Photography Business Plan
Starting a photography business by Brendan van Son

Starting a Photography Business: Company vs. Sole Proprietor

I get more questions about starting a photography business than anything else over at my photo vlog.  People always want to know how to make money.  But, I think before you even get to the point where you’re making money you need to do a couple things.  First of all, put in some time to actually get good at photography and making sure your photography is to a level where you can sell your services and for clients to be happy with the results.  Then, secondly, decide if you want to build a photography business of if you want to operate as a sole proprietor.

So, in today’s blog post I want to discuss some of these things in detail.  I did also discuss this idea in my latest video “Starting a Photography Business & How I Operate Mine”.  You can see that video below, or check out the details.

Starting a Photography Business – Why?

The decision to start any type of business is always a process.  Why should you start a photography business?  Well, there are a lot of reasons. And, of course there are reasons why you shouldn’t.

Let’s assume that if you’re reading this photography blog you’re already a photographer and you’re deciding to start selling photos.  But, you’re unsure where to go from there.  Or, you’re already selling photos and you want to take it more seriously.  You might even have a business plan.

The next step is going to decide how you want to operate your business.  And to do that, we need to first understand the difference between a sole proprietor and a company.

Sole Proprietor vs company

Sole Proprietor vs. Company

A sole proprietor is an owner/operator that files their small business income on their personal income tax.  They can be “self-employed” but don’t have a registered company.  In some countries you have to register as a sole proprietor, in others you simply operate that way and file your income from your various business transactions.  Most photographers starting out are sole proprietors.

Starting a company in photography means that you’re incorporating a business.  It essentially means that, even if you’re the sole owner and share holder, your business and your person are totally different.  Your business files corporate taxes, and you file personal taxes.  Your business takes care of all business photography-related expenses and income.  Then, that business pays you (either in salary or dividends or both).

So, which one is better?

Photography Business
A stock photo I bought with through my company. Expense paid by my company’s account rather than my personal.

Reasons for Starting a Photography Business

There are benefits to being both a sole proprietor and owning a business.  A lot of choosing which you decide has to do with how established you are in the industry, how much income you’re generating, and how reliable your work is.  But, there are some other reasons.  These are the most important ones to me.

Taxes

Ok, so this might be a bit a long bit of information. So, before you even get to it the TL;DR is that you might want to start a photography business because it means that you pay less taxes.  Or, you might not.

I want to examine 3 different scenarios and show you why it might make sense to incorporate a photography business based on taxes.

Scenario 1 –  USA

Ok, let’s imagine a scenario where the corporate tax rate is 21%. Let’s pretend that you’re earning about $100,000 from your photography business. In the US, the personal tax rate at 100k is around 24% (note that all figures are fictional or quickly generated from internet searches and not exact, or even correct; they are examples). So, if you were to file as a sole proprietor – in the most simplified terms – you would pay $24,000 in taxes.

But, if you were operated as a business, you could pay yourself $2,500 a month for a $30,000 a year annual salary. That would put your personal tax rate down into the lowest bracket at 12% meaning you would only pay $3,600 in personal taxes.

In your business, you’d then have $70,000 of income to claim. You’d pay at 21% which means $14,700 in corporate taxes. Meaning, at the end of the year you pay Uncle Sam $18,300 in total taxes rather than $24,000. That’s $5,700 extra money in your businesses pocket. Of course, you don’t have that money personally (unless you wanted to pay dividends) but your business can re-invest it in things like camera gear, with that kind of left over money, you could get 2 EOS R cameras.

Essentially, in scenario 1 if you would be paying less in taxes by filing as both a business and personal taxes, it makes sense to start a business. In some cases it’s much more drastic or less so.

Scenario 2 –  Denmark

The previous scenario is even more drastic in countries with high personal income taxes and low corporate taxes.  For example, in Denmark the average corporate tax rate was 22% in 2018 and the average personal tax rate 55.4%.

Thus in the same scenario, assuming the same income of $100,000 (yes, I know Denmark uses Krone).

A sole proprietor would pay $55,400 in taxes.

But, by creating a business paying themselves enough to live on in salary (let’s say $40,000), they’d pay $22,160 in personal taxes.  The business then has $60,000 of income to declare which translates to $13,200 in corporate taxes. Which means a total of $35,360 in taxes for uncle Morten (I assume that’s the Danish Uncle Sam).  Essentially, having a business would save them over $20,000 in taxes.

Now, of course that money stays in the company and doesn’t end up in your bank account to play with. But, it allows your business an extra $20,000 to re-invest in itself. You could buy lenses, cameras, printers, rent office space, etc.

Scenario 3 – Canada

In Scenario 3, you live in Canada. The average corporate tax is 26.5%. But, for argument sake let’s say this time you only earn about $50,000 from your photography. So, you fall in the tax bracket paying 20.5% in personal taxes.

Essentially at that level of income, if you had a business, you’d pay more in taxes. So, it’s best to just work as a sole proprietor.

photo business

Make sense?

Essentially, it’s math.

And you need to have a little bit of foresight into how much your photography business is going to make before you decide whether to incorporate a business or run as a sole proprietor.  If you’re saving a lot of money by incorporating, then it’s probably a wise move to incorporate and operate as a business.

But, that’s not the only reason why you might want to incorporate your photography business

Photography Business Plan

Liability

The second reason for starting a business is liability. For me, this was the biggest reason I decided on starting a photography business rather than continuing to operate as a sole proprietor. I run photography tours, so I needed to be covered by liability insurance. And, even better, I wanted my business to be covered.

But, on top of that, having a business covers you personally.

