Intro to Business
Hi, I'm susan stripling and welcome to thirty days of wedding photography thank you for being with me so far we have a very long way to go from here, but before we delve into any of the actual shooting or teaching of styles or techniques, we first have to start about how you start your business. You know, we we all it came from nowhere. We all had a first client at one point in time, and not a lot of us went to business school. Most of my photographer, friends and colleagues sort of fell into the business as I did, and with no business background, it can often be really difficult to figure out how to get started and where to go before you even get your very first client. Now, I know a lot of us did sort of a hybrid where we were shooting weddings a little bit for friends, and there was a certain point in time where you said now now is when I'm starting my business, but what do you do when you decide that your hobby is now a business? How do you do it legally? How do you do it correctly...
? How do you take care of your money? And how do you make sure that you're not making mistakes from the very beginning that are going to trip you up years down the road? Now I definitely made mistakes we all make mistakes, but if there's anything that I can do today and in these thirty days to make sure that you don't make some of the mistakes that I did, hopefully I can do that for you. So what we're going to talk about today is actually starting your business and the first thing you need to know before you start a business is what type of business you are now I'd like to process and I'm going to say this many times throughout today I'm not an accountant and I'm not an attorney and I don't have an mba and I didn't go to school for business however, before giving any of this advice to you, I did consult my attorney and I did consult my accountant, so I know that I'm not just making up things to tell you, but if you have any questions about anything that I'm saying today, I highly advise that you find a trusted professional to talk to on your end, especially because country to country everything is different. What I'm talking about in the united states might be different where you live and what I'm talking about in new york might be different from california, so instead of taking my word as gospel it would be really helpful for you to find a professional in your area who could tell you exactly how you should be doing things and again and when you tell you how I do things, but how I do things might not be the way that you want to do things, so take it all with a grain of salt, and hopefully I can help you out just a little bit. So the first thing we're going to talk about is what type of business is your actual business? There are several different ways you can go about legally setting up your business, and the first one is to be an llc and an llc is a limited liability corporation, and if some of this is sort of business one o one to you that's great, but it wasn't to me when I got started, I didn't know what any of these things were. Luckily, I had professionals to help me out and didn't give me advice that I can now pass on to you. But in llc, the limited liability corporation is where your profits and losses from your business are passed on to you. Now what does that mean exactly? First thing, you're liable on ly for the investment that you put into your business, you're responsible for the startup and the funds that you put in on your own and nothing else, you don't have to have formal meetings throughout the year, you don't have to keep a formal minutes. Through your meetings and I know some of you are probably saying, well, it's, just me at home, in my pajamas, at my desk y what? I have formal meetings or minutes, but if you are a cz, we'll talk about in a few minutes and s corporation, these are things that you do have to do whether you're one employee or ten thousand employees, each type of business set up comes with its own legal rules with the llc. Also, you have fewer profit sharing restrictions. You can share your profits however you like between yourself, your employees yourself, you aren't restricted with how you share the income coming into your business. Another thing is that your considered self employed well, yes, you're self employed, you own your own business, but that means that you pay self employment taxes. So if you are an llc, you are being taxed by being self employed, which again might not seem like that big of a deal. But when you're putting all of these things together, if you're going to look at what you're going to be paying every single year in taxes, figuring out what your self employment taxes are is kind of a helpful line item tohave in your budget for the year, the entire net income of your business is taxable. When you are an llc and again, when you're looking at the pros and cons of how to get sat up, you should look at all of the pros and cons all the way across the board I when I lived in florida, I was an escort, which made perfect sense to me. We'll talk about that in a few minutes, but it made sense to me because I had several employees I had a studio that I was working out of, and the benefits of being an s corporation fit the type of business that I was running when I moved to new york and I shut down susan stripling photography, the s corporation in florida, I started up susan stripling photography llc, which is based out of new york the reason why I did that was because my accountant and my attorney advised me to we're gonna talk about exactly why in just a second, the other thing about being an llc you pay taxes one time a year, you don't pay multiple taxes throughout the year the way you do in a corporation it's once a year at the same time you file your personal or if you file an extension, you're taxed once a year and when it comes to taxes, if you want the really warring tax information, you're filing a ten forty and a schedule c and the schedule c covers your income and your business expenses it's attached to your personal tax filings I highly recommend you don't