Ever since I've been taking photos, I've heard from people (as I'm sure every photographer does): "These are so nice! You should sell your photos!"
They're all right. I should sell my photos. But it's not that easy... Right?
The response (excuse) I have always come back with goes something like this: "Yeah, I've thought about it, but I don't really want to go through the trouble of making myself a business. I don't want to deal with all the tax stuff that comes with selling things to make money. It's probably a hassle."
Between you and me, I didn't really know if it was a hassle or not. In fact, until recently, I had never really explored the idea of becoming a business so I can charge people for photos. Over the past several weeks, I've been researching on the internet, asking fellow photographers, small business owners, and so on, in search of the answers I needed to be comfortable with starting a business.
It was easy and safe for me to sit behind my keyboard and try to find the answers I needed, but nothing is as good as talking to a person face-to-face about my particular situation. So I accepted the fact that I had no idea what I was doing and sought out the individuals who could help me.
The purpose of this post is to chronicle my journey in starting my own photography business. I was never really able to find "The Ultimate Guide to Starting a Photography Business Even Though You Already Have a Full Time Job That You Don't Plan on Leaving Anytime Soon" out on the Internet (weird, right? It's such a broad subject...). So this post is sort of serving as that which I have just described. Who knows, maybe someone out there will find this helpful for their situation.
Let's get into it.
Some background on my financial situation: I have a well-paying full-time job that I love, but I also love photography, and would like to get paid to do it. Luckily, I can do both. Great! But I hate filing taxes as it is, and I don't want to complicate things by having to file taxes for my business, as well.
The first decision I made was to become a Sole Proprietor. Basically, this just means that I'll be doing business under my own name. The nice thing about a Sole Proprietorship is that I can report income from my business on my personal tax return. Sounds easy enough. For the record, I haven't done this yet, but from what I've heard, it's pretty straightforward.
Okay, so I'm pursuing a Sole Proprietorship. Next.
In my research I read some things about certain municipalities requiring businesses to have permits or licenses in order to operate in said municipality. I had no idea if Portland required anything like this. I ended up getting the best information directly from the Business Licensing department at City Hall. Via email, they told me that I would not need any sort of permits or licenses to operate in the city (excellent news), but that if I wanted to sell my work out on the street (an idea I had mentioned in my original email to them), that I would need to follow the rules of selling on the sidewalk. Again, seems easy enough. So far so good!
Still, the thing I was most worried about was taxes. The last thing I want is the IRS knocking at my door because I didn't follow the right steps in setting up my business.
I spent a little time asking different people about the issue of taxes, but I wasn't really getting the answers I wanted. I also didn't want to bother anyone too much will all of my tax questions. Luckily, there are people whose job it is to be bothered by my tax questions!
I contacted an accounting firm here in Portland - Purdy Powers & Company - and they put me in touch with a Certified Personal Accountant (CPA) at their firm. I sat down with him on one of my days off from my real job to discuss my concerns with starting this business. It turns out that I should have just done this much earlier. He was able to answer all of my questions in a casual, half-hour conversation. He said I could call anytime with any further questions. They didn't charge me a dime for any of this, which was very unexpected - I had my checkbook with me, because I thought I'd be shelling out a couple of Benjamin's for this consult. It was a really good experience that really put my mind at ease. Here's a bulleted list of what we talked about, and the advice that he gave me:
- Writing off business expenses: Basically, write off anything that you can, and is a legitimate business expense. It will reduce your taxable income, and thus, the amount you pay in taxes.
- Track mileage: Yes, travel miles are a business expense. You can write off a certain amount per mile, which varies by year and state.
- Keep track of business expenses: This is very important. I currently have a spreadsheet to log all of my business expenses (for now). I'll talk about opening a separate bank account a little further down. Regardless, it's still important to track business expenses, should the IRS find reason to investigate, you'll have all of the records pertaining to purchases made for the business.
- Consider capitalizing large purchases: This one, I'm still a little foggy on. He mentioned that rather than taking an entire large purchase as a loss all at once, you can split it up over five years. I think I'll likely just take the hit of my existing camera gear, and just expense small things for now, until I get this capitalizing thing cleared up.
- Use a separate bank account for the business: I haven't acted on this one yet, but I expect to do this soon. The advantage to having a separate account is that your business assets are very clearly separated from your personal assets. This makes it much easier to keep track of business income and expenses. The accountant also said that it makes my business look more legitimate to the IRS, since I'm not just keeping track of the finances in a spreadsheet.
- Get a State Tax ID: This one I knew about already. In order to sell goods and services in Maine, you need to collect sales tax and remit it to the State. And to do this, you need to apply for a State Tax ID. I filled out the application online and it was very quick and easy, and now I'm just wait to hear back form the State.
- Sales tax: I confirmed with the accountant that what it all boils down to is that the State wants 5.5% of whatever sales you make. As long as they get a check for that amount, they are happy. I asked this question because, if I am selling items on the street, I don't want to have to add sales tax onto the price of the item (i.e. if I charge $15, they only need to give me $15). I have no problem taking the 5.5% hit on a sale, or even building that cost into the price. Knowing this just makes it easier for everyone in certain situations.
That's about everything we covered that immediately affects my goal of starting a business as a Sole Proprietor. We did discuss the future quite a bit, and about what to do if my business grows substantially, but I'll save that stuff for another post, since it's not really relevant right now.
So that's about it! Once I hear back from the State on the Sales Tax application, I should be ready to get plugging away at running my business. I owe a huge "Thank You" to Corey Templeton (an awesome local photographer), Derek Hall (CPA at Purdy Powers), and most importantly, my girlfriend, Kelsi, for her incredible support in this whole business adventure. A lot of the things you'll see me selling were her idea - she's the creative one, I just push a button.
I'm very excited to get going, and I will be writing blog posts here and there to provide updates on how things are going, and what's coming next!