Questions on the business end of photography

[NewShooter]

I did my first remotely serious bit of research into how to go about getting into the business. I have to admit that I was a bit overwhelmed with the myriad of issues that come into play.

In my mind's eye, my foray into the world of making money from my photography is small in scale and would hopefully avoid many of the complexities by staynig in the "hobby" arena. Consequently, any "income" would theoretically only be reported on the Schedule C of my personal taxes. However, I am concerned about liability and the lack of apparent protection this status affords. I am also concerned I may have a naive view of how this will work.

My questions to any who read this post:


From a tax perspective, are you engaged in photography as a "hobby" type of business?
Has this status been more or less beneficial to you, in your own mind?

If in a "hobby" status, how did you go about financing your hobby/business?


If doing this is a "hobby" did you consult with a CPA and/or attorney? Was this useful for you?

Thanks for taking the time to answer, its appreciated.

[brian.austin]

Originally Posted by NewShooter

From a tax perspective, are you engaged in photography as a "hobby" type of business?

Yes. It's part time income for me.

Has this status been more or less beneficial to you, in your own mind?

So far, since I make considerably more in my "real" job.

If in a "hobby" status, how did you go about financing your hobby/business?

Initially, self-financed. It's somewhat self-supporting at this point but hasn't even come close to recovering capital costs. In other words, I'm paying my current expenses but not my original equipment prior to starting.

If doing this is a "hobby" did you consult with a CPA and/or attorney? Was this useful for you?

You bet I did. CPA first, got some recommendations, then an insurance agent and (briefly) an attorney to double check my approach. It's possible (and cheaper) to do this without all of the hassle but if you have any assets or outside income, it will hurt more than just covering your photography business if something happens. They go after EVERYTHING.

[TimAndrea]

umm, i can make some pros out there upset, but what is the advantage of actually claiming this income? kind of like tips in a restaurant.
as for financing, i bought it(loan from the bank), then paid for it, then saved some up now just pay for it when i can.
uh, why would you need to consult a lawyer or cpa? i would think if you are making a living at it or making 20k-30k you might need some help but for as little as you start out why bother. as for the lawyer what would they be able to offer.
I hope more people chime in on this subject, as you can see i feel i like i have the same questions just from a different angle.
i dont mean to be negative to being "legit" but truly curious as to the benefits if you are staying at the hobby level.
look forward to seeing some posts.

[jfrancho]

but what is the advantage of actually claiming this income?

Its the law.

[NewShooter]

Yeah, I agree. The $ I may or may not make doing this on the side is absolutely not worth the risk of getting sidways with the IRS, especially when you consider that as a "hobbyist" I can just claim the income on my normal taxes as additionnal income. The only real headache then is how to account for the sales tax for the state. I'm not sure if as a hobbyist I have to worry about that or not, that' s why I think I need to talk to a CPA and lawyer. Also, there any number of landmines in my way that I'm not even aware of that a simple meeting with a CPA and attorney that I think will help to avoid.

Any other folks out there willing to share their experience?

[nikonjedi]

I was wondering along these same lines. In addition, how does one account for taxes on " resold" items, such as prints, albums and the like. do you pay tax based on your profit only or what? As for getting sideways with the "man", PUHLEEZ, i'd rather not and unless you are making a boatload of money, in which case, you'd definitely have an accountant, as NewShooter said, it's probably not worth the risk for change anyhow.

NJ

[TimAndrea]

umm, good point jfrancho

[jfrancho]

Look at it this way, a business hires you to do a shoot for a publication on their website. They write this off as a business expense. You provided an invoice and and a receipt of payment, and they probably provided you with a purchase order. There is a pile of paperwork documenting this transaction, and failure to comply with tax laws, even if you owe no taxes on the transaction is not going to look if one party gets scrutinized by the IRS. I don't know the details of the tax laws, but my accountant certainly does.

The same goes for that contract that you had that company sign. The verbiage in that, the way you invoice them, and provide receipt of payment is something your lawyer can help you with. And should you run into trouble, you have that lawyer to rely on to represent you.

I am neither an accountant nor a lawyer, and that's why I have them on my "payroll" despite my "hobby" status.

[NewShooter]

jfrancho you mind if I ask how you approach the liability issue? Do you have insurance or membership in any pro photo organization that provides the insurance as part of that membership?

