One of the most important steps in starting a photography business is to apply for a business license. You need this license to legally make money from photography, and also to open a business bank account. This article tells you about the business license and certificates that you need for your photography business.
Also make sure you set up a photography business bank account after you get your business license.
- Apply for an Employer Identification Number (EIN).
- Get your state business licenses and permits.
- Pay both State and Federal taxes every year.
- DIY or Hire a Pro
My First Mistake in Starting a Photography Business
During the first year of my photography business, I was an absolute wreck. New Year’s Eve was right around the corner, and I knew that tax season would soon follow. I was also painfully aware I had done nothing tax-related all year. No quarterly tax payments, no expense reporting, nada. Thankfully, I had done a few things right such as paying my bills on time, filing for my appropriate business paperwork, and saving my business receipts in a shoebox. However, it took the entire month of January to sort through my receipts. Eventually, I hired a tax preparer who put all of my finances in order and set up my quarterly tax schedule for the following year.
I now feel pretty secure in my approach to business taxes and have some advice for those of you who are just getting started or looking to better organize your business tax approach.
1. Apply for a Business Tax Identification Number ( aka EIN)
There are several business licenses and documents you need for your photography business. Among the most important is the federal Business Tax Identification number, also known as the Employer Identification Number (EIN). This nine-digit number is like a Social Security number for your business. You will need the EIN to file your business tax returns and to fill out a w9 form for clients if they ask for it. Apply for your EIN online and will get your resulting EIN almost immediately. Be sure to keep it on file as you will likely need to produce this number frequently.
2. Get your state business licenses and permits.
While you don’t need a business license or permit for the act of taking photos, you need these documents if you intend to make money from photography. The process of applying for a business license varies according to which state or country you are in. Here in Washington State, you must have a State Business License and UBI Number. This is the process here in Washington.
How to get a business license (varies by state and county)
Determine your business structure
Declare your business as either a sole proprietorship, general partnership, limited partnership, limited liability partnership (LLP), limited liability company (LLC), corporation, or nonprofit. Most photography businesses are best off forming as an LLC. As a single-member LLC, you will be treated as if you were a sole proprietor for tax purposes with the additional benefit of protecting you in case your business gets sued. Even if you incorporate as an LLC, you should still have business insurance in place.
Name your photography business.
Choosing a good name for your photography company can be a challenge. Most photographers will elect to use their name followed by the word “Photography.” This is the most straightforward and obvious way to choose a business name, but feel free to get creative in this process. As you brainstorm, check the websites below to make sure your business name does not resemble other registered companies and trademarks.
File for a business license.
You can apply for your business license online or via postal mail. It takes a couple days to process an online application and will result in the issuing of a nine-digit UBI number, as well as a printed Business License document sent to you by mail. Note that business registrations must be renewed annually if you are a for-profit corporation or LLC, and these reminders will arrive in your mailbox in early November every year.
Create a business structure and get a Certificate of Formation
Based on your preferred business structure (ie. LLC), you may need to register with the Office of the Secretary of State. This applies to corporations, limited partnerships, LLPs, and LLCs. Both my photography company and website company are LLCs, so I have been through this process several times. It is relatively easy and can be done online or via postal mail. There is a one-time filing fee (about $180 by mail or $200 online) and you will receive a formal certificate of formation with a gold seal and UBI number printed on it. Don’t lose this document as it costs $25 to have it re-printed.
3. Pay both State and Federal taxes every year.
State tax details will vary depending on which state you are in. Here in Washington, we are fortunate to not have income taxes but must still pay state taxes. These are due at the end of January for businesses who file annually. For photography businesses in Washington State, business tax rates are relatively low and very few expenses can be deducted. As a result, filing your own state taxes is easy to do on your own.
Federal taxes are filed annually and can be more complicated since you can now deduct expenses. As a result of the extra work required for annual tax returns, this is when you may want to hire a tax preparer or financial professional to help. Your overall business taxes are determined on net income (profit minus expenses).
When are Federal Business Tax Returns Due?
If your company is a split corporation, federal taxes are due March 15; if you are a sole proprietor or individual LLC, your federal taxes are due April 15. Input these deadlines into your business calendar and don’t forget them!
4. DIY or Hire a Professional
In order to keep your business records organized and legal, be sure to set up a photography business bank account. You’ll need your EIN and business license before visiting the bank. From then on, you’ll just need to track your business expenses on a regular basis so that you can deduct these costs from your federal taxes.
You can opt to do your own business bookkeeping on your own with the help of accounting software such as FreshBooks. Or you can hire a pro to do it for you. A bookkeeper can handle your daily or monthly financial accounting needs. On the other hand, a tax preparer is someone you’ll meet with once a year to handle your business tax return filings on your behalf.
If you’re making money from photography, you’re running a business. In order to be a legally operating photography business, you must have specific licenses and open certain types of accounts. Follow these seven steps to get your business going in the right direction.