Photography as a business
This is the only forum where this seems even remotely appropriate.....
I am considering turning my 'hobby' of 30+ years into a business. I would love to be able to write off a lot of the expenditures I make, trips I take, darkroom space, vehicle usage, etc. I am sure I can generate income from print sales and show a profit, but not necessarily every year. Certainly the first few years would be profitless.
Has anyone done this? (silly question, I know). How many years must I show a profit before the IRS thinks I'm just trying to bilk them?
I have pursused the SBA and IRS sites.
Are you incorporated or are you a sole proprieter, LLC, etc? Do you have a professional accountatn do your bookeeping and tax filing or do you do it yourself? I have a BBA in accounting wo that end doesn't worry me, but I am not up on the tax laws. I have looked thru Schedule C and it looks simple enough.
Can anyrcommend a good book on starting up a small business like this. I would have no employees.
The Photographer's Market Guide to Building your Photography Business.
by Vik Orenstein
i have had a sole propriotorship ( is that how you say it ? ) since 1988.
i file a schedule c with my taxes, and have never hired an accountant. i use a tax program (turbotax &C ).
go to your public library to see if there is any information on "score" they are retired professionals who usually were in the business you are interested in starting and they can give you insights. the world of "wet" photography hasn't changed in a long time, maybe they can help answer some of your questions.
You might check the archives here, Reggie. I seem to remember at least one similar discussion that might prove helpful.
Your profile doesn't indicate your location, but I'm assuming that you're in the U.S. from the SBA and IRS comments. If so, you may want to consider how the IRS views photography "businesses" - the subtle aspects of how the related tax provisions reflect that view. I think you'll find that the tax regs are aimed at an assumption that the average photography business is a tax fraud - that is, a hobbyist trying to write off hobby expenses. As such, you'll likely be under more IRS scrutiny than the average small business. (With the possible exception of massage parlors. ) You'll also want to think about the long depreciation periods assigned to photographic equipment, and what happens to you, tax-wise, if you decide to discontinue the business before the end of those depreciation periods. The key word here is "recapture". Then there are the issues of mixed-use of equipment. (What is used for the business versus what is used for personal/hobby purposes.) Lots of little "gotchas" like that to consider.
[COLOR=SlateGray]"You can't depend on your eyes if your imagination is out of focus." -Mark Twain[/COLOR]
Rio Rancho, NM
Having been in more then one business as a Sub S corp or sole proprieter my advice beyond Rob's above which was right on the point btw, would be to try and do it on the side and get a customer base and make contacts; No kidding. I've been borderline now for about 2 years to go full blown licensed business. I could see it if I was a wedding photographer or did alot of parties, but I'm not. I think it will depend on your service and what you are offering. As a landscape photographer trying to sell fine art I would say go sole proprieter just to appear as a legitimate, to say stock agencies. Beyond that it's a toss. It's a very personal decision and the services or products that your offering will have alot to do with the right decidion.
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As someone who has been on his own for nearly 20 years, I say go for it. Not if you want to make money though!
The IRS is very serious about the abuses by "hobby" businesses. As a sole proprietor you are more likely to be examined and be challenged by the IRS versus being a type S corporation. If you are considering this just as a way to write off your hobby's expenses then you might want to reconsider. You might want to start selling prints first and see how that goes. If you sell enough prints at a reasonable profit and elicit a serious positive response from people familiar with the photography market, then it might be justifiable to consider becoming a type S and opening up shop officially.
I have earned my living solely through photography for 30 years, I switched my area of interest and market about 4 years ago from advertising photography to fine art type landscape. What I have learned is that making a living through the sales of prints is not easy. It is extremely competitive, very expensive to do right and volatile. So far I have been very fortunate but I have encountered many people to whom it has been a frustrating struggle.
