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It seems more and more common that people just kind of find themselves running a photography business without having planned on doing so. In fact, this is how my own photography business started. I had a nice camera.
I started taking lovely photos that my friends admired, and they started asking me to take photos for them. Suddenly, I had enough people asking if I'd just take some photos for them that I decided to start a business. I hadn't really planned on it, and I thought it was going to be way more complicated than I thought, but it seemed like a great way to make some extra money and get nicer gear.
I think it's rare that someone would study the industry, decide to start a business, do all the planning and such and THEN start their business. It'd be the smarter way to do it, but most of us find that it's the natural next step, and so that's how it gets going.
Some people try to give it a go first without really being legal, though, to see if they can make it work before going through "the hassle" of incorporating, are trying to keep it under the table to prevent paying more taxes, or don't know how to do it and are afraid to move forward and learn about what it takes.
Besides the legal ramifications that you risk by doing this, it will also keep you from getting clients, so you can't accurately "test the waters" without jumping in all the way.
If you've got a photography facebook page and/or website and are acting as if you're legal but aren't, I'm talking to you. Even if you don't call it a business yet, if it looks like it from the outside you're doing it.
So, let's talk about how this affects your ability to get clients and what you'll need to do to get legal.
Before we even get to the client side of things, let's talk about the huge risks of not being a legal business.
You are putting every single asset you have at risk by running a business that isn't protected by the law. Let's say you are doing some photos from a friend of her toddler. While shooting a session at a local park, her child falls and breaks an arm. Your "friend" blames you and decides to go after you because she thinks it's your fault (whether it was or not). You have none of the protection you'd get from being a business and could lose everything you own. Not only that, but when she explains that she hired you to do a photography sesssion, it begins to sound a lot like you're running a business without being one and could get you in trouble for that aspect as well. \
I know this all seems unlikely, but honestly it happens. You never think it will happen to you, but what if it does? What if your friend goes crazy and goes after you? This is even more likely if you're doing sessions for people who didn't know you previously. Not worth it at all.
Depending on how you choose to incorporate your business, your personal assets may have otherwise been protected, and with liability insurance you wouldn't be responsible for paying all the huge sums of money if you were found guilty.
Most people never fathom the risks that they face by running an illegal business. The risk of tax penalties are nothing in comparison to the risk you take every single time you do a session for someone else.
You lose a lot of respect from people if you operate your business illegally and just "on the side", and many people would never risk hiring someone who doesn't do things the right way. If you aren't going to go through the process of becoming a real business, why wouldn't you take shortcuts when working with them as well?
In order for people to spend money with you, you need to have their trust. Being legal is a big part of that. While becoming legal won't suddenly bring droves of people to you, you'll stop losing the type of people who value working with a professional just because you aren't yet.
This will vary widely depending on where you live. I highly recommend talking with an accountant or lawyer about the best business structure for you. They'll also be able to walk you through the process step-by-step and make sure you're set up correctly for your jurisdiction.
After getting your business set up, make sure you have a separate bank account, set up a system for record keeping and get proper insurance (talk to an insurance agent to see what is best for you). Yes, this will cost you some money, but you can't run a business and treat it like a hobby and expect results.
Running a business is a lot more work than people realize, it costs a lot, and there's a lot of things you are required to do that aren't very fun (especially the record keeping side of things). It is incredibly rewarding, but it isn't a decision that should be made lightly and it's certainly not for everyone. If the thought of doing that stresses you out or you don't want to do it, there's nothing wrong with keeping photography just as a hobby. Just don't treat it like a business and look for clients and pretend it's a business when it isn't. It's not worth it.
Jamie M Swanson is a Wisconsin Wedding Photographer who shares her secrets about photography marketing over at The Modern Tog. Click to check it out!