Should You Incorporate Your Photography & Design Business?

Incorporating your photography business is an important decision.

Whether you're an established studio or just starting a photography and design business, deciding whether or not to incorporate is an important question. There are a number of factors to consider, such as legal benefits, tax incentives and financing options. Should you decide to incorporate, there are a number of different options available to you: the limited liability company (LLC), S-corporation and C-corporation, which take their names from subchapters "S" and "C" of the Internal Revenue Code, chapter one.

Legal Benefits

When you incorporate, your business becomes a legal entity separate from yourself. For your design and photography business, this is important if you are sued for trademark infringement or if one of your designs too closely resembles an already existing one.

If you are not incorporated, your personal assets including your savings, home and car can be seized. If your business operates as a corporation, your personal assets are shielded in case you are sued or fail to pay off a business debt.

Tax Considerations

Corporations enjoy the benefit of being able to deduct basic business expenses from their taxes. Limited liability corporations and S-corporations also avoid double taxation since they are not required to pay federal corporate tax. These two benefits make the LLC or S-corporation an excellent choice for a small to medium-size business.

C-corporations are required to pay federal tax on corporate profits and shareholders must also pay taxes on any dividends, so it is probably the not the best choice for your photography and design business.

Financing Ability

Incorporating can help you finance new equipment.

If you need to raise money to buy new equipment, upgrade your facilities or finance any other business expenses, your photography and design company has only one option if it is not incorporated, take out a loan. If you incorporate, you can sell shares of ownership, or "stock" in the company, to raise money. Incorporating gives you the flexibility to decide which method of raising funds is appropriate.

Should You Incorporate?

As of 2011, you can hire professionals online to incorporate your business for as little as $99. This amount may vary slightly depending on what state you incorporate in, as each state has different corporate filing fees. If you decide to form an S- or C-corporation, you are also required to hold annual meetings and record the minutes. While this is not a monetary cost, it may be inconvenient for you as a business owner. Considering the low costs and numerous benefits, it is likely you will benefit from incorporating your photography and design business.

References

• IRS.gov: Small Business and Self-Employed Tax Center
• The Company Corporation: Benefits of Incorporating
• The Company Corporation: Selecting the Right Business Structure

Resources

• The Company Corporation: Incorporate Now