If you have been thinking about starting your own photography business, let me first extend a congratulations. It can be very exciting to run your own business. However, before you run out to pick up your first client, you need to take the time to set up your business. While it may seem like a daunting task, it is actually relatively simple if you know what to do.
Below are five legal considerations you should follow when setting up your very first photography business:
1. Identify the legal entity that is right for you and your business.
2. Prepare your organizational documents and register your business with your state.
3. Prepare a standard contract, form model release, location release and print release.
4. Operate like a business by getting a tax id, bank account, and knowing how handling clients.
5. Know when to contact an attorney.
1. Legal Entity
There are many types of legal entities to choose from and identifying the right one for you is entirely based upon financial considerations. The primary difference between the various legal structures has to do with your personal liability, tax liability, and the actions that your corporation must perform each year and the types of policies your corporation must implement and regularly maintain to ensure accountability and fairness in your corporate practices. It is important to note, however, that no legal entity can completely insulate your personal assets from your corporate debts and you can always be held personally liable for the actions of your business in certain situations.
The types of legal entities available are limited liability companies (LLCs), partnerships (LPs or LLPs), corporations (S and C), and sole proprietorships. A brief summary of each type is listed below but it is best to consult an attorney before making your final decision.
Limited Liability Companies (“LLC”)
This structure will be right for most people as it sufficiently protects your personal assets in the event your business is sued, it reduces your tax liabilities, and there are minimal corporate governance requirements. With a LLC, the entity is separate from owner. A LLC is not taxed, instead owners report their share of profits and losses on their personal tax returns. Business profits are treated as “passing through” the entity and onto the individual members so you avoid being taxed on the corporate level and again on the individual level. A LLC is governed by an operating agreement. There are no requirements for annual meetings or recording of meeting minutes.
Partners remain personally liable for lawsuits filed against the business. The partnership entity is not taxed. Instead, owners report their share of profits and losses on their personal tax returns. A partnership is governed by a partnership agreement. There are no requirements for annual meetings or recording of meeting minutes.
In a corporation, the legal and tax structures of the business are separate from owners and personal assets are separate from business debts. It is important to note, a corporation has more governance requirements than a LLC or partnership. The corporation is governed by the bylaws and the articles. The corporation must also hold annual meetings and record meeting minutes. For C corporations, the corporation is taxed on corporate profits and shareholders are taxed on dividends (e.g. money received from corporate profits). For S Corporations, the corporation is not taxed, instead the owners report their share of profits and losses in the company on personal tax returns.
While a sole proprietorship might seem like a good idea, you should know that the owner remains personally liable for lawsuits filed against the business. You do not need to register your business at the state level so there are no corporate governance requirements. The owner must also report profit and losses on their personal tax return. Since there is no separation between the business and the owners, as the owner, you will be subject to double taxation—tax on corporate profits + income tax.
2. Organizational Documents and Registering Your Business
Depending upon the type of legal entity that you chose, you will need to prepare certain organizational documents. Each type of organization, other than a sole proprietorship, mandates that you have a governing document, which outlines the rules, procedures and practices that govern the legal entity. Each state has specific laws mandating the type of information that must be in your organizational document.
Once you have prepared your organizational documents, it is time to register your business with your state’s secretary of state office. In order to register your business you need to file, and obtain state approval of, the Articles of Incorporation (sometimes referred to as Articles of Organization) of your business. Most states have fillable forms on their websites that you can use and, generally, you can file your Articles on the state’s secretary of state website. Depending upon the type of legal entity you choose, preparing the organizational documents and filing with the state might only take a few hours.
The cost for registering your business with the state varies widely per state. However, do not register your business in a different state than you live in or plan to operate just to save money. In order to conduct business in a state other than your business’ home state (e.g. the state your business is formed in) you still must register your business with the other state’s secretary of state office.
3. Form Contract, Model Release, Location Release and/or Print Release.
I cannot stress the importance of entering into a contract every single time you provide photography services. A written contract contains language that protects both you and your work. By clearly outlining payment terms and the rights and duties of each party in a written contract, you will substantially reduce the chance of a future dispute. However, it is not always enough to simply hand the contract to your client and request a signature. I have heard countless stories from people that the client is not refusing to adhere to “x” even though it was in the contract and in order to preserve the relationship with the customer, the photographer is forced to make an exception. To avoid finding yourself in this situation, consider walking through key provisions of the contract with your client and/or requiring the client to initial next to certain key paragraphs. Thus, the client cannot later claim he or she did not know that provision was in the agreement.