A side bar that illustrates a common belief, or misconception about making a living as a photographer, I think Bill Schwab can really relate to this: I was shooting in Nevada last week, (I'm in the middle of a 6 week trip out west, 6 weeks out of the 22 weeks that I will be traveling/shooting this year), it's a few minutes after sunrise and I have already been up for about 3 hours. A truck driver comes to me and starts asking me about photography while I'm setting up a shot, he's clearly indifferent to the fact that I'm busy working. He asks the obvious, what am I doing? I tell him I'm setting up to shoot a photo. He asks me if that's my job, I tell him it is. He then asks who I work for, i tell him for myself. He then asks how i make money taking pictures of Salt Flats, I tell him that my prints get sold. He then asks how do they get sold, I then tell him by galleries. He then asks what my prints sell for, so I tell him. His reaction is, "Gee I used to do some photography in High School, I should dig out my camera and start selling some photos too! I can not tell you how often this exact line of questions and entire situation happens, I should probably print a FAQ hand out to give people and save myself some time.
Anyway, the point of the story is that it is an all too common belief that making a living through the sale of one's photos is easy. It is not. If you sell prints at a low price you need to sell a huge amount of prints, and a huge amount of prints is expensive and very time consuming to produce. If you sell prints at a high price you had better have prints that are worthy of that high price or you won't sell any. My advice keep it as a hobby. If your prints start getting a serious demand, and you start making some good money from them, then consider going full time as a business.
Just to make something clear regarding types of corporations: If you decide to incorporate, you will need to look at your state law and see what types are available. Generally, you can incorporate your business as a C corp, which is what most people think of when incorporating. You need a board of directors, annual minutes, etc. Or, your can incorporate as a LLC, a limited liability corporation, most of the benefits of a C corp, but with relaxed requirements. It's run more like a sole proprietorship, but you still have the limited liability of a corporation.
Once you have chosen which form of entity to create, then you have to turn to the tax issues. A "Sub-S" corporation has nothing to do with the structure of the business--it only affects how it is taxed. The designation "Sub-S" is an IRS designation only. If you do not elect Sub-S status, your corporation will be taxed as a totally seperate entity. You get no deduction from your personal taxes. You will have to file a seperate return. If you elect Sub-S status, the corporation is taxed like a sole proprietorship. All business transactions will eventually show up on your taxes. You will have to file a schedule with the IRS with your personal taxes, but not a seperate return.
I agree with the post above regarding S.C.O.R.E. It is the Service Core of Retired Exceutives, an organization through the SBA. Can be an invaluable service.
All very good advice. I've treated my photography as a business for years, although I have only started using it for tax purposes - this will be my second year. I file as a sole proprietor. I haven't made any money yet, but I say go for it. Also, I would recommend reading "The Success Factor" by Jack Canfield.
Been down this road with my camera business.
If you are near a location with a Borders or Barnes and Nobel bookstore just sit down with a few of the "starting a small business" books and get a brief overview of what is requried by the IRS.
For tax purposes you need to be able to demonstrate to the IRS that your "business" is truly one operated to make a profit and not just a hobby. The IRS lists certain standards you must meet. Do you dedicate a minimum amount of time to the business (500 hrs minimum). Do you keep proper books and use accepted acounting methods? Do you maintain seperate business acounts from your personal accounts? Do you seek help from experts to improve your business? Do you persue strategies to increase income year to year? Do you advertise? Do you maintain an inventory? Etc, etc.
The main thing is you need to show a profit somewhere in the first 5 years. I think the rule used to be 3 out of 5 years. I am not sure if that is true now. Of course you could go longer if you can demonstrate continued efforts to make a profit while incuring debt in that pursuit. You will also have to deal with state laws regarding collecting and reporting of local and state sales taxes if applicable. And if you go as a sole-proprietor and make a profit of more then $400 you have to pay FICA/Medicare taxes for yourself.
If you can meet the IRS guidelines, it is a great strategy to offset regular income from another job or a spouses income with the expenses of your profession. Want a new lens? Write off against earnings. Whole new darkroom? Write off against earnings. Just remember, eventually you have to show a profit and demonstrate a profit motive (something to be taxed) to the IRS.
This year and next I will be doing business as a sole-proprietor. (87% of all small businessses are sole-proprietorships). Then I will probably reorganize as an LLC. I could have filed in 04 and showed a loss, but felt it more prudent to only have one year of losses where I could one time expense out some gear and tools I require.
"Fundamentally I think we need to rediscover a non-ironic world"