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01/11/2006 03:46:50 PM · #51
Damian,

LLC stands for Limited Liability Company. It is not the same thing as an Incorporated Company. It is commonly thought of as one step up from a sole proprietorship or general partnership, but is nowhere as complex as a corporation. You should be setting up some type of distinct company as a legal entity if you are planning on making money from your photos, but you might decide that a sole proprietorship is enough for you.

As for piercing the shield/veil...

There is not a huge wealth of case law on this yet, but there are a couple cases that are typically held up as barometers...

The first is the "Hobby" case, where a prospecitve home buyer sued their homebuilder because the builder basically screwed the pooch on the new house. The builder was a two-member LLC.

The court, in this case, allowed the corporate veil to be pierced, and allowed the home buyer to sue the two people who owned the LLC as individuals. However, there were several specific actions of those two people that the court cited as reasons that they would permit action against them. In reality, the two owners had set up the company as a shell and the court saw through that.
*Immediatley after the buyer's check cleared they transferred all the money out of the company into another company's accounts, without recieveing anything in exchange. And, of course, that company was owned by the same two people.
*The company never had any assets, other than the real property that they sold to the plaintiff.
*The company's lawyer told the plantiff "go ahead and sue us. There is no money in [the company]. Why do you think we set it up as an LLC in the first place?"
*One of the members of the company signed the transfer tax documents for the plaintiff's property with his own name, and in fact stated that the seller was not a LLC.

In another case where the veil was pierced (Hallowell v. Orleans Regional Hospital), the courts ruled that the main factors allowing the individuals to be sued were:
*co-mingling of assets (which basically means depositing one company's profits in another company's bank account)
*and that the LLC was undercapitalized.

That last point is important. If you have a nest egg that you are going to invest in this business, then you would be wise to make one lump sum investment from your personal accounts to your business account and then work from that business account. In doing so, you show the courts that you are staking capital for the business, and once you do so, the business is in control of that money. If you intend to pay for prints and business cards using your own credit cards or checking account, then a LLC is not for you.

Every legal thing I have read says that it is possible to sue the members of a LLC individually, but that it isn't probable. The members of the LLC need to engage in some pretty bad business practices, and in many states, they also have to commit some element of fraud.

I figure some protection is better than no protection. I also figure that if I conform to good business practices I have a better-than-even chance of not getting sued individually.

Matt, I'm wondering what other reasons you had for not selecting a LLC. If it's just that the veil can be pierced, it would seem that some protection is better than none.

Message edited by author 2006-01-11 15:48:46.
01/11/2006 04:13:59 PM · #52
Originally posted by mavrik:

Also, as far as the "pass through" method, I think you missed something - you CAN deduct expenses from a sole proprietorship and partnership. Keeping meticulous records is important either way AND $5000 isn't $5000 if you buy a cam later. That's a business deduction.

The difference in the two for income purposes is that if you run a corporation at zero profit for 10 years, you're just a bad businessperson. If you run a sole proprietorship at a zero profit for 3 years, the government assumes you are a hobbyist and removes the business deductions.

M


Forgot about this part. After further research, you're right, you can probably make as many deductions to income with pass through taxation as you can with S-corp taxation. The three year thing is a new one to me and I'm looking into it now. I was originally planning on electing S-Corp taxation, but now I'm not as sure... like I said, I'm less sure of myself here, and far more likley to go to a CPA for this.
01/12/2006 08:45:50 PM · #53
Good info from both of you on the pros and cons of going the LLC route, thank you for posting it. I originally had thought about doing LLC, but now, I have now decided to do more research before making final decisions about it. As well as talk to our accountant and attorney.

01/12/2006 10:23:44 PM · #54
Originally posted by Skyarcher:

...As well as talk to our accountant and attorney.

That is an exceptionally good idea. :) This stuff is MONDO confusing.
01/12/2006 10:35:40 PM · #55
mark for follow
thanks
01/12/2006 11:39:38 PM · #56
I don't have an accountant or a lawyer. My web hosting business is microscopic so I never really needed to do much.

Do I need a lawyer and an accountant?
01/12/2006 11:49:40 PM · #57
Thanks for the info Andrew.
01/13/2006 11:42:15 AM · #58
Originally posted by Megatherian:

I don't have an accountant or a lawyer. My web hosting business is microscopic so I never really needed to do much.

