After years of pursuing photography as an avid amateur photographer, I decided to finally take the plunge and come to be a professional. I already owned all the valuable camera bodies, lenses, flashes and other discrete equipment, and having my own firm meant future 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."
Mecklenburg County Personal Property Tax
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 firm in the state of North Carolina.
2. You already have the photography expertise to qualify as a expert photographer (that's someone else description all by itself).
3. You've done the valuable explore to conclude either you have the time, energy, inherent customer base, and firm plan to ensure your new venture succeeds (again, this topic is someone else description on its own).
The first step was determining what kind of firm entity to be. After doing much explore online, I was a bit confused, until a Cpa explained it to me: there is a discrepancy in the middle of your Legal status and your Tax status. She recommended that my photography firm be an Llc (limited liability company), but file taxes as a sole proprietor.
As with all the different options, there are positives and negatives to each option. Llc status would safe me from personal liability in the event of a lawsuit, which was prominent to me. The paperwork is very easy to put in order and submit, which is also good because I wanted to take care of all myself.
Filing taxes as a sole proprietor would be very simple: just attach a program 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 regular taxes instead of a program 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 firm starts development so much money that I'm curious in a lower tax rate, I can all the time convert my status to an S-Corp.
Now that I've carefully 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 comprise 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 require 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 different photography firm in the future, you don't need to get a second license that year. A privilege license is 0, from the North Carolina wage Office. This must be done in person, but the wage division 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 prominent number, I will no longer need to pay sales tax when purchasing items for my firm (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 wage laborer explained to me that two forms will need to be mailed into the Nc wage Office each quarter. One is a form explaining what your revenues for the quarter were and how much tax you expensed your clients. You will need to comprise a check for the tax amount. The other form shows what equipment you purchased for your firm that quarter and didn't pay tax on. You will need to comprise a check for 1% of the total (hey, at least it's lower than paying the full sell tax on your purchases). This includes all 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 fee sales tax on services such as session fees, Unless the client ends up purchasing prints from the session. Of course you all the time hope and assume the client will buy prints, but you never know for sure. To be safe, you should go ahead and fee them sales tax on the session fees up front, assuming they will buy prints.
You all the time need to fee sales tax for tangible goods sold. So any prints, albums, or other products that you sell to your clients must all the time comprise sales tax.
The tax rate that applies depends on where the client took ownership 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 complicated part of the business-formation process. Fortunately the employees at the Nc wage office were very helpful, and gave me several "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 genuinely over the phone while I waited in the lobby of the state wage 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 supplementary County firm license.
I was, however, required to get a primary Home work 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 particular address. If I decided to move to a different house in a few years, I will have to get a new permit. It cost 5.
Next, I needed a firm checking account. I went level to Wachovia, since they already handle our personal bank accounts and I wanted all in one place for convenience. Wachovia needed copies of my privilege license, my Ein, and my state tax Id, as well as the general 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 extremely recommended by the Cpa I visited, in order to keep firm and personal expenses separate.
The final thing I needed was firm insurance. This is recommended in expanding to any homeowner or umbrella liability coverage you may already have. It's not too costly (less than 0 per year) so go ahead and get it. Any insurance agent will be able to go over the options with you. firm insurance will not only cover your equipment in the event any of those costly 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 firm is an Llc, you are legally required to have the initials "Llc" or the words "Limited Liability Company" in your firm name. This makes it clear to all customers and inherent customers that you are an Llc. Also, if you do not keep your firm and personal expenses separate, you lose the security of an Llc (meaning your personal assets are vulnerable in the event of a lawsuit). Do Not Risk This -- keep all well documented and separate!
Best of luck with your new firm venture! I suggest visiting the North Carolina State firm 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 preserve out there for people starting their own businesses. It's free, and these people know what they're talking about -- please take benefit of it!
How to Start a Home Photography company in North Carolina
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