Which Legal Entity Should I Choose For My Boudoir Business?

Facade of legal building

Ah… the fun stuff. The legal rigamarole of setting up and running a business is usually a topic people avoid until it becomes necessary but it is important. In fact, it’s very important when you start making some money, but it’s also important as a means to protect yourself from serious monetary or asset loss if someone tries to sue you.  

This is the “Eat your vegetables!” at the dinner table moment and I’m gonna’ be servin’ up a big bowel of mixed veggies for y’all. So, pull up a chair, grab a spoon, and let’s dive in because the dinner bell is a clangin’!

First, however, a little disclaimer. I am not a lawyer and any advice given in this article is for informational purposes only. Please do your own research in forming your business entity since laws are different in all states and countries, and/or consult with a qualified professional i.e. a lawyer or CPA (certified public accountant) before moving forward.

So, which legal entity should I choose for my boudoir business? In all likelihood you’ll probably want to form a sole proprietorship, a general partnership, or an LLC. So, let’s take a closer look at these three in particular. 

Are there more? Yes, but I don’t think you want to run your boudoir photography business as a non-profitable charity… I’m just guessing.

Which Business Entity (or Structure) Should I Choose?

The first thing you’re going to have to decide is which entity you want to form for your boudoir photography business. Now, this can be changed later but for now you want to pick the structure that is right for you, right now

Choosing which entity will affect the amount of taxes you pay, the relationship between owners (if there’s more than one), and what your legal liability is. 

It’s kind of like choosing what kind of house you want to buy. Different types of houses serve different needs depending on one’s situation. You don’t need a mansion if you’re living by yourself with just a twin-size bed and that single place-setting you bought at Good Will. 

If you’re married, however, you’ll probably be looking for something that suits the both of you.

And if you’ve got a big family with lots of expensive furniture, electronics, and cars, you’re going to need something that will keep all of that safe and protected. 

Sole Proprietorship

A sole proprietorship is the easiest and least expensive entity to set up and is usually established by one individual.

With this entity you are personally liable for all debts incurred by the business, all taxes, and you can record your profit and loss as personal income.

With a sole proprietorship your business assets and liabilities, and your personal assets and liabilities are all one thing. There is no separation between the two. To use the house analogy, everything is under one roof.

This is where a lot of photographers start, with a sole proprietorship, since their business is a simple service orientated one. It’s also a good starting point if you’re just testing the waters with a business. It gives you the option of changing to another entity as things progress and start to get serious… as in expansion and more business (translation — more $$$).

A sole proprietorship is used when you don’t have a whole lot of assets that someone could come after, and by assets I mean both personally and from your business.

What About Insurance?

Insurance is a way to off-set any liability you may encounter, especially if you’re a sole proprietor. If there’s an accident on your set and someone gets hurt and you’re responsible or they sue you, if you’re insured then your insurance will cover that accident up to your limit. Of course it depends on the type of coverage you have. 

Some companies that offer insurance for photographers are:

Hiscox

NEXT

The PPA (Professional Photographers of America)

Insureon

Hill & Usher

For a bigger selection just search “photographers insurance” online and more choices will appear. (Personally, I use Hiscox.)

If you’re a sole proprietor, it’s a good idea to look into photographer’s insurance for liability, and if you have a lot of expensive gear, you can choose to get that covered as well against theft or accidental damage. 

If you’re shooting boudoir with natural light, in a safe environment like a studio or a home, you’ll  have to weigh the benefits of having insurance and its cost against the likelihood of someone getting hurt and seeking compensation for their injuries. 

Look into it though, it’s not really that expensive. 

Partnership

An entity established and operated by two or more people.

There are two types of Partnerships:

General Partnership

Also easy to set up. 

In a general partnership responsibility is shared equally among its members, or per a Partnership Agreement. If you want to go into business with your spouse, friend, family member, or business partner, this will probably be the one for you. 

All decisions, profits, and liabilities are shared so make sure everyone is included when important decisions are made because everyone will be held equally responsible.

In a general partnership (like with a sole proprietorship) your profit and loss is filed with your personal tax returns, and there is no separation between personal assets and business assets. 

Limited Partnership

In a limited partnership, one person has control of the business while the other(s) have limited input and profit. So, depending on whether your partner is active in the business or a silent partner (just providing funds) this may be the way to go.

