I'm curious how many people have gone the option of incorporating their business vs. the sole propritorship option. It seems there are advantages and disadvantages to both.

I'm thinking I'll incorporate, but it seems like a more expensive option (but with perhaps more benifits?) Is that the case?

I would really love some input on this for those of you who have completed all the paperwork for this stuff.

1. why did you go the route that you went...

2. what were the first steps in going down that route.

Thanks!

I went the incorporating route to provide a little more security and protection, and the s-corp (which you submit after you've incorporated) is a great way to retain the tax benefits of a sole proprietorship while separating your business liabities from your personal life. Right now my business life is about 95% of my life so if I got hammered with a law suit I'd be wiped out pretty good, but hopefully one day that won't be the case and having the added protection will be well worth the $500 or $1000 it costs to get that stuff done.

I had my assistant take all our paperwork to a legal documents service and they typed up and packaged the whole thing for us. I couldn't imagine going through it myself...that stuff is a headache!

Cheers

Hey Chris....just finished a grad class on this...

I'm leaning towards an LLC (Limited Liability Company). There is less paperwork, easy to set-up on your own, no minutes required and no double taxation...

They are great for start-up businesses...

I found some great info online and from my class...enjoy!!

The main similarities between LLCs and corporations are:

* Both Incorporation and LLC are legal entities created by a state filing
* Both Incorporation and LLC help protect personal assets from your business liabilities
* Both Incorporation and LLC have few ownership restrictions

The main differences between LLCs and corporations:

* Corporations issue stock and are owned via stock. An LLC does not issue stock. Like partnerships, a Limited Liability Company is simply owned by the members and/or the managers of the company.
* Corporations are required to hold annual meetings and to keep written minutes. An LLC does not have this requirement, resulting in less official paperwork.
* An Incorporation is a taxable entity, and they must pay taxes on their profits at the corporate tax rate. An LLC, like a sole proprietor, partnership and S Corporation, is a "pass-through" tax entity. This means that the profit or loss generated by the business is reflected on the personal income tax return of the owners, thus avoiding the double taxation of paying first corporate tax on profits and then personal income tax on distributions of profits.

Hope that sheds some light...

So much to think about...AHHHH! I need some turkey or something.

Happy Thanksgiving to all!!!

Mary Jane

Awesome post!

Thank you! I pinned it so it should stay at the top of the page!

Cheers,
DJ

So, is there any way I can change from a sole proprietorship to an LLC once I have 'declared my major'?

I think you can change your business entity at any time, though it is usually easiest when it coincides with the beginning of a fiscal year.

I just became an LLC. Went through a lawyer to file everything so it was done correctly. Main thing I liked is that is protects my personal assets. So if someone sued me it would be the company assets only, where as a sole prop could lose eveything they own...

There is an online legal firm, www.LegalZoom.com. They can do incorporations for $129. Trademarks, and all sorts of other legal services for very affordable prices as well.

I guess for someone who knows how to do it, this type of filing is VERY easy.

-Tim

Thanks, Tim. Is this company trustworthy? Anyone else have experiences with their services?

Yes, and thanks Mary Jane for the concise explanation on the differences between the LLC and corporation.

Honestly guys, I wouldn't trust something that important to an online firm. Just pay out the $1,500 and be done with it.

Check with the Secretary of State's office in your state.

A single member LLC is VERY simple to file.
Our state provides the forms or guidelines, and step by step instructions... all downloadable.
We've done this with two filings in the last six months, (different companies) the last was just last week.
It took about 5 minutes to type the forms. Filing in the office of the Judge of Probate took another 5 minutes. Total cost of filing was $76.

Spent much more time driving to the courthouse than it took to do the filings.

Simple and easy, and gives you protection.

Mark

I agree with that. But does anyone know of a good company that could process the filing for me in California? Thanks.

we had our lawyer do it for us

Chris, I could have saved a ton if I had incorporated sooner! I am an S corporation now and will save on SS tax, etc. There is minor paperwork involved and I think I have to file things a few times a year, but I let my accountant worry about all of that. I do have to pay myself every quarter to avoid certain taxes, but again, I leave it to my accountant to deal with. It was the best thing I ever did and not that I need it, but it is nice to know my personal finances are now safe from my business dealings.


