Here's a quote from a Nolo book regarding what business entity to choose. The context is currently discussing Sole Proprietorships and partnerships. I found this paragraph rather informative but would love to hear what you established folks think:





I'll assume that for the majority, photographers won't find themselves going through bankruptcy. The profession is just not as volatile as say, a restaurant. So the question rises... why bother with an LLC?

I read all those NOLO books as well. I formed an LLC for other reasons (chose it over a partnership). LLCs are not going to protect photographers from lawsuits. It makes it very clear in multiple books that if you are the person performing the service, the shield of the LLC has almost no chance of protecting you and your personal assets from a lawsuit.

Now, also in those books you probably read that LLCs have MUCH lower rates of being audited than Sole Proprietorships. Not saying to cheat your taxes, but no one likes their IRS up in the business.

Right, I believe the book I quoted also says that. Which is why they mention that Liability Insurance is more an important component to have.

So, if LLC doesn't protect us, why go with it? (besides audits)

i'm not a tax guru, but i think you pay a slightly lesser percentage in taxes, but don't hold me to that.

I guess it's like wearing seat belts when you have airbags - an extra measure of protection.
There are other reasons for filing LLC, particularly in the area of taxes with multiple members.


Mark

Don't hold me to it, either, but my sister also runs her own business which is an LLC (mine is an SP). We compared tax notes this year out of curiosity. Her percentage was very slightly lower. I don't know whether that's because in Washington a photography business is filed as a weird amalgamation of service and retail while hers is purely a retail business, or what. But it was interesting to see the difference.

The difference in our gross incomes was also "interesting." She grossed well into the six-figure range, while I grossed $20K. We started our businesses in the same month of the same year.

Clearly I chose the wrong profession!