Setting up home-based business... paperwork?!

[jim mucklin]

<p>I live in the other US commonwealth, your almost there. I agree with the other posts, kids, family and studio don't mix. Not to mention strangers coming to look at your equiptment. Do you have a lager enough, high enough space that can be dedicated to just shooting?<br>

I shoot on location and my business insurance is half of what it would be if I used my home, I do have an office in my home but that's it. If your not confortable with your agent, meet with another to discuss all your options as far as business and homeowners, it's competive. I pay for the peace of mind if little Johnny trips over a light stand at the church and the light wacks him in the head.<br>

I would also recomend to find a great accountant, the money and time this guy has saved me more than makes up for his tax deductible expense. Along the lines of record keeping, hard drives fail. Every year I purchased a cheap accounting ledger and do it the old fashion way with a pen and paper. I break the business down into sections (income, printing, mailing, travel miles, etc) and have other sections for every penny spent, this works for me I post to the ledger every time it happens and file my receipts. It saves time at tax time instead of sitting down with a big box of paper and trying to figure it out I take my ledger to my accountant when I do my federal taxes. If you have ever been to an audit, the book pays for itself. If you are going to use quicken or one like it, they are great, but back it up daily.<br>

Not sure about MA but I have my sales taxes setup on line with the states website twice a year, go one line fill in a couple of boxes and send them their money. done.<br>

I think by having all your ducks in a row before you setting a good foundation for your business.</p>

 

[mikael_karlsson]

<p>Justin:<br /> <br /> Why keep on telling her to call the insurance company she has her homeowner's with? Doesn't make any sense at all, especially taking into consideration what the outcome was when you did it. Unless you want her to have to deal with a big insurance mess for some reason. Being ironic and/or sarcastic? Constructive help often works a heck of a lot better...<br /> <br /> ***************<br /> Raylene:<br /> <br /> Talk to a professional insurance company specializing in coverage for photography businesses such as Hill & Usher. Join a professional photography organization that will get you discounts on, among other things, insurance. Check the various organizations to see what kind of member discounts they offer and which organization would be best suited for you.</p>

[justin_greene]

<p>"Doesn't make any sense at all, especially taking into consideration what the outcome was when you did it."<br>

Because she is trying to run a BUSINESS in her HOME. They will likely not want her to do that, and doing it and having something happen, and them not knowing, regardless of having some other insurance, will not make them happy.<br>

Talking to "a professional insurance company specializing in coverage for photography businesses such as Hill & Usher" will likely not help, since they are not a homeowner's insurance company. However, they might be able to tell her a way to convince her homeowner's policy to play ball, so it might not be a bad idea.</p>

[mikael_karlsson]

<p>Justin:<br /> <br /> Sorry but you are dead wrong. I have been running a business out of my home since 1998. No problems getting insurance for gear, liability etc. And no problems at all keeping the home owner's either. I agree that honest communication is needed but that's true for the vast majority of things.<br /> <br /> I have my home owner's with State Farm and my business insurance with Hill & Usher. <br /> <br /> I talked to my State Farm agent (the same guy we've used for forever) prior to starting the business and he said it made zero difference to him as long as I didn't try to claim anything business-related on the home owner's insurance. He recommended business insurance with a different insurer (than State Farm) and said there was no conflict whatsoever. Maybe my situation is different (Nebraska) but I don't think the difference is huge compared to other states in the US.</p>

[justin_greene]

<p>Like I said, talking to HU might give her ideas on how to work it.</p>

[mikael_karlsson]

<p>Justin:<br /> <br /> Sorry man, I just realized that my comments might have come across a lot harsher than what my intent was. The intent was no harshness at all.</p>

[aimee_pieters]

<p>All of us on this site would probably be much better off to keep our posts and suggestions to the marketing side of photography. Accountants, attorneys, insurance professionals, etc. are the best source for that type of information as that is who you will turn to if you should have a problem. You're certainly not going to post here with a serious issue down the road.</p>

[robert_sholl]

<p>I am on my 4th small business. Two I closed because they were under successful, the third failed miserably. With that in mind, take my advice for what it is worth.<br>

If you do nothing else, get a business permit and an IRS EIN. Tax evasion can get you jail time and nothing is easier to prove in tax evasion than showing you were running a business without telling the IRS.<br>

If you can open a business account at a bank that is a good thing. If not, get a credit/debit card that you use ONLY for your business. If all else fails, you can show the transactions for that card as receipts. Only use it for REAL business expenses - lenses, processing, etc. Sure lunch on a shoot is a business expense but unless you are going to track things like an accountant, dont risk losing ALL your expense declarations over a $5 lunch.<br>

Remember that you only need proof if you get audited and even if you no longer have the receipts, if you can show the transactions and you can show that the account was/is used only for your business, you will likely be ok. If you have a habit of mixing the occasional personal purchase in there, you will probably get all of it rejected.<br>

<strong>PAY YOUR SALES TAX!</strong> After I closed one of my businesses I got sloppy and didnt pay my sales tax on time for the last quarter I was open. I got slapped with a tax lien on my house based on their projection of my sales. They took the two years pervious and said, "that is about right, pay up." I had to go over EVERY transaction from the final quarter and show when I terminated the business. Thank god I had a brick and mortar presence and could show a lease ending! Given the time I spent, I might have been better off just paying the estimate. I got it all settled in less than a week but the tax lien stayed on my credit record for 7 years.<br>

Talk to your insurance company. They might be happy to sell you a business rider (mine did) or a separate policy. Just be prepared in case they say no.<br>

Dont try to expense your car. Gas yes, car no. Its an audit flag and not worth it until you get big enough to buy a company car. If you had a shoot 40 miles away they know you didnt fly so take the $.42 a mile and be happy. By the time you break out what percent was business and what was personal, the expense is not much and unless you are in a really high bracket it doesnt save you much. Is it worth an audit flag to expense $500 at in a 20% or less bracket?<br>

If you want to expense your cell phone, you had better have two. You wont get away with saying you never used it for personal calls. Even better, use Google Voice to set up a business phone number. It's a great service and one of the things that can help you on an audit is showing where you tried NOT to spend money. Buying $30K worth of gear and doing $200 in business is not going to fly.<br>

Separate as much of your personal and professional life as possible. Different email, different website. I have a personal web site, flickr account, blog, facebook, etc. None of those are referenced anywhere on my professional site and in fact I dont use my real name on my personal sites. I know that sounds backwards but you cant conduct a business under an assumed name. If its too late to use different names, just dont reference the two. The more you mix personal and business, the more the Tax Man will decide you are just trying to not pay. <br>

You can be a REALLY (Really!) sloppy records keeper as long as you dont mix your personal and professional money. Expenses records can be scribbled in a book and be accepted. They know you could not have gotten that $500 check for prints unless you actually produced prints for the client. But as soon as you order personal prints (or worse, clothes) on your business account or try to expense a vacation to Hawaii based on one stock photo sale they will be all over you. That new lens might spend way more time being used for personal pictures but its a lens.<br>

Not a lawyer, not an accountant, just a thre time failure :) Of course if I make it this time Ill be batting .250 and that gets a pretty decent contract in the NL.</p>

<p>Good Luck</p>