Help setting up business

[jprechel]

I am trying to legally start my photography business. I have chosen the sole proprietorship route for now with plans to go LLC if/when the business starts to take off. I decided I would swing by the local Small Business Administration to see if they had any tips or local knowledge of how to proceed with setting up my business. I walked in about 10:45 am and found an empty receptionist desk and a bell to ring for service. After ringing the bell a few times over about 20 minutes I decided to walk around the hall (SBA is in a bank building) where I found a propped open door to the SBA offices. I walked in and said "Hello," "anybody here." Not a soul was there, although the door was wide open with computers, office equipment, etc. there for the taking. I left disgusted, thinking maybe I should forget the photography business and get a job at the SBA! People actually get paid for this!

Sorry about the rant, but I had to vent a little. I since have gone to my county clerk and obtained my DBA certificate. I know I need to obtain my sales and use tax permit, but I need to know if I should get a IRS EIN number first. Apparently I don't NEED one, but I some people seem to recommend one anyway. I should also say that I will be operating out of my home/on location and have no plans to hire any employees. Any thoughts?

After I have my DBA, sales and use tax permit, (EIN?), is there anything else I need to be legal? I am located in Harlingen, which is in Cameron County and I don't think I am require to get any local permits.

They sure don't make it easy to get a business going these days!

[brad]

An EIN will allow you to do things as a sole prop without spreading around your personal social security number... its a way to help prevent identity theft. Its a good idea.

Local permits will depend on where you plan to do business.. if out of your house, you may have to deal with the city on zoning. If you don't have a lot of customers in and out, they may not care, but its still a good idea to contact them anyway... they may require an occupancy permit as well. (Even for business out of your home.)

If you cordon off an area of your home and use it *exclusively* for business (and it has to be exclusive), you may be eligible for a tax write off on your federal.

If you purchase items as a business expense, you may also have to file a rendering on that property to the local taxing district.. they will want to tax you on it annually. Not a big deal for photographers most of the time as we don't have a lot of inventory, but its still one more place to stay legal.

I know I've left stuff out, but that's a start.

[toverman]

With the sales tax ID, you will also have to actually pay the sales taxes (actually, levy the proper amount from your customers, set it aside and pay your sales taxes). This might sound obvious, but I've heard of people not actually knowing this. And if you don't have any sales in a given quarter, you still have to file the $0 sales.

[Jeff Lane]

I'm with Brad -- get a separate EIN for your business even though it feels like "you" are the "business." If you do any fairly big job for a commercial entity (say, executive portraits or product shots for an extensive brochure) that company should give you a 1099 at the end of the year, and they'll need either a SSN or an EIN at that time, and you should be a little more discreet with your SSN. Identity theft of an EIN is much harder, and much less lucrative, so I've never actually seen it happen (although theoretically it can), and if it happens, it should be much easier to contain the damage and clean up the mess.

More importantly, however, you should get at least a bank account, and if you can, a credit card, in the d/b/a name you establish for your business, using the EIN. It looks more professional (giving you some added credence in marketing), but it also helps you develop the discipline of keeping your business life and your personal life separate. If you get some basic business bookkeeping software (like, for example, Quickbooks) it will help you tremendously at tax time if all your business income and expenses are in segregated accounts, you can quickly download a "Schedule C" report that will save you hours of frustration.

As far as keeping your sales tax straight, if you have only one business banking account, Quickbooks will let you set up a sub-account that looks like its own bank account on your records, but that from the bank's perspective is only only one account. You use it in your records to track money set aside for a specific purpose. In my case, I take retainers from clients, and put them into a special trust account. I only have one trust account, but in my Quickbooks, I give each client its own "account" that is a subaccount of the Trust Account at the bank. I make all deposits and withdrawals in the one bank Trust Account, but record it as a transaction in a specific client's "account." Quickbooks then includes the amount of that transaction in the overall Trust Account balance as well as in the individual client's "account." You can do your sales tax the same way, by setting up a "Sales Tax" account as a subaccount of your only business checking account. When you get paid by a client, always deposit the whole payment into your business account, but when you record it in Quickbooks, you can split that deposit recording most of it in the "main" checking account, and the appropriate part of it in the "sales tax" account. Then when it comes time to do your sales tax return, you'll have two benefits: (1) you'll know instantly how much sales tax you owe; and (2) you'll always have the money to pay the tax. And when it comes time to do your 1040 and Schedule C, you'll have all the income and expense information in one quick, easy spot.

Gook luck with your new business.

[ka5txl]

Jim,

Another important item to look at is liabilty insurance, check out some of the professional org's such as ppa

Good Luck

[jprechel]

Thanks for all the great advice. I just got my EIN online and I also just applied for my sales tax permit. I will look into opening a business account at my bank this week and I will also check out the PPA's insurance program. I already picked up quickbooks the other day since they were offering a $50 instant rebate on it at Office Depot.