Do I need a lawyer and an accountant?


Only you can answer that question.

If you're comfortable operating under the auspices of a Sole Propietorship, and can figure out how to fill out an IRS form 1040 Schedule C, then probably not.

If my recient tretises on LLCs and such have left your head spinning and you don't have a clue what to do, then probably so.

One thing that hasn't been mentioned yet, but that is on my radar screen is sales tax. I suspect that I should be collecting sales tax on things like prints, frames, albums, etc. but I'm curious on how Matt (or anyone with a currently running studio) works that. If I'm collecting sales tax then I need to be a registered company with the state anyway.

---A
01/13/2006 11:52:36 AM · #59
I am registered with the state, I collect sales tax on all sales and I don't pay it with most vendors (all if I remembered to give them my tax id!) I keep sales tax in a separate place on quickbooks so at the end of the quarter, I know what I've collected in tax and I just remit that. :)

M
01/15/2006 09:26:50 AM · #60
This is a little off topic...do I have to get a business license or a tax id? I am not turning much of a profit at this point. I know that I am not making enough income from my photography to have to claim it on my taxes yet. After buying the 20D, I won't have to claim the photography income for a long time! HA ha!
01/15/2006 09:36:42 AM · #61
There's almost no reason not to, I think. We got our partnership paperwork filed and fixed up a couple years ago now - it's like $25 and basically just makes you official and stuff. It's hard to say - "should I keep it legal." Well... yes. But that doesn't mean you "MUST" keep it legal. lol I would suggest registering, filing with the state and getting a tax id then collecting sales tax. It's a bit of a hassle if you're small, but imagine someone gets really ticked off at you and goes to the BBB or the state and you're doing business without a business license. Much worse than someone gets ticked off at you and you are registered, etc. At least then your concern is "how do I fix this?" not "what do I tell the state - that it was my 'first' paying job?"
01/15/2006 11:20:51 AM · #62
Let's move along - try this Q.

Who is your prototypical client? Make up a best-ever client and tell us why. I will save my answer as I want you guys to really think about who you want as your #1 client. Be serious, be honest. Don't tell me "the one who buys my best piece of work for $4 million dollars!" unless you really, seriously mean to take a $4 M piece of art and sell it. What defines your best ever client?


01/15/2006 12:42:36 PM · #63
My ideal customer is a loyal customer who gives me repeat business. I don't care if they pay me $4 million dollars or not as long as they appreciate the work I do, come back and hopefully spread the word about me.

Edit: Let me know if that's too general.

Message edited by author 2006-01-15 12:42:55.
01/15/2006 01:03:28 PM · #64
Too general. :)

Why do they come to you - for what type of work? How does it go start to finish?
01/15/2006 03:28:12 PM · #65
In my case I think there will have to be two because I want to pursue both portraiture and commercial work featuring people...

My best portraiture client is the one who wants to take the time and explore their own personality. I meet a lot of people who maintain a very thin, and safe, veneer over who they really are. Wonderful things happen when that veneer is allowed to come down, even if it's only in the context of a portrait session. I also enjoy it when the client adds a challenging location that it important to them... farmer in their barn, artist in their studio.

I'm a long way from commercial work, but I want to work with clients who need images of interesting people at interesting locations. In this case I'm thinking of commercial work that has a reportage or editorial feel but planned ahead so the right peoplel or at the right location when the light is most interesting. I'll probably have to start with stock customer's interesting in those type of images and then use that to help find real clients in the commercial space.

Message edited by author 2006-01-15 15:29:41.
01/15/2006 03:59:56 PM · #66
I guess my ideal client would be one that allowed me to be creative with the portrait. A portait that has meaning and depth. I would like there to be objects in the photo that have a special meaning to the client that other people would overlook. But everytime they look at the photo it takes them back to a special time or memory in their life. In order to do this, they would have to tell me about themselves. Portraits with a plain backdrop and the client just smiling at me make me yawn. I would rather not even do them.

I would like the client to not be afraid of the camera and just relax and be themselves.
01/15/2006 04:13:15 PM · #67
I really think I need to re-evaluate my goals and just where I am headed. If I'm at too early of a stage for this mentorship just let me know.

