# Is It Necessary to Become an LLC?  What did you do about your business setup?



## PeK77 (Jun 2, 2014)

I've been looking into starting an LLC in Pennsylvania as I'm starting to prepare my year long plan to launch my photography business.  My problem is that I seem to be getting different opinions on if I need to start an LLC.  

Let me start by saying, I don't own enough photography gear to warrant an insurance policy in a case where I may be sued.  I'm very professional in the way I treat people I shoot for but am concerned that if I were to go into a home and set up lights, backdrops and stands and something was to fall and hurt somebody that they could file a lawsuit.  One person recommended starting an LLC so my personal belongings would not be able to be touched in a lawsuit.  Another told me that even with an LLC I could be sued and my personal items could be in danger unless I start an S corp.

I know you're not an attorney and I should find one in my jurisdiction but what did you do?


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## sscarmack (Jun 2, 2014)

You should start it as a business once you start accepting money for it........ :roll:


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## PeK77 (Jun 2, 2014)

sscarmack said:


> You should start it as a business once you start accepting money for it........ :roll:



Right.  That will be happening within 6 months.  The question is - what kind of business to start.


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## sscarmack (Jun 2, 2014)

I honestly don't remember what I did, but I am registered and I have my business ID number.


Try searching google for your states business requirements 


Someone will come along shortly


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## The_Traveler (Jun 2, 2014)

Liability insurance is for much more than you dropping a light stand on someone.


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## Overread (Jun 2, 2014)

Try asking your local council - they often have advice and initiatives setup to help new local businesses and much of it is often free information or information packs which might well help you setup.


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## Will722 (Jun 2, 2014)

Here is more info on an LLC LLC Basics. Limited Liability Company Business Structure | Nolo.com

Personal assets are protected.


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## PeK77 (Jun 2, 2014)

Overread said:


> Try asking your local council - they often have advice and initiatives setup to help new local businesses and much of it is often free information or information packs which might well help you setup.



Just talked to my borough and they said I may need a "Home Occupancy" application?  Government makes everything so complicated.  I can't wait to see what kind of information they send me....ugh.   May end up taking is slower if this is the kind of stuff that is going to happen.


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## Will722 (Jun 2, 2014)

You may also want to find out if you need a business license in order to operate a business in city limits.


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## KmH (Jun 2, 2014)

Are you in the USA? (No location in profile).

If you are the only member of an LLC (single member or SMLLC), your personal possessions may indeed at risk if you lose a law suit.
The  LL stands for _Limited_ Liability and does not mean NO liability.
LLC law is state law, so there are 50 slightly different versions.

Single Member Limited Liability Companies

What is a Single Member LLC?


> There is some lingering worry among legal analysts as to whether a member of SMLLC will be given the same protection from liability as a member of a limited liability company with multiple members. In most states, the statute appears clear, but it may take many years for case law to develop to the extent that some lawyers will have the comfort level that they have from decades of case law on one-shareholder corporations. In the end, it seems probable that a member of a SMLLC will have no less protection than a sole shareholder of a corporation.



Limited Liability Company (LLC) | SBA.gov


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## PeK77 (Jun 2, 2014)

KmH said:


> Are you in the USA? (No location in profile).
> 
> If you are the only member of an LLC (single member or SMLLC), your personal possessions may indeed at risk if you lose a law suit.
> The  LL stands for _Limited_ Liability and does not mean NO liability.
> ...



I guess the real question is - How much $ should I be making before I take these steps.  I thought building a website to get my name out there would be a nice way to show my work and let people know that I'm available.  A neighbor suggested the LLC as thats what he did for his consultant business.  Maybe I should wait until I have earned enough to do this.  I think there are ways to file for income earned without going through all of these steps.


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## JoeW (Jun 2, 2014)

PeK77 said:


> I've been looking into starting an LLC in Pennsylvania as I'm starting to prepare my year long plan to launch my photography business.  My problem is that I seem to be getting different opinions on if I need to start an LLC.
> 
> Let me start by saying, I don't own enough photography gear to warrant an insurance policy in a case where I may be sued.  I'm very professional in the way I treat people I shoot for but am concerned that if I were to go into a home and set up lights, backdrops and stands and something was to fall and hurt somebody that they could file a lawsuit.  One person recommended starting an LLC so my personal belongings would not be able to be touched in a lawsuit.  Another told me that even with an LLC I could be sued and my personal items could be in danger unless I start an S corp.
> 
> I know you're not an attorney and I should find one in my jurisdiction but what did you do?