LLC (Limited Liability Company)

An entity that protects its limited partners whereby their personal assets are protected from the business. Can also be formed by an individual and is the entity you eventually want to move into from a sole proprietorship or general partnership once you start earning some decent money, or if you have serious assets you want to protect like a house, a nice car, personal bank accounts, etc. 

Open a Separate Business Bank Account!

Once you start earning money, you’ll want to have a separate business bank account that every expense and every dollar of income comes in and out of. 

This is for auditing purposes if the IRS comes a knockin’, but also for personal asset protection, which I’ll explain in a minute.

If you need to pay yourself, do it with a check or a bank withdrawal that you can keep a record of and notate its purpose. You can even pay yourself a set salary, even if it’s $5 a month, $100 a month, or whatever but having a record of that transaction from your business account to your personal account is paramount. 

If the government ever decides to audit your business you need to be able to account for all the expenses and all the income for that business. Having it separate just makes this a whole lot easier.

Don’t Pierce the Corporate Veil 

Another really critical reason to have a separate business account is if you have an LLC as your business entity. With an LLC your personal assets and your business assets are kept separate, so your liability is limited to your business assets… unless, however, you pierce the corporate veil. 

Piercing the corporate veil is if someone can prove that there really is no separation between your personal affairs and your business affairs, and one way of doing this is if you pay for personal expenses with your business account. 

“Oh, I think I’ll pay for my daughter’s new bike with training wheels out of my business account.”

If an attorney can prove that has happened or something like that, then all the protection you acquired forming an LLC is at risk and now they can go after not only your business assets but also your personal assets, like your house, your car, your personal bank accounts… or your daughter’s new bike with training wheels… ouch.

This, of course, is a worst case scenario, but if someone got seriously injured during one of your photoshoots, like say a light stand collapsed with a heavy strobe on it and hit your model in the head and caused serious injury, your LLC will protect your personal assets.

This, of course, would be above and beyond any liability insurance you might have, but if you didn’t have that insurance and you’ve pierced the corporate veil by paying for personal expenses from your business account, then your personal assets will be at risk.

The attorney can argue that there really is no separation between your personal and business accounting. 

How Do I Form a Business Entity?

Most business entities require nothing more than filling out a form and paying a fee from the agency in your state (if you’re in the U.S.), district, or principality that handles businesses. In the U.S. that agency is usually the secretary of state.

It’s not hard to find out though, just search for “forming business entity in Maryland” or whichever state or part of the world you live in. Make sure you go to the official agency’s website because there’ll be third party outfits vying to get their grubby little hands on your money as middlemen to do it for you that will cost you more. No need for that.

Do I Need a Business License?

Depends…

Some states will require one, some won’t but you need to find out. Just remember though, you can’t get a business license until you have your DBA (doing business as) filed.

Isn’t this fun?

So, start with filing your DBA first before you attempt to get a business license and/or form your entity. Life will be easier that way. 

Should I Get an EIN Number?

EIN stands for Employer Identification Number, is issued by the federal government, and functions like a social security number for your business. 

It’s also known as a federal tax ID. (Yeah, taxes!)

Most banks will require an EIN to open up a business account. Forming certain types of entities will also require one as well like an LLC, Corporation, or Partnership.

Applying for an EIN is free from the IRS (my three favorite letters of the alphabet!). Again, beware of third party services who will solicit you to do it for a fee. Go to the official IRS.gov web page to apply online. 

Along with being a requirement for many business-related issues, an EIN provides you with a certain level of privacy with regard to your social security number since it can be used in place of that in many instances. 

I hope this jaunt through the wonderful world of Legal Land has cleared things up for you a bit. I know it’s a pain but in the end when you become a world famous boudoir photographer with millions of adoring Instagram fans and a waiting list that’s a year long… you’ll be glad you did. 

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If you found this article helpful, pass it along to someone else who may find it useful as well.

Thanks for your time!

Charles Mitri

Founder / Lounge Boudoir

Bella Mitri Boudoir

Charles Mitri

Charles Mitri is an award-winning boudoir photographer and also founder and writer of LoungeBoudoir.com, an educational blog and resource website for boudoir photographers worldwide. He lives in Yorktown, Virginia.

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