# Business or Hobby?



## lissthis (Jul 24, 2013)

Hey guys, so I know asking this question probably means I am not ready for a business... I have been doing more shoots lately but they are still pretty casual. I am now "hired" on to do a photo shoot for my company (headshots, buildings, etc), but I don't have a business license. Do I need to get one? While I should be making a good chunk off of this, I have never profited before because I am buying new camera equipment. I am not afraid of what comes along with a business, and am interested in businesses (accounting major), but I don't want to end up losing a lot money because I have a business. This is also something that I do more as I can since I work full time too. [Sorry I'm so scatter-brained!]

Thanks!


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## tirediron (Jul 24, 2013)

There's absolutely nothing wrong with a side-business/hobby-business or part-time business; call it what you will, BUT, it needs to be legitimate.  It's almost certain that you will need a municipal/county/state business license to conduct business, and depending on the volume of business and income, likely state and/or federal tax numbers as well (which, if you'll pardon my saying so, an accounting major would know, I should think).  You also need insurance.  Liability and equipment insurance so that if something happens, you are not out thousands (or even millions of dollars if you get sued).  You also need to draft and adhere to a business plan so that what you do with the money from this gives you maximum benefit.  Yes, putting most back into the business at start-up is very common, but it's not necessarily the best plan.

There was a post here some months back by a woman who made money from her hobby, and had been 'found out' by her municipal government, who were trying to levy fines and penalties against her for operating without a license which amounted to many times the amount she had made.

Granted it's likely that you could operate "under the table" for a long time before you get caught, but after doing the risk/reward analysis, I know which side I'd opt for!


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## Stevepwns (Jul 24, 2013)

You dont need anything other than your Social Security Number to have a business.   Now there are things that you can purchase as an individual to protect yourself and you clients like insurances.  But for legal purposes, as long as you claim the income (anything over $600) in a calender year, you are completely legit and breaking no laws (federally).   I would suggest looking into any local laws, but as far as a business is concerned, if you have an SSN you are straight.  Keep all your reciepts, and claim everything you can on your taxes as a "right off".   Yes its better to have Articles of Incorporation, or become an LLC.   But you dont have too.


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## tirediron (Jul 24, 2013)

Stevepwns said:


> You dont need anything other than your Social Security Number to have a business. Now there are things that you can purchase as an individual to protect yourself and you clients like insurances. But for legal purposes, as long as you claim the income (anything over $600) in a calender year, you are completely legit and breaking no laws (federally). I would suggest looking into any local laws, but as far as a business is concerned, if you have an SSN you are straight. Keep all your reciepts, and claim everything you can on your taxes as a "right off". Yes its better to have Articles of Incorporation, or become an LLC. But you dont have too.


While I can't speak with great authority on US law, I suspect that your approach here may be a bit simplistic.  Certainly not everything purchased for any business can be a [_sic_] "right off", and I suspect that state, county and municipal authorities may want to be involved at least to some degree.


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## ShooterJ (Jul 24, 2013)

Operating on just your SSN is typically what you do (in the US) when operating as a sole proprietor.. and that's perfectly ok.  However, do keep in mind that you'll probably want to play it safe and take the neccesarry steps to obtain a sales tax permit in your state.  Any tangible product in the US will require that (including prints, flash drives or discs with images)..  you could register a "doing business as" name if you want, also called a trade name.. you'll want to see about an EIN and you'll need to check with the state you're in regarding sales tax and reporting.  tirediron was correct in that regard.. and as he said, insurance!

EDIT: Just about anything purchased for business use can be a tax write off.  Also, if you work out of home a certain portion of that can be a tax write off.

It gets complex though.. so you really need to research what's considered legitimate business expense.


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## Ilovemycam (Jul 24, 2013)

Biz license?

I don't know. But good for you and your success!


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## runnah (Jul 24, 2013)

ShooterJ said:


> Operating on just your SSN is typically what you do (in the US) when operating as a sole proprietor.. and that's perfectly ok.  However, do keep in mind that you'll probably want to play it safe and take the neccesarry steps to obtain a sales tax permit in your state.  Any tangible product in the US will require that (including prints, flash drives or discs with images)..  you could register a "doing business as" name if you want, also called a trade name.. you'll want to see about an EIN and you'll need to check with the state you're in regarding sales tax and reporting.  tirediron was correct in that regard.. and as he said, insurance!
> 
> EDIT: Just about anything purchased for business use can be a tax write off.  Also, if you work out of home a certain portion of that can be a tax write off.
> 
> It gets complex though.. so you really need to research what's considered legitimate business expense.



I've been doing it for a bit. There is a loop hole that since I don't produce physical goods I don't have to charge sales tax. Also I do write off all my equipment and software purchases along with any fee associated with servers and internet. The tricky part I had to deal with was the fact due to my home loan stipulations I wasn't able to run a business out of my home but since customers don't actually come to my house I am ok.

It seem daunting but it's not nearly as hard as one would expect. My one word of advice would be to KEEP TRACK OF EVERYTHING!!! Learn to love Quicken or Excel. Write down every single expense and any income. Always have a slush fund for when tax time comes around because you always end up owing more than you think.