try this at home an escort is another option for setting up your business and an s corp is an actual corporation your business is a corporation and what does that mean? First of all it means that you have to be chartered as a corporation in your state and you can't do that by just waking up one morning and saying I'm a corporation you actually have to go through a fairly extensive process in which to be chartered as a corporation in your state and again if if you've never done this before if you don't know what you're doing if you do have a good attorney or an accountant they can help you through this entire process the first time I did it I stumbled through it myself but then once I actually hired some trusted professionals to help me out I made less mistakes I paid lesson fees because I didn't screw anything up and I knew that I was getting solid advice to help me in my endeavors with an s corporation your corporation is separate from the owner so you are not your business and your business is not you you are you and your business is a completely different entity your business is not attached just the shareholders of the business are taxed and you have to pay yourself a wage this is where a lot of people make mistakes with their s corporation because you have to pay yourself a fair wage you can't look at your business income over the year and say my business made a million dollars and I paid myself twenty five thousand dollars as a salary that's not considered a fair wage so where you can get in a lot of trouble if you're an s corporation is by not paying yourself a fair wage based on the income that your business is generating with an s corporation it comes more forms, more filings and more due dates for your taxes so that's another thing to keep in mind as you're moving ahead. The other option that you can consider is being a sole proprietor now in a sole proprietorship you are your business and your business is you and I know that a lot of you are probably sitting at home and thinking well, I am my business it's it's just me I'm the only one who does this but legally there's a vary strong distinction between all of these three things when you are a soul proprietor, you don't pay separate taxes on your business and your business income your income is your income because there is no separation between you and your business it's easy to set up a sole proprietorship it's inexpensive to do it there isn't a lengthy process with forms and filings and fees you can get going pretty much right away very easy it's easy to do your taxes because it's all on one return the only catch there is that your personal liability is completely unlimited if you don't show to a wedding if you don't deliver from a wedding if you I have a problem and you lose all of your client's files they can come after you for everything because you are your business and your businesses you they're coming after you not just your business that's something that personally made me incredibly uncomfortable, which is why I immediately steered away from being a sole proprietor. Now I'm an llc why based on everything that we've talked about so far? Why did I choose and quieted my attorney and my accountant advised me to become an llc it's pretty simple first of all I am taxed as a sole proprietorship because I am one member of my llc I'm not I don't have a ton of employees I don't have multiple shareholders I don't have multiple investors so that's a benefit for me being one person in my llc if I add another member if I bring in another shareholder or a partner or employees I can profit share however I want there's no set number there's no percentage I can do however I would like with sharing the profits of the business and as long as I don't pierce that veil I have limited liability now piercing the veil is something that you need to be very very careful about its using your business account by a pair of shoes it's using your business money for personal things it's going on vacation and buying dinner with your business debit card I'm very very careful and we'll talk about exactly how my money is managed very shortly but I am very careful that my business funds our business funds on my personal funds are personal funds because if anything ever were toe happen in any of my clients for any reason were to ever come at me legally I need to be able to show that my business and my personal have always been completely separate that the funds have never intermingled so that's something that you need to be very very careful about I believe regardless of whatever you are but especially if you go the llc route you need to keep things separate the other thing that we had to consider we talked about self employment taxes we also talked about the filing taxes that you pay when you're an s corporation my accountant and I sat down when I moved to new york and we looked at several years of my income and we looked at all of my numbers and we found that the self employment taxes would actually be less then the s corporation filing taxes and fees to pay my accountant toe file those taxes I don't do my taxes myself somebody else definitely does them for me I am a photographer I am not an accountant and I shouldn't be we all sit around and we complain about potential clients who hire a friend to do something or professional photographers who do their own website or make their own logo and everyone all gets up in arms and says, well, you should hire a professional for dude doing that your taxes and your income and your money should not be an exception and when I say don't try this at home I'm not kidding because if you mess up the seas and being audited and all of that such an incredible hassle and then becomes more expensive than doing it the right way from the beginning so we did find that myself employment taxes would be less than everything that came with filing s corporation taxes so that's why I went that way again I would like to reiterate I'm not a lawyer and I'm not an accountant I'm giving you the advice that was passed on to me from the professionals that I work with but