Starting a photography business...best way to run it for tax purposes...

Discussion in 'Business of Photography' started by rochelle_negle, Nov 7, 2008.

  1. Hello all..

    I'll preface this by saying I hope you all can excuse my ignorance on all this...I never quite handle this area
    of household work and figured I would look into this myself.

    I've been getting busier and busier with my photography and need to set it up as a business...

    What is the best way to do this?

    How does it work with sales tax?

    I know I'm asking a very general, broad question - so any input or even direction would be wonderful.
     
  2. Well without you saying which country you live in it's not possible. Best bet is your local government's small business help, or your local town hall.
     
  3. If you live in a big enough city with even a community college, take one of their courses in running a business. Or go to an SBA office (in the US), and they will walk you through the steps. Another good resource is your state's Secretary of State or Corporation Commission office. They will be able to tell you exactly what paperwork to fill out and when.
     
  4. best way is to make it profitable.

    Sales Tax questions are dependent on local laws.

    Avoidance is legal , evasion is illegal.
     
  5. Hire an accountant.

    Pay your taxes on time, especially withholding and FICA.

    I second making it profitable.
     
  6. You should contact a tax professional in your area. There are so many aspects to an accurate answer for your
    situation that you can't get an accurate answer here. (It's similar to asking, "How long is a piece of string?")

    I'm a CPA, so I'm naturally biased to my profession.
     
  7. I agree with Joel. Best thing you can do is set up an appointment with a CPA. There are so many things to take in
    consideration. Do you know what you're allowed and not allowed to deduct? (You may be surprised) Do you know
    what expenses to keep up with, how to record them? Do you know some taxes have to be sent in quarterly? Do you
    know how much you're going to be taxed in the first place? That will be helpful to know so you know how to set up
    your prices for maximum profitability.
     
  8. It's not something to fiddle with or to trust to advice on a blog. Consult a local accountant and attorney and get the correct answers for your locale.

    A friend of mine grew his business into three studios (two in the US, one abroad) very successfully and with a number of employees. He almost lost it all due to following bad advice on handling sales taxes. He had to get a $600,000 loan to deal with the past due amounts, interest and fines accrued over several years, which made for a couple years sweating to get back on an even keel.

    So, spend a little now to get the right answers to your questions and avoid possibly much, much bigger problems in the future!

    If unsure where to start, many places in the US there are "Lawyers for the Arts" groups who will give at least an initial consultation for little or no money, to set you on the right path.
     
  9. In many states all that stuff you mail order from out of state is legally taxable; ie stuff you skirt paying those local sales taxes on; unless its stuff you resell; or print paper that later becomes a sold print. Thus in California when I was audited I had to pay the back sales taxes on NYC items suchs as tripods; lenses; but not albums that were later resold to a customer. Its one thing that most skirt and saves one money until one is audited. One pays back sales taxes on the out of state items; PLUS penality; PLUS the interest on boths say 3 years down the road. <BR><BR>This area is one that many dont pay and feel smart about until audited and raked over the coals. In a down economy gathering these unpaid taxes is lucrative for the states. <BR><BR>Most folks "feel" its ok since they "got away with it" so long with purchases as an amateur; and are under the radar screen. <BR><BR>Your local competitor may wonder why your prices are so low; a local photo outfit or ex-employee pay tip off the skirting of sales taxes issue. <BR><BR>Since rarely due mail order outfits collect sales taxes; most folks blindly assume the tax doesnt legally have to be paid. Its an issue thats been on the books for eons and is not always enforced; but can be taxing both in money and time lost when you are caught. <BR><BR><BR><BR>One can have all sorts of taxes kick in thus one should consult a local professional a cpa in your area. Many places have city business licenses; licenses for alarm systems. Some places require permits and fees for signage on buildings and vehicles. Some places tax one on inventory each year. Some places tax one on the capital in your business each year; ie one pays tax on cash in the bank; on tripods; on capital items. One may have city fire fees per square footage for fire; for the number of fire extingisters. If one buys more of them to be safer; one pays more tax. If one rents buys a building an now one runs a business there; the city can tax on in some places on the number of parking spaces. Ones minimum natural gas bill can gas go from say 6 bucks to 15 if one converts a house to a full business. Ones cable modem bill might got from 35 bucks to 99 bucks since one is a businees now ; and one has the same service. Tax folks need money thus the change when becoming a business is more taxes. In one business I run they tax one on inventory which includes fixtures and everything they cann write down with a zillion clipboards. Thus when we made the front counter exposed to customers from 17 feet long to 25 feet long we get taxed more each year; since the "exposed counter" to customers is taxed on a per foot basis. Thus the clipboard chaps might tax an old 286 with software that cost 5200 bucks at 5200 * 0.024 = 124 dollars per year; thus one chucks the sucker out to save inventory taxes. The absurd nature of taxes is often bizzare; a dead as door nail printerr that cost us 52 grand in the early 1990's was still in our building in the corner as scrap with 240 volt cord cut off; even the motors removed. The chaps still wanted 52,000 * 0.024 = 1248 dollars on the hulk each year in taxes; thus it got cut up with a sawsall and dumped in the trash and big stuff hauled to the junkyard .<BR><BR>One can have taxes each year on just being a corporation too; whether on makes a dollar or not.<BR><BR>If one leases some equipment the salesman's game is to no mention taxes and you get a fat bill a year later for the local property tax. <BR><BR>One gambit folks do as customers is give one tax exempt number that bogus or really doesnt apply fro your photography you sold them. Thus a contractor dude might have you shoot a wedding and give you this number and demand you dont charge him sales taxes to skirt taxes; you holding the bag if audited for filing to collect taxes. Folks will give you their numbers from a boat trailer; plumbing business; or dog collar and want you to not collect sales taxes; like the number is really important and not what its really for. <BR><BR>One needs to thing about insurance as a business and on vehicles too. Your current vehicle insurance may not be so valid if its now used in a business. <BR><BR>When I was a kid in college I shot with a TLR and kept most all as profit; now older one has all theses bloody taxes, and fees running a business; and real worries its going to increase as the government needs more funds. The "overhead" with running a business has all these fixed costs that have to come out of real sales. Thus a new business often fails due to not understanding what these costs are; ie folks burn out of cash after awhile. A CPA can give one proper rules but not the hussle factor to make ends meet. Do not go too crazy with expenses.
     

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