Actually Earning a Living from Photography...

Please forgive me if there is already a thread here pertaining to this topic (I

did look before posting).

 

I'm in my 6th year of business and I've been thrilled with how well things have

been going. I realize that a large portion of whatever I'm earning needs to go

right back into the business (equipment, etc.), but at what point can I start

taking some of that money and using it for things I want to buy (clothes,

furniture, personal items)...I'm making a profit and that's great. The whole

point of going into business for myself was so that I could have a little money

of my own, so when can that happen? I know that whatever I take and claim

as "income" has to be taxed, but is that a bad thing? I don't have any

employees, so I'm not writing any payroll checks, but I'd like to be paying

myself. I took $20 out at an ATM for personal use last year and my accountant

seemed confused by that...

 

I've known photographers who claim that they operate at a loss every year, but

1) How is that legal and 2) Why would you want to do that?

 

Am I making any sense? I didn't start this business solely to support "it", I

want to support "me" too! I have money sitting there, but I'm afraid to take it

out! Help!

you definitely be paying yourself a salary and saving for retirement and have that as the number 1 priority from day 1.

Ellis took my answer. If by "making a profit" you are finally bringing in over your overhead,

you aren't making any profit. Pay yourself.

Any business can continue to lose money year after year, if there is another source of funds, a day job for instance. There is nothing illegal about it. In the U.S. the IRS looks askance at any business that doesn't make a profit one year out of five. They can judge it to not be a business, but a hobby and disallow previous "operating expense" deductions.

 

<Chas>

It all depends on how an whether you are "incorporated."

 

If you are a sole proprietor, the IRS rules stipulate that you can't go more then three years without a profit or it will consider your business a "hobby" and annul your prior years deductions and reassess your taxes based on those revised numbers. (You my also be charged penalties and interest.) (Of course, you have to be audited for any of this to happen, which is about a 1% chance these days.)

 

If you are a corporation (either S or C), then you may have losses indefinitely.... indeed, many publicly traded companies haven't made money in years... Most venture-funded companies never turn a profit, even after they go public.

 

 

 

dan

I use a "pie grid" system of determining how much *I* earn (and yes, as others note, you

have to pay yourself and pay yourself FIRST each month) and then how much I reinvest into

the business in various categories. I establish firm sales goals for each month and I

scramble a bit if it's . . . say April 23 . . . and I see myself not making the mark. You have

to light a fire under your own butt sometimes to get out there and not only make enough

to cover the expenses of a growing business, but to make it profitable and rewarding on a

personal level to keep your motivation up!

 

Just double checking, but are you writing off a lot of business expenses? That certainly

makes a huge difference in terms of how you count "profit" and taxable income every year.

I assume you know this if you have an accountant.

 

Keep at it and stay focused on the goal, the PROFIT will come :)

 

Good luck!

 

Karen

 

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It seems to me that (like many small businesses) you are a keen photographer who has `gone into business` simply because you are a good photographer, and people are paying you for that skill.

 

No offence intended but phrases such as: ` I'm making a profit and that's great.` vs. ` I don't have any employees` vs. `but I'd like to be paying myself ` vs. ` they operate at a loss every year` indicates clearly to me that there is very little grasp of the mechanics of a small business in regard to the business and accounting ledger.

 

Also, (again without offence intended) the phrases: `. I took $20 out at an ATM for personal use last year and my accountant seemed confused by that...` and ` I have money sitting there, but I'm afraid to take it out! Help!` strongly indicate to me that your accountant is acting as a simple bookkeeper and not as your business partner.

 

To address both these points I strongly suggest in the first instance, you take a PRACTICALLY focused course in business and small business management; and one which has a working overview of bookkeeping and tax issues relevant to your precinct.

 

To address the second issue I suggest you interrogate your accountant with the view to her being more proactive as your business partner; or alternatively to uncover that such is not a service his business actually has, in which case I suggest you change accountants.

 

WW

Thanks Everyone...William, I'm not offended at all! I appreciate your honesty, and you are exactly right! I took an accounting class in college, but struggled with it (of course at the time, I didn't know I would ever be going into business for myself), so I would love to revisit the topic as you said in a "practically focused" class. I think we have some that are offered periodically in our community. In the meantime, are there any good accounting books you would recommend?

`Accounting` is the sums and the ledgers, (IMO), whilst it may be useful to have an in depth knowledge, for projections and etc, `accounting` per se, was not really where I was coming from.

 

I chose my words carefully:

 

`you take a PRACTICALLY focused course in business and small business management; and one which has a working overview of bookkeeping and tax issues relevant to your precinct.`

 

I mean by that the course will have some basic accounting and accounting practices (enough for you to read understand the key elements of the bookkeeping sheets (Trail Balance; Ledgers; P&L etc) and to understand what your accountant is saying to you and to prep you to ask the accountant relevant and creative questions.

 

But the course I suggest you get to is a BUSINESS course and MANAGEMENT: it will have an accounting element, but also: tax (relevant to you) advertising, marketing, differentiations between types of businesses and the advantages and disadvantages (company, sole trader, franchisee etc)

 

What I am looking at for you is, a GENERAL course but PRACTICALLY focussed.

 

I do not know of any good accounting books, but I suggest you not go that route: if you do want to have a reference book, my guess is something like a basic `bookkeeping for dummies` would be sufficient, IMO.

 

That`s what I have: just enough to understand the terms and the language and to understand my financial advisor and my accountant and my tax agent when I speak to them and to arm me sufficiently to ask questions which they easily understand.

 

BTW here (Australia), the adult learning system has GREAT community (Municipal) night classes on many topics: usually the teachers live locally and are professional educators (in there subject area: high school; tertiary technical college and university) wanting a bit of extra money. And usually these courses are both flexible (I.e. the teacher can and will answer specific questions) and more practical than theoretical (theoretical tends to be so, for exam preparation)

 

I suggest you interrogate the teachers: that is the key IMO.

 

WW

I don't have any employees, so I'm not writing any payroll checks, but I'd like to be paying myself. I took $20 out at an ATM for personal use last year and my accountant seemed confused by that... ...............?

I take every months money for my personal use or transfer to my personal account from business account. Do I miss something?