in your state in your country where you live, you need local help to tell you how to do it correctly for you setting up my llc in new york was a completely different process than it would have been to set it up in tallahassee, florida so I'm glad that I had people with me to help me do it correctly to avoid half als in the future and that's, what all of this thirty days is trying to help you do, which is avoid any sort of hassles or difficulties down the road because you didn't do it right from the very beginning. So to move on, who helps me run my business? A lawyer, an accountant, a financial advisor? Yes, all of the above, I don't have a studio manager to do anything for me. I don't have a full time bookkeeper, I don't have someone on staff who does these things for me, but I do have an accountant, I send him my numbers for two, ten times a year, depending on kind of how freaked out I am. I look at my own numbers throughout the year, I'm constantly checking my profit and loss. I want to see my making mohr at this point in time this year than I was last year at this time, because I don't want april to roll around and get a huge tax bill that I wasn't prepared to pay. So I do send in my profit and loss statement to my attorney several times a year when my quarterly taxes are due always to make sure that I'm paying the right amount, I have a lawyer where if I have any contract questions, I could go to him if I have a client requests that don't seem quite right, I can ask advice of this person if a client comes back and says, oh, we really want to hire you, but we want to change the contract to say this instead, I have a professional that I can ask so that I can make sure that anything I tell a client in anything that I do is correct legally, and some of you might be sitting at home and thinking god, this is so much overkill is so money, you're just a photographer, all you do is shoot weddings, but one misstep is so much heartache and so much trauma and so much difficulty that I would rather make sure all of my bases are covered. So if anything does happen, I'm prepared. I have a financial adviser that I work with, who helps me with investments. He helps me manage money because I am only one person and I'm running a business with only one employee, and I want to make sure that I am maximizing my profits and then taking care of the money correctly so that it will continue to serve me in the future, you know, with what we do when I retire there, there is no pension plan. For this, there is no employer who's going to partly match my salary in my retirement years, so the on ly one my husband and I have to rely on for taking care of us in the future is ourselves, and I did a really brilliant thing, which is marry another wedding photographer, so we will be very screwed, so to say, in our retirement years, if we don't make sure that we're taking care of our money now and I don't care for making five million dollars a year or five dollars, a year, good financial planning is worth its weight in gold, no pun intended. So moving on from here the basic things that you should do when you're setting up your business and it again, it varies by city, and it varies by state you need tohave the right permits, you need to have the right licenses, what does it take to do business legally and not only your country or your state, but the town you live in every town is different? Are you collecting and paying your sales tax? I'm going to assume that you are, because if you're not, you're in trouble. It is very easy to collect and file sales tax I file online in the state of new york, and I'm not making this money, I'm simply collecting it from my clients. Holding it and then giving it to the state of new york. If I could give you one massive piece of advice it's to get a handle on your sales tax from the very beginning you need to know in your country and in your state what you're paying sales tax on. Is it the entire collection? Is it just the product? Does it matter where the wedding takes place? Does it matter where the deliverer bols go in new york? It doesn't matter where the wedding takes place, I could shoot the wedding in seattle, or I could shoot it in san francisco, or I could shoot it in new york. What matters is where the final tangible product is delivered, and if I deliver a final tangible product anywhere in the state of new york, I have to collect sales tax on the entire collection. I can't break it out into coverage plus product, it has to go together. And if it's sent to the upper west side of manhattan, I have to collect sales tax on every single thing that I've done for you in your collection. But every state varies. Don't get on the internet and look it up, you'll find conflicting advice, talk to a trusted professional and find out how to do it. And don't deviate if your clients ever give you any trouble about sales tax or tried to dodge it by paying cash are paying you under the table don't do it it is not worth it if you ever go through a sales tax audit you will wish you had done it correctly from the very beginning moving onwards insurance if you do not have insurance for your business I will come to your home and smack you having insurance for your business is non negotiable I don't care if you have one camera or five hundred cameras you need to have your equipment insured and you also need to be insured for liability in new york I'm often asked for certificates of liability before shooting a reception at a venue I have to go back to marsh which is my insurance company and say the lighthouse at chelsea piers needs an insurance certificate can you do that for me? I supply the date of the event that I'm shooting I supply the address and contact information of the venue and they write up in insurance certificate so that the lighthouse knows that I am fully insured and capable of working there some places are different when I lived in florida nobody ever asked me for a certificate of insurance and it's not the same is just making a copy of your insurance policy and sending it in it's a completely different thing with