DJ said it all. Even though you may not be fully protected, it is nice to know you have some shelter. I only paid $267 with my accountant for them to file the paperwork? You guys are paying a lot!

Does it matter if you have a lawyer do it? The paperwork should be the same, right? Total I paid $650 to have my taxes prepped and the fee for the S corp filing. We use them for our personal taxes so perhaps there was a discount and we are in Indiana. I imagine some areas will be more expensive than others.

Good luck!

Jenny




Jenny

The cost for filing a LLC is dependant per state. It's actually easier and cheaper to do it yourself or through a legal student. Which I'm doing.

Oh yeah goto your local university and see if theres a small business law student that might help you out.

Just do it yourself, Greg. It's much cheaper, and there is nothing the company does for you that you cannot do yourself.

I was thinking of using legalzoom.com as well to set up a LLC. Anyone else use them? If so, which package did you go with?

yikes! this sounds a lot like
"have your uncle shoot your wedding , there's nothing the photographer does for you that he cannot do for you."

after 3 YEARS i finally found an accountant. in the next few weeks we will be an s-corp. it has been well woth the time and trouble to find someone who DOES do something for me that i can't do myself! an attorney will set it up. you may want to talk to an accountant to help you decide.

setting up your biz foundation is something you don't want to skimp on. we never expected our biz to grow the way it did. i now wish i would have searched and found the accountant before i started. i wish i would have searched and found the attorney before i started. the money i would have saved over the last 3 years would have been nearly 5 figures.

to find them, start asking around. who do others use? do they understand the photography biz? these people are paid waht they are worth, too.

just my $0.02.

i've used legalzoom,com to become an llc. painless and i have all the paperwork to prove it, so I'm guessing they are trustworthy.


yes. me. llc.....very simple and had everything delivered to my door in a few weeks.

That's good to hear. Which package did you go with (Economy, Standard, Gold)? I'm wondering if there's a need in anything other than the Economy option.

Well said Robin. A good accountant that you can trust is worth every penny spent; every taxpayer is different and it is impossible to councel someone on what entity would best suit them without looking at the whole picture.

Accountants and Attorneys work on time spent, so do a little research, educate yourself on the options, have your information in a clear and organized fashion and you will get the most benefit from your appointment. Using a professional is the only way to go, usually you won't find out you made a mistake until it is too late.


Melissa O

melissa (who , by the way IS an accountant!),

my new accoutant sat down with me to do my personal taxes this year. we spent about an hour, as my personal taxes are simple...
then there's the biz....

OMG - what a mess. he talked with me for about 45 minutes about what the difference was for us to go from a partnership to an s-corp. he was so helpful, i seriously was in tears when i left i was so happy. this stuff has been a nightmare for me and my biz partner.

if you are not sure what to do, get some professional advice. the mistake could cost you a lot of money, and you will never know.

I have had an accountant do my taxes for me and it pays for itself. Seriously, I am getting wicked refund this year and it is all thanks to my wonderfully talented accountant. He also can set up things for me such as Roth account or any of the above. He is well worth the money!

So whats the recommendation for husband/wife teams? LLC?

FYI for those of you who use TurboTax to file each year, they do have an option that walks you through the incorporating process, which I intend to do as soon as I get the time (which will be never but I hope to make it happen by end of Sept).

This thread was a kick in the arse to get stuff like this taken care of....which I have been lacking on. I am looking for an accountant who knows this business, and has worked with photographers before. I am in Florida. Doesn't necessarily have to be local, but it would be nice.

I need a pro, as I don't want to, like someone previously said, "skimp on this."

Someone point me in the right direction, and no online services please!

Thanks!

Nick

I don't completely understand the legalities and such...
But i would say, Mike, to get incorporated... If it's you and your
wife running your business, that's your income right there...
and if someone sues you, that would suck. The person
sueing you could go after your home, even.