I'm going to assume you're in the USA (you may not be).  Incorporation and local tax laws vary with each state.  So the appropriate format for Ohio may be different for Utah or Mississippi or NY.  Also, I'm no lawyer (nor do I play one on TV).  So take all of this advice as nothing more than gossip.  Go see a lawyer or tax attorney (or some localities with have offices in city hall aimed at helping new businesses and they can offer advice on which model to go with).  Or...contact SCORE (free advice...retired Executives provide coaching and help, administered by the US Dept. of Commerce.  Okay, all of those caveats aside, I've been a sole-propriotorship, an LLC, a partnership (in some states, an LLC and a partnership are the same, in others they're not), a C-corp and an S-corp (hey--35+ years of business).  Here is what I'd have to say...

1.  The argument most people give for incorporation in some form is to protect yourself legally.  I think that's a weak one.  You need legal protection of course but it's called insurance and the appropriate forms (like very specific model releases and client agreements).  LLC is usually the best combination of legal protection while minimizing paperwork requirements.  The legal considerations may be important if you have a spouse who makes big money or if you shoot stuff that can get you sued (lots of corporate work, porn, paparazzo, corporate espionage/private investigator work).    S-Corp worked best if you were getting paid in dividends rather than actually salary.

2.  The model of incorporation has impact on what kind of tax forms you fill out.  

3.  Sole proprietorship makes sense if you just want to name your business after yourself (PeK77 & Associates).  You don't have to file a corporate return, legal requirements and tax requirements are minimal.  Otherwise, you don't have a lot of protection for your company name...you can come up with something really cool and another company can take that name.  Also, some organizations won't do business with a sole-proprietor (think of it as if a photographer proposed to shoot your wedding and they showed up with a point and shoot...you'd assume they were no good).  Additionally, if you're looking at renting/leasing office space or getting certain kinds of insurance you probably need to be incorporated in some form (LLC, partnership, C-corp, S-corp).   Sole proprietorship also significantly limited the benefits you can claim tax-wise (for instance, I don't think you can write off travel expenses to scout out your next location shoot).

4.  How much money should you make first before doing this...that's the wrong question.  Do a business plan.  Every smart business needs one.  If this is just a hobby for you and you're making beer money, skip the business plan and just get insurance and get a local lawyer to generate the model release and any other key forms.  But if you intend to make money off of this and (at some point), make this your sole or primary income, then create a business plan.  If you do this, you'll have a target market/niche.  It will identify if developing a website is a key priority or something to do 2 years from now.  It will tell you if you need to incorporate right now and if there is a particular format that matters to you.   It will identify critical expenses (for instance if you're shooting kids sports teams then a critical expense is space rental at local elementary schools, if you're shooting formal portraits than a studio is probably a critical expense, if you're shooting architecture than a tilt-shift lens is a critical expense, sports...than you need some f2.8 200mm and 400mm zoom lens).   The SCORE reference I mentioned earlier can help you with this (the business plan).

Bottom line:  don't obsess about the organizational form.  Make sure you've got insurance.  Make sure you have good, well-written, locality appropriate forms (such as model releases, property usage, contracts for your most common types of work like if you specialize in weddings or dog shows or kids sports teams).


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## JLaurenPhoto (Jun 7, 2014)

PeK77 said:


> I've been looking into starting an LLC in Pennsylvania as I'm starting to prepare my year long plan to launch my photography business.  My problem is that I seem to be getting different opinions on if I need to start an LLC.
> 
> Let me start by saying, I don't own enough photography gear to warrant an insurance policy in a case where I may be sued.  I'm very professional in the way I treat people I shoot for but am concerned that if I were to go into a home and set up lights, backdrops and stands and something was to fall and hurt somebody that they could file a lawsuit.  One person recommended starting an LLC so my personal belongings would not be able to be touched in a lawsuit.  Another told me that even with an LLC I could be sued and my personal items could be in danger unless I start an S corp.
> 
> I know you're not an attorney and I should find one in my jurisdiction but what did you do?