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## ShooterJ (Jul 24, 2013)

Yeah, as I understood it sales tax only has to be collected when you sell tangible goods. Most photographers probably will unless they deliver 100% of their work to clients electronically.


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## runnah (Jul 24, 2013)

ShooterJ said:


> Yeah, as I understood it sales tax only has to be collected when you sell tangible goods. Most photographers probably will unless they deliver 100% of their work to clients electronically.



You can get around it by having them go to places like smugmug for printing and having smugmug charge sales tax. This way you are technically only offering a service.


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## tirediron (Jul 24, 2013)

ShooterJ said:


> ...EDIT: Just about anything purchased for business use can be a tax write off. Also, if you work out of home a certain portion of that can be a tax write off...


 Is it not the case that a PORTION of the item's value can be written off?  For instance, if I buy a new D4, but I only make 25% of my income from photography, than I will only be allowed to claim 25% of the value as a write-off?  Likewise with a vehicle; you may be able to claim some of your transportation costs, but unless you have a vehicle that you use exclusively for (and I suspect registered to) the business, you're not going to be able to write off all of the costs.

Like legal advice, if you want the correct answer, book a consult with a local CPA who deals in small business.  It will be well worth the couple of hundred dollars to get correct answers from a qualified authority!


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## runnah (Jul 24, 2013)

tirediron said:


> ShooterJ said:
> 
> 
> > ...EDIT: Just about anything purchased for business use can be a tax write off. Also, if you work out of home a certain portion of that can be a tax write off...
> ...



Well the personal photos you take with your business camera can be considered as training for your business. 

It all depends on how creative your CPA can be and how comfortable you are with bending the truth.


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## tirediron (Jul 24, 2013)

runnah said:


> tirediron said:
> 
> 
> > ShooterJ said:
> ...



A lot less comfortable than the revenue authorities would be bending me over to extract their pound of flesh!


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## ShooterJ (Jul 24, 2013)

Indeed a portion of most business is written off, not 100% of it.  The US tax code is over 7 million lines... which is why I said it gets complex and research is a good idea.


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## Tony S (Jul 24, 2013)

Since you are in Alaska check with the state to see what is required to have a business or hobby/business. I'm seeing some very uniformed answers and generalities here that could get you in trouble. A lot of states now will collect tax on what you make even if it is electronic transmission of a file that you get paid for, so it's important to check with the local agencies that govern where you live (in Alaska no sale/Use tax but local city/county governments might have a sales tax). Or spend the $100 or so for an initial consult with an attorney or CPA on setting yourself up for success, as a business or hobby. There is nothing worse than a letter for the tax folks making an appointment for you wanting to see records... better have them.

Department of Revenue, State of Alaska


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## vtf (Jul 28, 2013)

I would seek a good accountant. Creative accountant worries me. Remember it is ok to avoid, not evade, but you should already know this.


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## imagemaker46 (Jul 28, 2013)

Do the shoot, enjoy the money, pay or don't pay the taxes, your choice, if it's a good chunk of money you're better off adding it to your income, if it's not a lot, take a chance.   It seems to be what most professional hobby photographers are doing.


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## DiskoJoe (Jul 30, 2013)

lissthis said:


> Hey guys, so I know asking this question probably means I am not ready for a business... I have been doing more shoots lately but they are still pretty casual. I am now "hired" on to do a photo shoot for my company (headshots, buildings, etc), but I don't have a business license. Do I need to get one? While I should be making a good chunk off of this, I have never profited before because I am buying new camera equipment. I am not afraid of what comes along with a business, and am interested in businesses (accounting major), but I don't want to end up losing a lot money because I have a business. This is also something that I do more as I can since I work full time too. [Sorry I'm so scatter-brained!]
> 
> Thanks!



You should take some entrepreneurship courses if offered at your school.


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## Browncoat (Aug 13, 2014)

Never ask about starting a business on an internet forum. You get a lot of armchair lawyer and CPA responses that have little to no value. There are some general rules of thumb, but your particular situation and location have a major part in this.

Ask a professional. Talk to a business lawyer (most will consult for free) and/or a CPA where you live.


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## JacaRanda (Aug 13, 2014)

The $600 figure that many like to toss around I believe is now $400. If you really want to find out if you need to file you may enter the information here IRS.gov 503 Error Page.


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## Tailgunner (Aug 13, 2014)

tirediron said:


> Is it not the case that a PORTION of the item's value can be written off?  For instance, if I buy a new D4, but I only make 25% of my income from photography, than I will only be allowed to claim 25% of the value as a write-off?



Who would know? I mean who would suspect a photography business spending $6,000 on a camera body that would primary be used for personal usage? It's not like writing off gears equates to free gear, you still pay for it and deduct it from your taxes. You could still end up owing money at the end of the year. 

Anyhow, It's complicated. I can't speak for Canada but I believe we can write the whole camera off in one shot or you can write off an annual depreciation for up to a certain amount of years...I believe 5yrs? I haven't actually sat down with my CPA to discuss this subject but I'm holding on to every receipt. 

