Photography LLC or Sole Proprietor—How to Make the Choice 

Should a photography business be an LLC?

In this article, we cover all the different things to consider when deciding between an LLC or sole proprietorship for your photography business.

If you’re just starting a photography business in the U.S., one of the first choices you’ll have to make is whether to form an LLC or not. 

Most of the resources for photographers we’ve seen treat this as a cut-and-dry question with the answer: Yes, all photographers should form an LLC.

But we have a different opinion. To us, the answer is: Well, it just depends.

Why? Because my wife and I had an LLC for three years then dropped it. For us, the complexity and extra cost just didn’t make sense—and we didn’t think there was a chance we’d get sued, which is the main reason to form an LLC (more on that below).

But you may feel differently. It really comes down to making an informed decision based on your tolerance for risk, the stage of your photography business, and how much complexity you’re open to dealing with.

Just want the brass tacks? Jump to the next section for some quick guidance for making a decision.

A Quick Guide for Deciding Between an LLC and Sole Proprietorship

In a rush? Here’s a quick way to decide whether you need an LLC or can just work as a sole proprietorship.

Which one describes you best:

Option 1

  • You run a small photography business and don’t plan to grow it.
  • Your photography business is pretty new.
  • You don’t have any employees and don’t plan to hire any employees in the next 6-12 months.
  • You’d rather not spend any money and/or time on extra business-related activities, like paying annual fees or filing paperwork for your business.
  • You’re not worried about being sued while doing your photography work and/or your tolerance for the risk of being sued is fairly high.
  • You don’t think your clients will notice or care whether you’re operating your photography business as an LLC.

A sole proprietorship is probably a good fit for you.

Option 2

  • You run an established and/or growing photography business.
  • You have employees or are thinking about hiring them within the next 6-12 months.
  • You don’t mind spending some money and/or time on business-related activities, like paying annual fees or filing paperwork for your business, perhaps because your business is big enough that you’ve hired a CPA or have someone in-house doing this kind of work.
  • You worry about being sued while doing your photography work and/or your tolerance for the risk of being sued is fairly low.
  • You work with high-end clients who will see your business as more professional if you’re operating as an LLC.

An LLC is probably a good fit for you.

Keep in mind, this isn’t a permanent decision. 

You can work as a sole proprietor for a while, then form an LLC when the timing makes sense for your business.

Or, if you’re a worrier and planner (or over planner?) like me and my wife, you can form an LLC out of the gate, then decide to drop it later if you feel like you don’t need it. There’s no punishment for dropping your LLC, and you can always start it again later if you want.

Defining Terms: What Is an LLC and a Sole Proprietorship?

Establishing an LLC requires paperwork and fees, though it’s not that complicated. 

On the other hand, being a sole proprietor doesn’t require anything—just by making self-employment income you’re automatically a sole proprietor.

This means that, if you don’t form an LLC, you’re automatically working as a sole proprietor. You don’t have to do anything to establish this, it’s just the default designation for self-employed individuals in the U.S. who don’t use an LLC or some other kind of business structure for their business. 

Here are definitions of each term:

  • An LLC (Limited Liability Company) is a U.S. business structure in the United States that provides personal liability protection to its owners (known as members) while allowing profits and losses to be passed through to their personal income without facing corporate taxes. This structure combines elements of both a corporation and a partnership or sole proprietorship.
  • A sole proprietorship is essentially an unincorporated business owned and run by one individual, where there is no legal distinction between the owner and the business. For photographers, this means your business earnings are your personal earnings, and you’re responsible for all aspects of the business.
  • The Number One Reason People Form an LLC

    The biggest reason small business owners form an LLC (Limited Liability Company) is to protect themselves from getting sued. 

    When you have an LLC, if someone sues you for something that happens while you’re working for your business, they can only go after the assets in the LLC—but they can’t touch your personal assets. (That’s what Limited Liability means.)

    But if you’re working as a sole proprietor, you can be sued and your assets could be directly on the line.

    That’s a scary prospect. And it’s the number one reason people form LLCs: To create a shield around their personal assets so that if they get sued, it’s their business that’s getting sued, and not them personally.

    But not all businesses run the same risk of being sued.

    For instance, the work I was doing with my wife was all freelance writing and marketing for small- and mid-sized companies. And it was all remote, so there was no in-person opportunity for us to break something or do something that could result in a lawsuit.