[jfrancho]

My equipment is insured through a rider on my homeowners'. No membership. All my customers come through personal referrals. Its a hobby, and for now it can stay that way. Since I own a house, have run my own single proprietorship business, and have been through a divorce, lawyers and accountants have been an important tool.

[cpurves]

Originally Posted by NewShooter

as a "hobby" type of business?

If in a "hobby" status....

If doing this is a "hobby" did you....

I really don't think there is such a thing as a hobby business. That term is only a justification of spending money for equipment. There was a time in my life when I wanted "all those deductions" that a hobby business would give me.

I do two things to bring money into my household. I am a manufacturer's sales representative and a photographer. Neither of them is a hobby. Both are business. I collect, and pay taxes when I have to. I have business licences and insurance.
Photography is one of those unique forms that can be both hobby or business. (Notice I stayed away from using the word "professional") It can be both at the same time BUT the two sides have to be seperated.
Think of this scenario -

action shots at a soccer game -

Business photographer has expenses that have to be accounted for - equipment, insurance, staff, advertising, licenses, wages, etc, etc. All of these things have to be paid for from the sales at the game because that is his only source of income.

Hobby photographer has the same expenses but doesn't HAVE to account for them.
He works for some one 9 to 5 so the soccer game is a freeby in the wage department
He doesn't advertise because the coach who is his brother in law asked him to come.
He doesn't have insurance or a business licence because it is a "hobby"
So hobby photographer says I only pay $ 0.18 for a 4X6 so I will sell it for a buck and make 82 cents profit. "HOO HOO - Wow does this hobby ever pay good!"

So business photographer (who charges $ 5.00 to cover his expenses properly) loses the business from that game. Now a year down the road Mr. Hobby photographer loses interest in the soccer games cause "it takes up too much time." "It's a lot of work" or any of 100 different excuses. Meanwhile the coach goes to the business photographer, asks for him to cover the game and complains bitterly when the price is $5.00. His brother in law used to do it for a buck.

I hope you can see where I am going with this. A hobby photographer selling against business photographers damages the whole profession. If you are going to sell something photographic then sell it like everyone else does. Research your market, compete on your abilities as a photographer, not on price. Think about how your actions affect the business photographers around you.

There are times when taking pictures or aunt Katy and her cat will make you some money and not hurt the portrait studios. But if you are going out and looking for photo jobs to pay for your camera, please, please treat it like it is your living. You will put out a better product and when time comes to be a business photographer you will have a better understanding of what has to happen to be successfull at it.

Cheers
Chris

[NewShooter]

Of your entire post, the part I agree with you most is ..."You will put out a better product..."

If there is a legal way to do the work as a "Hobbyist" where I can pay taxes properly, protect my self from legal liability, etc then that may be the way to go for me. Mostly I want the business part of the whole affair to be as simple as possible while meeting certain requirements on the legal and liability front.

I don't intend to pursue this as a full time job. I suspect I'm like the thousands of other photographers out there on this. I enjoy photography and if possible would like to generate some income from the activity. If that leads to something great, but if not, no problem.

Oh, and I also agree with your tag line, never stop learning. That's what I'm trying to do and I appreciate your insight.

Thx

[jfrancho]

Like I and others said, for specific details, talk to a lawyer and an accountant. As far as the post above about pricing, that's up to you. You do not owe anything to any establishment when determining prices. However, you cannot realistically do it right for any less than the average for your area.

[joshranwest]

From a tax perspective, are you engaged in photography as a "hobby" type of business?
Has this status been more or less beneficial to you, in your own mind?
Its a full fledged business. I am insured, and registered.

If in a "hobby" status, how did you go about financing your hobby/business?
All self financed. Thank god for day jobs! No loans here.

[tekdiver500ft]

I am with joshranwest. I fall within the law at every opportunity. My business is a legal entity, I have a tax ID (for collecting sales tax, and tax-free purchases for resale), I claim my income, I am insured. I don't want to spend time in jail, and I don't need trouble with the IRS.

I am entirely self-financed, although I would not be adverse to having an investor so that I can grow even faster.

[Songman45]

It seems to me that "hobby" and "business" just don't go together. It is either something you do soley for fun, and as such has no advantage of tax write-off or it is a business and with the privilege of tax advantage comes the burden of tax responsibility. You just can not legitimately have it both ways.