Well everyone has said very good information the main thing about having an llc or corporation is having line between personal and business.


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## W.Fovall (Jun 7, 2014)

you don't need anything.. just use your last name as the business name and add a Schedule C-EZ to you tax return..(if you want to pay taxes on the income) you can buy liability insurance separately fairly cheaply if you think your going to start hitting people with light stands.. biggest risk is getting caught shooting at a location on private property or at a event you don't have rights to and trying to sell the images. 
If you make a big photo studio in your house and have people coming over all the time you may need a business license from your city and check your homeowners association if your allowed to..


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## colnago1331 (Jun 11, 2014)

You absolutely want to start an LLC or similar type business. Anyone who doesn't leaves himself personally exposed. And not just what he owns. His future earnings could also be at risk. Insurance is great - definitely get it. But your insurance only protects you up to the limit you choose, and it may not protect you at all.

Let me give you an example. You don't set yourself up as a business. You agree to shoot a wedding. You start out the day of the wedding shooting the bride at her house while she's getting ready. Then, you get in your car to drive to the church for the actual ceremony itself. On the way, you get a text message. You start to read the message, and while doing so you blow a red light and hit and kill a pedestrian. That's okay - you've got auto insurance. But wait - the limits are only $100,000 for bodily injury to others and you hit a doctor, whose life is worth millions (arguably)! So your insurance pays the $100,000 but you're still _personally_ liable for damages over $100,000 because you never set up a business. Or worse, your insurance denies coverage because your policy contains a business auto exclusion - i.e. your personal auto policy does not cover you while you're in the course and scope of your employment (as a photographer). Now they won't even pay the $100,000. But you, personally, have a house, a car, and all that expensive photo equipment so the doctor's estate comes after you personally.

In the alternative, you set up an LLC. Generally, so long as you keep your LLC's finances completely separate from your personal finances, your personal assets are protected in the above situation. You might lose the photography equipment as it may be considered to be owned by the LLC, but your house, car, etc. are likely protected.

Second, you set up your LLC and get business auto insurance, which will likely protect you in the above situation. *But you should also get* *general liability insurance.* General liability insurance can help you in a variety of situations, from if you drop a camera on someone's toe to if your strobe falls over and starts a fire. It could even protect you if you get accused of sexually harassing a model. And something many people don't know about insurance policies - if you get sued for something that _*might be* covered_ under the insurance policy, then the insurer will provide you with an attorney to represent you in that lawsuit. In most cases you'll probably only have to pay your deductible, and in auto accident cases you may not even have a liability deductible. Without the right insurance in place, you might be stuck defending yourself or having to pay an attorney out of your own pocket . . . and that can be very very expensive.

Finally, in addition to getting insurance you should also have a strong Operating Agreement for the LLC (even if you're the only member of the LLC), and you should run your LLC as the Operating Agreement requires. Doing this along with keeping finances separate help insulate your personal life from your business life.

If you're seriously considering a business of any kind I highly recommend you contact a local business attorney who can help you set up the right business entity for you. If you don't know of one, call your local bar association; most have a referral service and can give you names/numbers of business attorneys.

_***The preceding is not intended to be, nor should it be considered to be, legal advice***_


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## W.Fovall (Jun 11, 2014)

and what if a space ship land on your head.... 
llc is overkill for anyone making less then $5k a year doing this..


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## colnago1331 (Jun 11, 2014)

That's true, because if you make less than $5,000/year doing photography you can *never* be held personally liable......


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## W.Fovall (Jun 11, 2014)

i run a million dollar a year company and its not a LLC.. its a DBA. carry a 5million $$ liability insurance policy... been to court many times and never had a issue with them taking my camera.. that just silly... there are laws in place to prevent the courts from just seizing your property... this is just silly... 
LLC is generally if you have 10 or more employees and make allot more then charging your friends $60 to take there picture in the park..