    Yes, we could hypothetically have broken someone’s website or made someone feel like we didn’t deliver what we promised, and that could have somehow led to a lawsuit. But for us, after three years of experience doing this work, it just didn’t seem likely. So we made the decision to drop our LLC and work as sole proprietors.

    The decision is personal and comes down to your tolerance for risk, the complexity you want to deal with, and things like whether you plan to hire people or foresee needing a loan.

    But the prospect of getting sued is important to consider when making the decision between forming an LLC or remaining as a sole proprietor for your photography business.

    A Few More Reasons People Form LLCs 

    The main criteria for choosing between an LLC and sole proprietorship are covered in the two options we shared in the first section of this article.

    But there are a few more reasons that people with growing businesses prefer LLCs.

    Those are:

    • Loans. In general, banks look more favorably on businesses that are LLCs when it comes to providing loans. They also typically want you to have an LLC or some other formal business structure if you’d like to establish a business bank account (though this varies by institution).
    • Investments. Same as above—potential investors typically look more favorably on businesses that have a formal structure, such as the type an LLC can provide.
    • Being professional. We touched on this above, but it’s worth repeating that establishing an LLC can make you appear more professional, both to clients and to colleagues. For instance, if there’s a wedding planner who you’d like to get recommendations from, it may give your legitimacy a boost if they see you have an LLC. 
    • Reduce taxes. An LLC can opt for taxation as a corporation (C or S corp) to potentially save on taxes. By choosing S corporation status, LLC owners can pay themselves a reasonable salary (subject to employment taxes) and receive remaining profits as dividends, which are generally not subject to self-employment tax. (But before you do this, we’d recommend talking to a CPA or doing some in-depth research on the IRS website.)

    Complexity vs. simplicity is a useful lens for looking at the two options. As you can see from the list above, LLCs have some great attributes, but those things carry with them a fair amount of complexity.

    If you just want to make some money as a photographer, you can go out there and do that right now as a sole proprietor. But if you want to build a big business, maximize your tax savings, and potentially take out loans or seek investments, then you’ll probably want to form an LLC.

    Pros and Cons of LLCs vs. Sole Proprietorships for Your Photography Business

    Above in the Quick Guide section we shared two lists to help you make a fast decision between forming an LLC for your photography business vs. working as a sole proprietor.

    Here, we’ve taken all the information covered in this article and divided it into pros and cons to help you evaluate the two options.

    Sole Proprietorship Pros and Cons

    • Pro—It’s easy. You don’t have to do anything to set up a sole proprietorship—it’s just a designation in how you file your taxes. Simply by working for yourself you already are a sole proprietor, with no extra steps required. So it’s an incredibly easy way to structure your business. 
    • Pro—Taxes are also easy. Also, taxes are easy to file as a sole proprietor because you’re just filing under your own name and social security number. (Learn more about taxes for photographers.)
    • Pro—It’s free. Also, you don’t have to pay anything to set up a sole proprietorship. An LLC will cost you an annual fee, which will vary depending on your state—in Tennessee, where I live, the cost is $300 a year plus $50 per additional member.
    • Con—Personal asset exposure. If something happens to someone’s property or person while you’re working for them, your personal assets could be exposed if they decide to sue you.

    LLC Pros and Cons

    • Pro—Liability protection. An LLC acts as a shield for your personal assets against business liabilities, providing a layer of financial security.
    • Pro—Tax flexibility. LLCs can use pass-through taxation (meaning, you just pay taxes as yourself, with your own social security number, with the LLC’s revenue passing through to you). But you can also choose corporate taxation structures, which could save you money. (To understand which option is best for your business, we’d recommend talking to a good CPA.)
    • Pro—Banking and investment benefits. LLCs can get EINs and create business bank accounts, business loans, and pursue investors, all of which can be hard to do as a sole proprietor.
    • Pro—Credibility and professionalism. Operating under an LLC can enhance your professional image, potentially attracting more clients and business opportunities.
    • Pro—Structural flexibility. Unlike corporations, LLCs are not required to have a board of directors or annual meetings, offering more flexibility in management.
    • Con—Cost and complexity. Setting up an LLC is more costly and complex than operating as a sole proprietor. There are initial formation fees, annual state fees, and potential for more intricate bookkeeping and legal requirements.
    • Con—State-by-state variance. Regulations and fees for LLCs can vary significantly by state, adding to the complexity of setup and maintenance.

    Still stuck?

    Don’t let this choice paralyze you. The important thing is to start doing the work—so just make a choice and get out there and start landing clients!

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