I'm not sure who my client would be at this point. Unfortunately for health reasons I can't really get out much so I need the majority of my work to be from home. That kind of rules out portraiture since I don't think I'm going to convince too many pretty people to come and check out my basement studio built out of sheets and work lamps.

I thought I might have a chance selling stock photography but looking at other posts it seems like that is more likely to just bring in small sporadic amounts of side income.

My current job is very uninspiring though and I'm not very financially stable at this point (I don't have much for photography upgrades right now or have money for lawyers and accountants). I'd really like to work full time in photography and will do everything I can to make that happen bu I guess I'm not even sure what my options are at this point.

If I'm too far behind for this mentorship just let me know and I will graciously bow out to make room for someone else.
01/15/2006 08:27:40 PM · #68
My best client calls me on the phone and says, "I need some shots for an Emperor Penguin article so we're sending you to Antarctica tomorrow."

Why is he my best? He knows what I most enjoy shooting - nature. He knows I'll drop everything for a once in a lifetime shoot. He has complete confidence I'll get the job done.

My ideal client knows what they want, knows I can deliver, and trusts my judgement on what to deliver. Maybe I'm spoiled by the newspaper. Typical call goes, "Can you be at such and such to take pictures of such and such? We want so and so doing this for the front page."
It may sound exact, but there is a lot of leeway in there.

My worst client? "Can you shoot my wedding solo?" Why? I have a certain way of doing things. I like relaxed portraiture instead of set-ups. I could partner with someone, but I couldn't handle the pressure alone...
01/15/2006 08:31:34 PM · #69
Great answer Dahkota - perfect for where we're going. I'm looking forward to everyone else's!
01/15/2006 09:03:56 PM · #70
My best wedding client would have to be very good in communication (in letting me know what she wants). She would also reply quickly to me when I e-mail or call her (I find a lot of brides dont do this). Ofcourse I want her to love the work that ill do and the most important part would be for her not to interfere and make my life a living hell on her wedding day.
01/16/2006 05:41:13 AM · #71
:( Well, I tried to intercept the call to Dahkota for the Emperor, it went through though. So I've decided to stow away in her luggage.

;)

That would be absolutely the best for me too, or any nature shoots.

I don't do good with people. *laughs* So, I'm not going to be doing portraiture and stuff like that. Until the day comes when that awesome calls comes, I plan on trying to get stock up at AGPix, Alamy and Corbis Pro.

Yes, it will be a long road, but it is my dream, that I hope to make a reality.

I would like to know more information about licensing, incorporation, etc.
01/16/2006 02:57:53 PM · #72
My best client would have to be someone who I can have a good rapport with, not just someone who orders a print and pays then leaves. (although that is good) I much prefer to get along and have a chat or even a coffee with the people i sell to. For a couple of reasons, I am like that anyway I want to get along with everyone, plus it is a very effective marketing tool.. they walk away thinking how nice was that, I must tell my friends etc...you have more chance of word of mouth and repeat business.

I also like when clients communicate well, either via email or phone. That to me is the start of a great client.
01/16/2006 08:15:33 PM · #73
I've held off answering this question until I could think about it some. This client knows my work, likes my work, and pushes me to produce a product better than I've done before. S/he has a good eye and an open mind, is a regular and has a reasonably flexible schedule (at this time in my life). S/he is willing to pay for the quality and expertise s/he is receiving.

This client is clear about what s/he wants, while allowing creative license to achieve it.

What I can't decide, is if the client is the model (bride, portrait, etc), wants something photographed (product, nature, architecture) or is a company/third party (stock). Right now, I'm going to try out a variety and see what I'm willing to work with. All have their pros and cons - I need to see where I feel comfortable.

Becky
01/16/2006 09:49:30 PM · #74
My ideal client comes to me knowing what they want and trusting in me that I can deliver it, yet allow me to use my own creativity to achieve the final product whatever that may be (portrait, landscape, commercial etc.) Once they see the finish product they see the value of their purchase, they become repeat clients and are my best form of marketing.
01/17/2006 11:39:11 PM · #75
I typed a reply - I lost my reply. I will reply, but it may be a day or so. If the other people who haven't answered would like to continue with us, please answer asap.

Thx.
M
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