Moving from hobby to Small Business?
Please forgive the message if found to be annoying. I am going to be shooting a wedding here in a couple of weeks. I met with the couple briefly tonight. My wife and I have decided that I should have this as a separate business. Simple question...how did you go about choosing a name for your business? followup- what did you have to do to separate from the family finances? I have already contacted MN SBA and have thought of a name that does not appear to be in use. I will contact county officials tomorrow for further details. anything else besides insurance for the equipment and business practice that i might need to know short term?
To create one's own world in any of the arts takes courage.
I don't know about MN, but here in Ontario if we operate a proprietorship using our given name, there is no requirement for any sort of business registration. That will save some time, trouble and expense up front. Here also there is no difference between a proprietorship, partnership or personal name business as regards year end dates or choice of income types/routes etc. To be allowed to defer income into a future tax year, we in Ont. must be incorporated (as we did after three years of partnership with my wife)
Names ... My experience in a very small but profitable business was that a business operator who does a good job need never worry about the choice of name - the word of mouth advertising is what will drive most of your customers to you. Most of them will have your name wrong when they get to you the first time anyway and it won't matter because they care only about the quality and price of the job and all you want is their money. They'll know your name properly later when they refer you to someone else.
So ... in a proprietorship, choose a name which gives the least trouble and setup cost, identifies you in some way and is easy to say - usually that is your own name unless the business name indentifies a unique type of business or service. (such as "Satin Snow")
When you incorporate the name won't matter as you will likely be a numbered corporation "operating as" your previous name under an agreement (hopefully a name rental or "loan to purchase" agreement) with yourself.
Those are my thoughts - and they're worth exactly what was paid for them
Clear and complete records following GAAP.
Originally Posted by unohuu
All receipts, invoices and related paperwork sorted by type and chronologically.
As far as I know, unless you're incorporated, your business income "is" family income. (Here in Ont anyway)
By the sounds of it , I would name the company after your own name, Fred Smith Photography, Over a long period of time name recognician will be important. For example you may start as a wedding photographer , be successful, and then for other reasons decide to go to another genre. Ie fine art sales.
The name recognician will help you make this transition .
Warning: get an good accountant, if you are going to lease space for the buisness make sure you know a good lawyer in the commercial leasing field, make sure you are well covered with commercial insurance, and try to have a very good relationship with the banking industrys.( I learned all of this the hard way)
In Canada , and I am sure in the States , you are responsible for all of your companys debts and goings on , if you are the sole or part owner.
Do not be mistaken about this. You can separate the finances from *Family* and your new organization . But in the long run it will always boil down to you personally regarding debts, leases, tax and so on.
As a small venture to suppliment income the above is a bit to heavy but small ventures overnight can explode to full time operations . be prepared.
Yes, this (what Bob says) is very true and is something that I forgot to mention. Over a period of time spent making the business successful, the name will grow to be important and there will come a time when a transition to an incorporated and, severally liable and saleable entity might make sense. At that time, the name will have value that can be capitalised on.
Originally Posted by Bob Carnie
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I agree with the comments of others suggesting the use of your name as part of the business name - unless there is already a photographer in your area with the same name. If so, you'll obviously need to differentiate yourself somehow. Having a good accountant is also a good idea, even if you're already familiar with GAAP (generally accepted accounting practice). At a minimum, you'll want a separate checking account and separate record keeping. Also, check with your city regarding business license requirements, and your county regarding business property taxes.
Naturally, there is a long list of legal and business issues to consider. The IRS has a couple of booklets that relate to the operation of small businesses that are worth reading. In reading the tax regs relating to photography businesses, it seems to me that the IRS almost assumes that a photography business is a sham, intended only to enable a hobbyist to deduct hobby-related expenses. Perhaps that's because so many people have tried to do just that. Who knows. But, establishing a photo business may make you more subject to being audited. As such, you may want to make sure that the use of the equipment is as separate as your accounting. In other words, beware of "red flag" issues that make the business appear to be questionable.
[COLOR=SlateGray]"You can't depend on your eyes if your imagination is out of focus." -Mark Twain[/COLOR]
Rio Rancho, NM
I used to have an Assumed Name certificate but let it drop. I now ask for checks to be made out to my name. Ralph is correct with regard to an accountant. I do use a copy of Quicken for invoices
I did this many years ago (so my info is dated) with a aerial photography "side" business in Minnesota.
We choose a name with "aerial" in it - with the rationale that we'd rather be considered for this specific type of work than have the flexibility of doing other forms of photography. You have to file something like a "certificate of assumed name" with the state. They required us to modify our first choice slightly to avoid being too close to another name. We then had to publish a notice in the newspaper legal notice (there were a few choices in newspapers). I think the state was the only one involved in choosing and registering a name.
Personally, I disagee with the idea of using your own name for a couple of reasons. One, at some point you may choose to sell the business. Two, the name doesn't communicate anything about the business. That's just my view.
You may want to check into a LLC designation. I believe it has some advantages from a liability standpoint. But keep in mind that any legal entity where you are the sole owner (or even you and your wife) may not afford the protection you commonly think you get from incorporating. (However, I'm not an attorney and don't even play one on TV.)
Of couse you'll want to set up a separate bank account and keep separate books. The IRS can get sticky with hobby businesses. We avoided that by never showing a loss. That meant I used my own equipment until we had enough revenue to buy separate equipment and still show a profit (and pay taxes) at end of year. I did not have the business pay me rental for the equipment, but I suppose I could as long as I documented the fair value (but then you have the issue of the fees as personal income - not worth the trouble).
Whether you insure your equipment is a risk/reward decision you can make. I feel liability insurance is far more important (the downside of having your equipment stolen is calculable and fixed, the downside of liability for an accident is limited only by every asset you have). I've seen a fair amount about insurance options on the photo.net forums.
The MN SBA had a great book on starting a business. If it's no longer available, let me know and I'll try to dig up mine if I still have it.
Take a peak at the IRS website..... setting things up so your business design agrees with the tax stuff in advance is... handy.
"One of the painful things about our time is that those who feel certainty are stupid,
and those with any imagination and understanding are filled with doubt and indecision"
I'll agree with this completely. I also had a small photo business, and early on my accountant told me the same thing. Showing a loss would be an invitation to an IRS audit. I did as mgb74 did, and never had a problem. Good Luck.
Originally Posted by mgb74