If you intend to use models or plan to utilize a private location in photos you intend to sell, you need to obtain a model release or location release. A model release is a liability waiver granting the photographer the right to use the images in one form or another. The release is signed by the model and preferably a witness, and the language may vary depending upon whether the model is an adult or child. (For more information on model releases see the past Capital Photography Center blog article; When Do You Need A Model Release)
A location release is a liability waiver granting the photographer the right to shoot on private property and use the resulting images in one form or another. The release should be signed by the owner of the property or the owner’s authorized representative. Not shooting on private property? Well, do not assume you are free to shoot away. Many city and state governments require you to obtain a permit if you plan to use certain landmarks, structures or locations for commercial purposes.
A print release allows the recipient of your images to print those images for personal use. It protects your ownership rights as the photographer, while also allowing the client to share the images on a limited basis. It is important to note that a print release usually only allows the CLIENT (or any other names specifically listed on the release) to share images - it does not allow the client’s aunt’s sister’s kid to share or print the images.
4. You Are A Business Now, So Operate Like One
People often are so excited to start their business that they forget to adhere to certain acts of professionalism that can save them lots of time and energy in the future.
First and foremost, after registering your business with the state, go obtain an employer identification number (EIN). This is basically the social security number for your business and you must have one in order to obtain a bank account for your business or hire employees, among other things. Speaking of a bank account, do not forget to open one! You should not co-mingle your business and personal funds! In the event you are sued, having a bank account is one of the surest ways to prove that your business is separate from its owners and thus, protects you should someone attempt to come after your personal assets in a lawsuit.
When dealing with clients, it is important to put everything in writing! If the client calls you on the phone, as soon as you hang up send a confirmatory email to the client. And, if you intend to modify any of the terms of the contract after (or even before) the contract has been signed, ensure those modifications are in writing. When modifying your photography contract you should (a) expressly note that you are modifying the terms of the contract and (b) obtain the client’s signature and/or other written confirmation that he or she consents to such modification. Always file the contract with any emails you sent to the client and the response of the client.
Despite your best efforts, you may eventually find yourself in a dispute with a client. When this happens, first and foremost, remain professional. Many disputes can be solved by simply keeping a level head; remember, you want to avoid any form of litigation since litigation is expensive. Ensure all communications with the client are in writing and even if the client is in the wrong, try to negotiate. Also, learn from the experience. There is a good chance you can modify your photography contract and/or change your interactions with other clients to prevent similar disputes in the future. Nearly any situation can be diffused with a little professionalism.
5. When To Contact An Attorney
I recommend you establish a good relationship with an attorney early on. Now, the thought of hiring an attorney may seem overwhelming, however, it really is not. Nearly every major city has an organization that provides legal assistance to photographers, videographers, or other artists for free or on a reduced-fee basis. Also, there are many attorneys who specialize in providing legal advice to creatives and a simple Google search and/or phone call to your state’s bar membership organization should provide you with a good set of names.
You should consult an attorney on the appropriate legal structure for your business and request his or her assistance in preparing your organizational documents. Additionally, you should also have an attorney review all of your written agreements, including model release, location release, and standard photography contract. While you might be tempted to just pull sample contracts from the Internet, this is your business and each business’ needs are different. So, take the time to ensure your business is protected since you have taken the time to start your business, you should take the time to ensure both you and your work are adequately protected.
Also, you may eventually have the dreaded moment with a client – you have made every effort to resolve an issue but the client has become completely unreasonable or refuses to pay the remaining balance after cancelling the contract prematurely. At this point, you should consider consulting with an attorney. Most attorneys will give you an hour or so of their time for free, which gives them time to evaluate the case.
You also should consider consulting an attorney if the client is unjustly defaming you and your business on the Internet or in your community. I have witnessed countless photographers (and other creative professionals) have their reputations ruined because a client took it too far by calling in local media and/or defaming the person on the Internet. Your reputation is key and you need to protect it. Now, please note that you will need to be able to show the client is lying in any defamation claim (I hope you put everything in writing).
Starting your own photography business is an exciting and rewarding adventure, enjoy the journey, just take steps to protect yourself, your reputation, and your work.
Disclaimer: This article is for general information purposes only. While Adriel Sanders is an attorney, she is not your attorney. Nothing in this article should be or is intended to be taken as legal advice. You should consult an attorney for advice regarding your individual situation. Contacting Adriel Sanders in any capacity, including via the comments section, does not create an attorney-client relationship. The receipt or viewing of this information is not intended to create any attorney-client relationship.