As for the OP, Photography makes for a great side job. The most basic thing you can do I guess is to get a DBA (Doing Business As) which will use your SSN for a tax ID number. Then I would highly recommend anyone photographing groups, people, or events to take out insurance.


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## KmH (Aug 13, 2014)

The thread is over a year old and was dug up by a spammer who has since been banned, but ....
Check what is required by your city and state governments.
As far as US Federal :

Business or Hobby? Answer Has Implications for Deductions


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## JoeW (Aug 13, 2014)

lissthis said:


> Hey guys, so I know asking this question probably means I am not ready for a business... I have been doing more shoots lately but they are still pretty casual. I am now "hired" on to do a photo shoot for my company (headshots, buildings, etc), but I don't have a business license. Do I need to get one? While I should be making a good chunk off of this, I have never profited before because I am buying new camera equipment. I am not afraid of what comes along with a business, and am interested in businesses (accounting major), but I don't want to end up losing a lot money because I have a business. This is also something that I do more as I can since I work full time too. [Sorry I'm so scatter-brained!]
> 
> 
> Thanks!


Not to overcomplicate this but you (and a couple of the posts) are mixing a couple of issues.

1.  Do you need to formally be a business in order to do work for another business?  No.  In fact, you can operate as a sole-proprietorship in most cases.  So for taxes purposes with the IRS, this will likely be the workable approach.
2.  What does your employer require?  You see, I've operated as a one-person business (sole proprietor, LLC, C-Corp, S-Corp) at various times in my life.  And bigger businesses often times will require you to sign a contract, provide proof of insurance, have your "chief financial officer" sign the forms, sign a NDA, and a host of other nonsense.  Not all companies.  But yeah, stuff like this does happen.
3.  Then there's the issue of what your locality expects and requires of you.  For instance, they may require that you register as a business (or your state requires you to get a license as a corporation) depending upon the amount of money involved, who the company is, etc.  Let me give you an example:  I did some work for a local City.  They required me to file a quarterly "proof of a working wage" form.  I have no (and have never had any) employees.  So I'd fill the form out indicating I had no employees, send it in.  They'd send it back to request details, I'd explain and then we'd repeat it all the next quarter.

As another post indicated, the State (or County you're in) should have an office for small business startups.  Or you can contact SCORE (US Dept. of Commerce, retired business executives who offer advice for free...it's a great program).  And explain your situation and have them tell you if there is anything you need to do.

I am not a resident of Alaska nor am I an accountant or tax law specialist.  But I bet that unless you're making an obscene amount of money for this gig, there is nothing you need to do (other than to indicate it on your taxes).  Effectively you'd be a contractor, your employer could pay you and send you a 1099 or just include it as supplemental income on your paycheck.


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## Tailgunner (Aug 13, 2014)

KmH said:


> The thread is over a year old and was dug up by a spammer who has since been banned, but ....
> Check what is required by your city ans state gevernments.
> As far as US Federal :
> 
> Business or Hobby? Answer Has Implications for Deductions



Dangit.


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## Browncoat (Aug 13, 2014)

Ugh. We got necro-trolled by a spammer.


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## Scoody (Aug 13, 2014)

Well, I went from hobbyist to professional when I wadded up my Yamaha R6 on the side of a car that turned left in front of me.  After several surgeries I was given good news and bad news.  They were able to save my leg was the good news.  The condition of my leg would for ever be a detriment in working my trade as a mechanic.  I started shooting for money.  Got a DBA license and put my name out there.  Business has been growing and this past Saturday was contacted to do the local Freshman, JV and Varsity Football Team and individual photos.  212 kids.  Most of sons of very voracious sports parents.  I have been taking orders all week and almost all of them are for my most expensive package and many want extra products.  Very wise decision to go pro.


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## Santa_Claus (Aug 23, 2014)

Just wanted to add that if you are going to make money from your photography you will probably want to strive to be considered a pro in the eyes of the IRS. Primarily because as a hobbyist you cannot deduct your photography expenses. To be considered a pro the main hurdle is you need to demonstrate a "profit-motive". I have heard that you don't want to show a loss more than 2 out of 5 years, but things like economic downturns can affect such "rulings". Of course, you have to have gross income of over $600 a year to even show up. It is highly recommended that you segregate your business finances from your personal, so get a DBA or business license and open a business account. And as has been mentioned above, if you deliver anything tangible (even a thumb drive) you need to collect sales tax. I hand that part off to SmugMug. Finally, I will agree with the above that almost every expense that you can legitimately claim benefits your business can be written-off. The big exceptions are gas (you take a milage deduction, instead), clothing that _could_ be worn off set, most dry-cleaning, and "personal care" expenses like hair, makeup, manicures, etc. Hiring a hair and makeup artist to come on set, however, IS deductible! But if you pay them more than $600 be sure to get a 1099 from them! Arghhhhhh.....


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## KmH (Aug 23, 2014)

If you pay a make up artist or some other independent contractor, _you have to give them a 1099_ at the end of the year, not the other way around.


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## Santa_Claus (Aug 23, 2014)

Sorry, I meant "get a W9".


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