CHAPTER 3-: This is the third chapter of “The Complete Guide to Starting a Photography Business.” – Once you make up your mind to become an entrepreneur in the photography industry, you need to divert your attention from thinking like an artist to thinking like a true business person. In the world of an artist, there is not much room for corporate structures and complicated business organizations.
Through an artist’s eye, the world is full of colour and life, waiting to be represented in the form of an art. The artist has little to no concern about the complexities, the intricacies, the trials and the tribulations that are daily occurrences in the world of an entrepreneur. Once you do decide to make that shift from being an artist to being an entrepreneur, you need to start taking a look at this world in a rather objective manner.
Perception of a Photography Business
One of the first questions that you need to ask yourself before you go on to establish your photography business is what do you see when you take a look at another man or another woman’s photography based business organization? Do you see an exemplary institute that is spreading happiness throughout communities and cities in your country through their wonderful works of photography?
Do you see a training ground and a breeding place for fresh, hungry and insanely talented photographers who are destined to rule the industry in the next few years? Do you see a company that is built on the hard work of men and women who have developed a strong and unwavering relationship with photography? If the answer to any of the above questions is a yes, then you are not doing a very good job of trying to become an entrepreneur.
All of these are ways in which an artist would view a photography company or a photography business. These are the first impressions that pop up in the mind of a professional photographer who tends to be free from the obligations of the business world. There is absolutely nothing wrong with harbouring such opinions about a photography business, as a matter of fact, these are quite intriguing views on the subject. However, none of these views are in harmony or in line with the mindset or mentality that is needed to be an entrepreneur.
Observe the Size of the Business
As an entrepreneur, you need to look at a business more objectively as mentioned before. Your mind cannot be distracted by the wonderful contribution that the company or its workers are making in the field of photography or in the industry of photography for that matter.
You can set aside those compliments for a later date. As an aspiring business person, you need to break down your view of the company in numbers. Every single piece of information that you have about the company should be analyzed and assess so that you can make an educated remark about the state of the company and how its progress can be expressed in business terminology.
If you want to view a company like an entrepreneur, then you must at first take into account the size of the company. Forget about the astonishing works of photography that they are churning out by the bucket load on a daily basis, forget about how talented their photographers are and forget about how hard working and dedicated the owners of the business are. Think simply about the outcome of all their endeavours and learn to categorize and compartmentalize companies on the basis of the impact that they are creating in the world of business.
5 Types of Photography Businesses That Can Exist Legally
When you look at a photography business, you should have the ability to immediately categorize it into one of the following 5 groups.
- Hobby Based Business
- Sole Proprietorship
- Limited Liability Company or Private Limited Company
In other words, you need to be very technical with your categorization. Just calling a business brilliant, outstanding or poor is not enough. You need to know exactly what the capacity of the business is based on the category in which the business belongs. The above mentioned business category terms and their meanings should be embedded in your head. You will need to have a clear and thorough understanding of these words before you can proceed with the task of launching your own photography business.
a. Hobby Based Photography Businesses
Most professional photographers or entrepreneurs who are dealing with the photography industry will claim that hobby based businesses should not even be mentioned in the same breath as other forms of businesses that are based on photography.
In their opinion, a person making money out of photography as simply a hobby rather than a serious career choice as other people do is borderline disrespect to all the other professionals working in the field. Then again, that is popular opinion and whether you want to agree with this opinion or not is completely up to you.
Perhaps, you yourself could be in need of starting a hobby based photography business. This name that has been given to such businesses is to be fair quite harsh to the people who are running these operations. Not everyone in the world has the ability or sometimes the time to make photography business a complete career choice.
Despite that, they still choose to create a business out of photography simply out of their love and passion for entrepreneurship and the craft of photography itself. These businesses may not be the most significant money makers in the world of photography businesses, but there is a great deal of inspiration that you can derive from the owners of these businesses.
The owners of a hobby based business could also be people who are simply bending the rules to be exempted and excused from all the complexities and intricacies of launching a business organization. Sometimes, you do not need to officially establish a business. You can simply run business operations under the label of a hobby. In tax terms, your work of photography will be considered a form of hobby.
This is not how everybody in the field starts their photography business, but you are sure to come across a fair few number of individuals who have adopted this eccentric approach. When you begin such a business, you are not required to fill out any additional paperwork. This allows you to cash in checks directly or have checks written to you directly without the involvement of a business organization.
he income that you generate from such a photography business will be entirely yours and will become a part of your personal income, which will be subjected to personal income taxes. It is worth noting that personal income taxes are not usually as high as business taxes, therefore many aspiring entrepreneurs in the photography industry see hobby based businesses as a way to evade taxation. Whether such an approach is unethical or disrespectful to other professionals or not is up to you to decide and judge.
With such a business under your helm, you have the provision to write off certain expenses in the case that you incur losses and if the expenses exceed your income. With that being said, you must ensure that expenses are ordinary and necessary before you can write them off. Expenses that are written off must be mentioned in a tax form.
b. Sole Proprietorship Photography Business
If you have knowledge of what a sole proprietor is, then it may seem to you that there is a fine line between owning a hobby based business in the photography industry and being a sole proprietor in the same field, but in technical terms, the two are massively different from one another.
First of all, you can make the transition from a hobby based business to sole proprietorship if you have recurring revenues i.e. in excess of a few payments. Under such circumstances, you need to acquire a business license. Before a business license can be achieved, you need to start thinking about attaining the status of a sole proprietor.
Majority of the photography businesses that you will come across are sole proprietorships. The reason for that is because photography is an art at the end of the day, and it is usually not the kind of product or service (however you may see it) which can be distributed in mass scales.