marsh you have a form that you fill out and you send back and they within about a week or to get you what you need marsh is through p p a that's where I found them and got their insurance I had many quotes from other different people I like them best I liked their pricing and their policies and their customer service just by went with them I'm not saying that I'm married to them for the rest of my life I'm open to switching if something better comes along but right now I've been really well taken care of from them so I'm very happy to stay with them I carry two million dollars in liability insurance which again some of you are sitting at home thinking two million dollars in liability insurance that's insane you never know you never know what if I plug in a battery pack and it sparks in the outlet and it sets it on fire and I burned down a wall at the reception venue is not gonna happen yeah no I mean probably not but what if it does what if I'm standing in a balcony and I'm shooting a ceremony and by seventy two two hundred for some reason dismounts from my camera and falls down and hit somebody it'll be pretty glad that I have all of this liability insurance in case something like that ever happens to me two million dollars might be a little excessive most of the venues that I work at require that I hold about a million dollars in liability hey, the cost between one million and two million was really negligible when I looked at the amount that I was going to pay every single year in insurance, but it just makes me feel more comfortable knowing that I am very, very, very covered in case anything were to happen to me for any reason whatsoever all of my gear is covered all of my computers, all of my hard drives, every linds, every everything that I have is covered just in case you never know what's going to happen to you, you never know if you're going to get in a car accident or someone's going to steal your things or anything. I want to know that my insurance company will help me replace my entire gear bag if something were to happen above and beyond all of that all of my computers, all of my hard drives everything that I used to edit is also covered now living in new york, living in the middle of brooklyn I don't own my apartment I rent and I have renter's insurance, but with my renter's insurance you have to be very careful with your homeowners and your rentals it varies by policy, but if you have something in your home that you're using for your business, it might not be covered under your renters insurance it isn't with mine, so I make sure that it's covered under my business insurance insurance is not terrific ly expensive I pay less than fifteen hundred dollars a year for both my liability and my gear it is money well spent and it is no pun intended and insurance policy it makes me feel better every time I get on a plane every time I leave home for the weekend and leave my gear behind if anybody's watching this I never ever, ever do that my dear is always with me don't visit my home when I'm not at home but if anything were to happen I know that I'm covered when I was in new orleans photographing a wedding in december I lost my eighty five millimeter one point four and for several harrowing day is my assistant night legitimately thought that we just lost it or that someone had stolen it? Luckily my client did find it in at the place she got ready in which was very helpful but then I had to figure out what I want to make a claim on the lens or do I want to just purchase a new one which is kind of the smarter thing if I lose a stove an omni balance or if I lose a flash and it's not that expensive I'm going to replace it myself but if I lose my entire gear bag I'm going to be very, very very happy that I have an insurance policy that can help me replace it now about a week and a half ago I had a tripod stolen from a reception it wasn't a very expensive tripod I'm not going to go through the hassle of getting my entrance company to give me money for it so that I can replace a tripod but if someone stole my I d for with my seventy two two hundred you better believe that I would be calling marsh first thing monday morning to see what I needed to do to get help replacing it so moving onward above and beyond the insurance that I carry through marsh I'm also a member of p p a it is not terrifically expensive I believe it's less than twenty five dollars a month and with your membership with people a comes pps indemnification trust and it's what a lot of people call errors and omissions what it does is it covers any data loss that you have if you shoot the wedding if you lose the files if anything happens to your data you are covered it covers missing an event which I hope you would only do if you were very very ill not just I don't feel like going to work today I'm pretty sure they're not going to help you with that one but if for some terrible reason you had to miss an event that does cover it. It covers missing images. It covers unhappy clients if they take you to court and it costs fifty dollars yearly for this, if anything were to happen and you did need legal representation from peep a your deductible is only two hundred dollars. I've had to use them one time back in two thousand three or two thousand four. I was not yet quite wise about my digital backups, and I had an external hard drive fail and there were several files on the external hard drive that were not on my computer. I couldn't get it recovered through any of the data recovery software is that I could have installed on my computer, so I had to send the drive off to drivesavers. I highly recommend drivesavers, they were professional and they were fast and they got my data. It cost me three thousand dollars. It actually cost me two hundred dollars, because people helped me out. I'm not saying that you should look at this as a if I screw up, they'll save me this. This isn't some sort of safety net, but if anything is to ever happen to you, it is wonderful to know that you have insurance and peep a and the indemnification trust backing you up to help you out.