with your business like a client sues the business and gets a judgment granted in their favor, you will not be personally liable to pay that judgment. As mentioned above, to start an LLC all you need to do is go to your Secretary of State’s website and fill out the paperwork for a ‘Domestic Limited Liability Company’. Then, you pay the filing fee and also an annual fee every year (to alert your state that you are still an active business.) Remember, an LLC is also an actual business entity, unlike a sole proprietorship. So, this is the only way to legitimize your business on a state level. TLP highly recommends becoming an LLC as soon as practicable and the little bit of work upfront is totally worth it protection-wise in the long run!
How can newer photographers protect themselves and their clients?
Have you ever had a conversation with your spouse or someone you work with and wish you would have had a tape recorder so you can play it back to them later if there is a disagreement on what was agreed to? I mean we all have had that thought, right?! Well, contracts are essentially a recording of everything that was agreed to by you and your client. If there is ever a disagreement on the terms of your services you should be able to pull out that contract and know exactly what was agreed to and be able to solve a disagreement.
Contracts are essential for keeping you and your clients on the same page. When you have good contracts, clients know what is expected of them and what they need to pay you. There is also a clear understanding of what they will receive from your services. Without good contracts in place, you will likely have sticky situations come up with your clients, and those could lead you into refunding clients when you don’t want to or, even worse, in legal hot water in small claims court with little to no record on what was originally agreed to. TLP’s suggestion is to ALWAYS get your contracts in place before taking on clients!
What contracts do I absolutely need?
We understand that there are a lot of contracts in our library and you may not know what is necessary to start with for your business. We really recommend that you start with the most essential client contract for your particular business.
If you’re a wedding photographer, that would be the Wedding Photography Contract.
If you’re a family and portrait photographer, that would be the Family & Couples Contract.
If you’re an adventure elopement photographer that would be the Adventure Elopement Contract.
… You catch our drift here.
Then, once you have your main client agreement all squared aware, we recommend adding these other contracts to your legal tool belt that you’ll need to use as time goes on: Contract Addendums & Amendments, Print Release Forms, Testimonial Releases, and Cancellation Contracts.
Is there anything else we need to know about??
When you are first starting out you should be soaking in all the help and tips you possibly can. The Legal Paige offers lots of free resources to our customers like our blog, podcast, our TLP Community Facebook Page, and our various free downloads which can be found HERE. TLP has such a heart to keep businesses protected and successful. If you do not know where to start, look at those resources. From there we have many contract templates and clauses that you can purchase that we know will help you continue to be a successful photography business.
THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. EVERY SITUATION IS DIFFERENT & IS FACT-SPECIFIC. A proper legal analysis is necessary based on your location and contract. Consult an attorney in your home state for advice regarding your contract or specific legal situation.