But I think you'd need another opinion other than mine, since,
like I said, I don't completely understand it all.

I participated in a PPA tax webinar and they stated that about 95% of the photographers they work with, they recommend S-Corp. (I'm not sure of the exact %, but it was high).

I just talked with my new accountant, he basically said the exact same thing that the PPA folks said. S-Corp. We're a husband and wife team. Mostly for tax benefits but there's some protection for personal assets (not totally) and it supposedly reduces audit risk. The S-Corp is not taxed as a corporation (which is a lot if you start making a significant amount).

I'm considering just have MyCorporation (from Quickbooks) fill out and file the paperwork.

I did my LLC through legalzoom and everything went fine. It costs about $250 in CA. There is also an $800 minimum yearly tax requirement that no one tells you about that you will have to pay, even if you made zilch that year. But if you are looking at an LLC that is probably not the case...just so you know. LegalZoom can handle everything, or just a portion of the process and you choose....let them do it. Saves headaches down the road.

You can have multiple owners so I think it would be great for a couple team.

My husband and I are also trying to decide on this. It seems like the concensus, at least for a husband/wife team, is to become an S corporation. I'm going to try setting it up myself, we'll see how far I get.

Regarding tax preparation, should we find an accountant now, or wait until tax season next year when we're ready to file? I've never filed with deductions before, so I'm wondering if there is an easy way to start keeping track of things so it's easier for the accountant.

From their site look who is a founder:

Robert L. Shapiro, Co-FounderMr. Shapiro, Co-Founder of LegalZoom, is one of the most recognized attorneys in the world. He is currently a partner of Chistensen, Glaser, Fink, Jacobs, Weil & Shapiro, LLP, a full-service law firm with approximately 120 attorneys (no relationship with LegalZoom). Mr. Shapiro has over 31 years of legal experience and has served as counsel in United States of America v. Samango, People v. Christian Brando and People v. O.J. Simpson. Mr. Shapiro is the author of "For the Defense" (Loyola Law Review, November 1996), "The Search For Justice: A Defense Attorney's Brief on the O.J. Simpson Case" (1996) and "When The Press Calls: A Lawyer's View" (California Litigation, Fall 1991).

Wow. I never really thought about incorporating. A mentor from SBA.gov mentioend that I should think about it, but since I thought this would only be a part-time business that I woudn't need something like that.

But I want to separate what I make with the business from my personal and family income completely.

Does anyone have any good accountants they woudl recommend in the OC, California area?

Just do a search for your state and "LLC." It's handled by the Secretary of State office for your state.

In Oregon it's ridiculously EASY to do it yourself online. Takes just a few minutes and you're done.

This thread has been going on for a long time and I have been wanting to add my two cents about incorporating for a while. We have taken our time to become an LLC, only because we wanted to get all of our "ducks in a row" before we announce it to the world. And, this fall, we are doing a complete re-branding and site design and wanted to do a huge kick off, purely as an LLC.

Okay, now I will get to the knitty gritty! What I really want to know is how many of you out there are legit?

Do you have the right to even practice business or take money from someone for the services you provided for them?

And if you are not legit, why have you not taken the extra steps to become official in order to protect yourself and your client?

I know of several photographers who operate purely under the table, and quite frankly, it is going to catch up them eventually.

I don't want this reply to be a bashing of any sort, just want to get a feel as to how many OSP'ers are legit.

Thanks!

I dunno. But I cannot imagine many people who are going to admit, in writing, on a forum, that they are not legally legit. ..

So I would guess most everyone is. And if they aren't, that's up to them.

It's free to register a Sole Prop and $50 for a DBA in NJ. How the heck could I justify NOT being legit?

I am not sure if this is "off-topic" and sorry if it is, but if I am a sole proprietor, can't I just get insurance in case I get sued? I got insurance through my insurance company (american family) and they say it covers my business if I get sued for up to something redic. like 50 million or something. Is this too good to be true? I also have my equipment and stuff insured through them.