I'm a wedding photographer. Do I need an LLC?

The question

An illustrative letter.

The answer

My dear, I am glad no one was hurt, and I am glad it scared you. A near miss is the cheapest lesson a business owner will ever get. You have built a real business, $40,000 a year on weekends, and real businesses need real protection. The good news is that the protection is not complicated or expensive.

What does an LLC protect?

A limited liability company creates a separate legal entity for your business. If the business is sued, or cannot pay a debt, the claim is generally limited to what the business owns, rather than your home, your car or your personal savings. For a photographer working at venues full of guests, cables and children, that separation is worth having.

What does an LLC not protect?

This is the part many people miss. In most states, you remain personally responsible for your own careless acts, even if you work through an LLC. If you set up that light stand where a child could trip over it, the injured family could still pursue you personally, not only the business. An LLC also does not protect you from debts you personally guarantee.

And the protection can be lost if you treat the business and yourself as one. If business money and personal money are mixed in the same account, a court may decide the LLC is not truly separate. That is why keeping a separate business bank account is not optional.

Why does insurance matter as much as the LLC?

Because insurance pays the claim, while an LLC only limits who can be pursued for it. For a wedding photographer, a few kinds of cover are worth pricing:

• General liability insurance. Covers injuries to guests and damage to a venue caused by your work. Many venues ask photographers to show proof of it before the wedding day.
• Equipment insurance. Covers your cameras, lenses and lights against theft, loss or damage, which can add up to thousands of dollars.
• Professional liability. Covers claims that you failed to deliver what was promised, such as lost files or a missed moment, which matters a great deal in a business where there are no second takes.

Ask an independent insurance agent to quote all three. For many small creative businesses, the yearly cost is modest compared with the risk.

Will an LLC lower my taxes?

Not by itself. The IRS treats a single-member LLC as a disregarded entity by default, which means your business income is reported on your personal return just as it is now, with the same income tax and self-employment tax. An LLC can choose to be taxed as an S corporation, which can save self-employment tax for some owners, but it adds payroll, a reasonable salary for yourself and more paperwork. At your level of profit, a CPA can tell you whether it would be worth it.

What does an LLC cost in Georgia?

Not much. Filing articles of organization with the Georgia Secretary of State costs $100, or $110 online with the service charge. Each year after that, you file an annual registration between January 1 and April 1, which costs $50, or $60 online. You will also need a registered agent, which can be you, and a federal employer identification number, which the IRS issues for free. A simple operating agreement, even for one owner, helps show the business is separate.

How do I keep the protection working?

Open a business bank account and run every payment through it. Sign contracts in the business's name. Keep records of income and expenses. Pay yourself by transferring money from the business account to your personal one, rather than paying personal bills from the business. These habits keep the LLC truly separate, and they make tax time easier too.

What else protects me?

A written contract with every couple, setting out what you will deliver, your fees, cancellations and how you handle problems, protects both sides. And on the day, simple habits prevent most accidents: sandbags on light stands, cables taped down or kept out of walkways, and a quick look around before guests arrive.

Should I wait until the business is bigger?

There is little reason to. Risk does not depend on how much you earn; it depends on what could happen at a wedding, and one serious accident or lawsuit could cost more than a year of income. Insurance for a small creative business is often a modest yearly expense, and forming a Georgia LLC costs about the price of a nice dinner. Protecting the business now, while it is still small, is far easier than untangling a problem later.

What should I do first?

Get insured first, because it protects you starting tomorrow. Then form the LLC, open the business account and update your contracts. The checklist further down puts the steps in order. You have built something worth protecting. Now it will be protected.

One thing to do this week

Ask an independent insurance agent to quote general liability, equipment and professional liability cover, then open a separate business bank account.