For example, if someone sued me while on photography business, it’s not actually me getting sued but my company. If I lost that suit and it caused my business to go bankrupt, it would be my business bankrupt and not me.

And this might seem far-fetched, but that there was once a story of a wedding photographer who got sued for $300,000 because a couple didn’t like their wedding photos. If he would have lost that suit and not had a business he could have gone bankrupt, losing his house, car, camera gear, etc. But, if he operates under a photography business, his business could go bankrupt, but he’d survive financially.

There’s lots of stories of street photographers who are sued too. With all the crazy law suits in the US, I think any photographer working in the US should at least cover themselves with liability insurance. A business is probably a good idea as well.

Hiring Staff

If you’re business is growing you might want to start hiring full-time staff: a photography assistant, an accountant, a personal assistant.  And, you can’t do that if you’re a sole proprietor.  In most countries, you need to own a business to employ people.

Sure, you can contract people as a sole proprietor, but if you want salaried staff you need a business.

Clear Cut Accounting

One of the reasons I waited so long to start my business was because I was worried about the accounting.  But, since I’ve been incorporated it’s made my accounting life so much easier, and so much more clean cut.  Now I know that all photography business is accounted for by the company. I don’t need to figure out how that works with my personal income and expenses.  The lines are much more well clearly drawn.

That’s not to say there aren’t complications. I just feel like the accounting procedure is much more clear.

Access to Business Banking and Loans

This might not be something that small photography businesses think about, but access to business banking and a loan could be massive.  Especially if you’re doing well and you want to buy studio or gallery space somewhere expensive.  Having a business means that your business can take out the loan rather than yourself personally.   Again, it protects you from personal bankruptcy if things go wrong.

Reasons Against Starting a Photography Business

I’ve kind of outlined the reasons why you should start a photography business.  And, if you’ve made it through these 1,500 words you’re probably already thinking that you should register a business, aren’t you?

But, the reality is that there are a couple good reasons not to start a photography business.

Money / Taxes

I don’t think I need to get into the taxes thing again.  If you find that you save tax money by operating as a sole proprietor, then that might be a good reason not to register as a business.

But, there are also a lot of other costs to operating a business.  So, you need to account for those costs and decide if they’re worth the cost.  Things like simply the cost of registering the business, for example.  And, in some countries you need to hire an accountant to file your tax returns.  There are financial costs in owning a business that you don’t have a sole proprietor.

Limited Personal Credit

This is actually a reason I didn’t think about until I actually started my business.  And it might seem backwards, but owning a business might hurt your own personal ability to get a loan or get a good credit card.

If you have a business then lots of the expenses fall on the business. So, your personal income will be much lower. For example, if you only pay yourself $24,000 a year because everything goes through the business, then when you apply for credit cards, mortgages, leases, that’s the annual income that you’re going to list. Even if you’re saving more money, it looks like less and can limit your credit drastically.

My personal income, for example, is extremely, extremely low because everything goes through my business.  If I lived in Canada and wanted to get a mortgage for a house, I don’t think I could at the moment because my personal income is so low.

Is Starting a Photography Business Easy?

Yes, absolutely.

The fact is that starting a photography business is as easy as registering it.  Then, grab a copy of quickbooks, maybe do a course online on accounting, and get at it.

Of course, understanding things like how to invest in your own photography business, how to operate, how to stay solvent, etc. are all going to be things to learn along the way.  But, most photography businesses are uncomplicated.

How I Operate my Business

My business is complicated.

I thought I’d answer some questions about it below:

My Business

I’m an e-resident of Estonia. My business is based there. That’s where I pay taxes.

Tallinn, Estonia
Tallinn, Estona. Isn’t she beautiful?

Salary

Each month, I pay myself a salary. That salary fluctuates based on how much work I have.  As the sole owner/operator of my company, it makes sense that I pay myself for the work I do.

Staff

Due to the rules of e-residency in Estonia I can’t hire any staff aside from myself. However, I do often contract people. I pay Greg on a contract basis for assisting. When I run a travel photography workshop and have a co-leader, he or she invoices me. I contract people on a freelance basis. I don’t have any staff, nor can I have any.

Assets

The way I handle my camera gear is a bit funny.

I didn’t have enough money in my personal account to buy new camera gear when I needed to, so I bought it and it’s owned by my company. Thus, I don’t own my 24-70, 50mm, or 100-400mm lenses my company does.

Canon 16-35mm f/4 IS

I Rent Myself Gear

All the gear that I personally own, I rent to my company from month-to-month.

My 5d, 14mm, drone, gimbal, 200d, 16-35mm, etc. are all rented to my company each month. So, each month I send my company an invoice for the rental cost of my camera gear for that month.

What About YouTube?

My YouTube earnings are now a part of my business as well. That means, whatever I earn from YouTube each month goes into my business.

It also means that anything I do on my YouTube channel can be expensed.

Expenses?

Since my business is my life, it’s made it really easy to expense things. When we go island hopping, I can expense the hotels, flights, ferries, etc. I could expense the food, but I don’t because it’s a bit of a hassle.

What About the Apartment?

The truth is that since I spend most of my time working in my apartment in Crete I could claim part of that as a “home office” expense for my business. Or rent out the space to my business. But, I don’t. I think that’s just complicated.

Office Space

That said, when we get to Cape Town, I have an office rented with 2 desks. Jodie will take one of those desks and pay me rent.

Questions About Starting a Photography Business?

If you have any questions about starting a photography business, please feel free to discuss that below.  There’s obviously a lot to it beyond what I’ve touched on.  So, feel free to discuss.

**I think that this post also needs a disclaimer that every country’s laws are different.  So, don’t take my word for it, learn your country’s laws.