Therefore, it is not easy to construct an enormous corporation out of the blue in the photography industry. If you are unaware of what a sole proprietor is, then simply take a look at the term another time. The word sole implies that businesses such as these are run by a single individual.
In other words, only one person has the ownership of such a business and therefore the presence of a single entrepreneur or authoritative figure is enough to keep the business afloat in the industry. The one person running the business in such a company operates for the sole purpose of a profit.
If you are a sole proprietor, then your primary aim will be to provide photography products and services through the work of your employees and earn more revenue than the expenses that you have to deal with. It seems to be a quite simple equation and indeed sole proprietorship is far less uncomplicated than the other business organizations that you can form in a photography industry.
Therefore, being a sole proprietor is the best way to start out in the industry and you can then gradually move upwards towards establishing bigger photography organizations that will yield bigger dividends. If you are unsure about what kind of business to get your hands on, then simply close your eyes and go with sole proprietorship. This will serve you better than any other form of business during your initial stages in the world of entrepreneurship.
The laws of staring a sole proprietorship will depend entirely on where you live. The way you start the business must be completely compliant with the laws and the rules and regulations of the state or the city where you are planning to launch your business. The first order of action as a hopeful sole proprietor is to come up with a name for your business which must be different from your last name. This will be known as your trade name and your DBA or “doing business as”.
Once the authorities have made sure that there are no other businesses operating under the name that you have chosen for your photography business, you will be required to fill out some paperwork and pay a small fee to the government authorities. Once you have done that, you will have the liberty to advertise your business in the local newspaper using the name that you have chosen for it.
More often than not, it will take you about a year before you can break even. During that time, you can write off expenses for any loss that you have made. In the case that you are unaware of what writing off means, it’s a financial technical term that is used to refer to exemption or reduction of taxes for business owners who are just starting out their businesses.
You do not have to earn a profit in order to attain a write off. You can make a loss and still be entitled to write off expenses as long as the losses that you make are not too astronomical and are similar to the losses made by other business in the field that you are in. You must be able to convince the tax authority that you are on your way to earning a profit before you can avail the option of writing off expenses.
c. Partnership Photography Business
A partnership business in photography is hard to be differentiated from a sole proprietorship in terms of the size of the business but is quite obviously distinct in terms of its organizational structure. As the name suggests, a partnership business is based on a business partnership between two or more owners.
If you are running a partnership photography business, you do not have to run operations and fund them alone. You can receive technical, executive and financial assistance from other partners or investors. This allows you to divide the responsibility of running the business into various sections, with each partner taking care of one or more sections depending on their area of expertise.
Before you can begin a partnership business, you must make sure that there is a written agreement among all the partners who are involved. This allows you to contractually bind your partners to the business and avert disasters in the case that your business goes south and prevent a scramble for the last remnants of profit. The written agreement should clearly outline the individual responsibilities of the partners and the amount of profit that each partner is entitled to after the collection of the revenue.
A partnership business in the photography industry can be of two types. The first one is called general partnership, where all the partners are entitled to receive an equal share of the profit earned and have their personal assets on the line. In other words, the element of risk is the same for every single partner in such a form of business.
The second form of partnership is limited partnership and here at least one partner, (presumably the leader of the pack and the chief professional photographer) has their assets exposed. Limited partnership leaves room for silent partners to come into the mix. A silent partner is someone whose exposure of assets is limited and is based on the amount of money that he or she invests in the photography business.
A limited partnership business can play in your favour if you have a wealthy or affluent relative who is willing to invest a considerable sum of money in your photography business without dealing with the business complications that you are appointed to handle.
Like with any other business organization, any kind of partnership business can only be initiated with the permission of the legal authority. You need to register your business as a general or limited partnership before commencing your operations. In the forms, the roles and the liability of the individual partners needs to be mentioned and explained in detail in order to receive the clearance from the legal authorities.
d. Limited Liability Photography Company
Understanding Limited Liability Company and its function in a photography industry may be a little too difficult for you if you are just starting out a career in entrepreneurship. As a matter of fact, a Limited Liability Company or LLC as it is more commonly known is the kind of a business organization that draws comparisons with every other form of business including sole proprietorship, partnership and corporation.
You can think of it as a hybrid version of them all. The advantage of starting a photography LLC is that it is extremely effective in penetrating the photography market as it carries the benefits of all the other forms of business organizations. On the flipside, the problem of owning a LLC or trying to start a LLC is that it is outlawed in certain states.
To be specific, LLC allows you to have the taxation advantages of sole proprietorship. It gives you the funding and trust advantages of a partnership which means that multiple owners will take charge of the business and the death of one owner will not invalidate the existence of the business or the partnership. Perhaps the biggest advantage of having a LLC is that it grants you the benefit of having full-fledged limited liability, something that you can enjoy in a corporation.
If you are the kind of professional photographer who does not back down from a challenge and if love to be driven to new heights of success by your ambition, then starting a well planned out photography LLC may just be the ticket to glory in the photography industry.
e. Photography Corporation
Photography and corporations are hardly ever associated with one another but it is quite possible to have a photography based corporation under your ownership. A corporation can be owned by you all by yourself or you can have shareholders or stakeholders in the company that will act as joint owners in your corporation.
As mentioned before, your personal assets will not be in danger if the business goes bankrupt. There are ways in which you can have your assets separated from the business assets, and thus have it protected. Some of the biggest corporations in the photography industry are known to sell commodities such as photo tour books.
Given the massive stature of a corporation, it is quite needless to say that forming a corporation involves additional paperwork, greater costs and more cringe-worthy taxation. It is also worth noting that most entrepreneurs do not launch a corporation without prior experience in the photography industry. You are advised to work your way up the ladder before planning to open a major photography corporation.