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## colnago1331 (Jun 11, 2014)

I don't care if you run a billion dollar company. An LLC isn't about the size of your business. An LLC - and really any business entity - is about protecting your personal assets and keeping them out of reach of anyone who might sue you on the business side. It's nice that you can afford a $5M GL policy; most people can't afford that. Especially people making $5,000/year from a side business doing photography. And, btw, $5,000/year (which you seem to think is the magic number) isn't charging your friends $60 to take their picture in the park. It's one $500 job per month for ten months.

You are right about one thing . . . well, kind of. There are laws in place to prevent the courts (well, not actually the courts, but rather plaintiffs) from just seizing your property. It's called the US Bankruptcy Code. And you don't want to have any part of that if you don't have to.


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## W.Fovall (Jun 11, 2014)

ok here you go.. 
in the instance you are just getting a LLC just to cover your butt and just run it like a home business the LLC is pointless.. you CAN and usually will be personally responsible for any debts that you inquire. plus your equipment is no longer yours, it it belongs to the company and you will loose all your gear either way..  and you get to pay the average of $800 annual tax fees plus a bunch more fees and cant just take all the profits to do what you want with.. 

 [h=2]Piercing the Corporate Veil[/h] Above we discussed the ways you can voluntarily make yourself personally liable for a corporate or LLC debt. However, a creditor can also try to go after your personal assets by eliminating the limited liability protection provided by the corporation or LLC. This is commonly referred to as piercing the corporate veil. 
 The corporate veil is usually pierced if the creditor can show that the corporation or LLC was a shell created only to provide liability protection for its owners or the company was practically inseparable from or an alter ego of its owners.
 Courts will be more likely to pierce the corporate veil if:


Corporate formalities, such as holding annual meetings and keeping minutes, were not followed. 
Certain owners exerted too much control over the corporation or LLC. 
Owners commingled personal funds with company funds or used personal funds to satisfy company obligations. 
The company was not sufficiently capitalized when it was formed.


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## colnago1331 (Jun 11, 2014)

W.Fovall said:


> ok here you go..
> in the instance you are just getting a LLC just to cover your butt and just run it like a home business the LLC is pointless.. you CAN and usually will be personally responsible for any debts that you inquire. plus your equipment is no longer yours, it it belongs to the company and you will loose all your gear either way..  and you get to pay the average of $800 annual tax fees plus a bunch more fees and cant just take all the profits to do what you want with..



Yes, you're going to be personally liable for the debts you acquire most likely because a creditor (a bank, for example) isn't going to loan money to a newly-founded LLC without some personal guaranty from the LLC member(s). But that's a far different thing than being personally liable for the damages you cause while working for/as your LLC. Let's not confuse voluntarily acquired debt with accident-based legal liability. These are two different animals.



W.Fovall said:


> *Piercing the Corporate Veil*
> 
> Above we discussed the ways you can voluntarily make yourself personally liable for a corporate or LLC debt. However, a creditor can also try to go after your personal assets by eliminating the limited liability protection provided by the corporation or LLC. This is commonly referred to as piercing the corporate veil.
> The corporate veil is usually pierced if the creditor can show that the corporation or LLC was a shell created only to provide liability protection for its owners or the company was practically inseparable from or an alter ego of its owners.
> ...



And that's why I said....



colnago1331 said:


> You absolutely want to start an LLC or similar type business. Anyone who doesn't leaves himself personally exposed. And not just what he owns. His future earnings could also be at risk. Insurance is great - definitely get it. But your insurance only protects you up to the limit you choose, and it may not protect you at all.
> 
> <snip>
> 
> ...



Red added for emphasis.

I would never advocate just forming an LLC. That would, indeed, be stupid and very unlikely to protect anyone. But if you form the LLC, separate your finances (i.e. separate bank accounts, obtain an EIN from the IRS for the LLC, etc.), obtain separate insurance for your LLC, and have in place and follow a strong operating agreement then you will, in all likelihood, be protected from personal liability.


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## W.Fovall (Jun 12, 2014)

you have to take in the information that 99% of the people on here are very small time just shooting the people around them for very little money... its like telling the girls selling lemonade on the corner to get a LLC just incase.



colnago1331 said:


> W.Fovall said:
> 
> 
> > ok here you go..
> ...


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