After years of pursuing photography as an avid hobbyist photographer, I finally decided to take the plunge and become a professional. I already owned all the necessary camera bodies, lenses, flashes, and other miscellaneous equipment, and having my own business meant future photography purchases would be tax deductible. A smart decision, right?

The short answer, at least for me, was “yes.” However, the long answer was: “It depends on how much time you want to spend searching and researching the requirements.”

Luckily for you, I’ve already done it in North Carolina and I’m willing to share the results (at least for this state!).

For the purposes of this article, I assume the following things are true:

1. You will be operating this business in the state of North Carolina.

2. You already have the photography experience to qualify as a professional photographer (that’s another article on its own).

3. You’ve done the necessary research to determine if you have the time, energy, potential customer base, and business plan to ensure your new venture succeeds (again, this topic is another article on its own).

The first step was to determine what type of business entity it would be. After doing a lot of research online, I was a bit confused, until a CPA explained it to me: there is a difference between your LEGAL status and your TAX status. He recommended that my photography business be an LLC (limited liability company), but file taxes as a sole proprietor.

As with all the different options, there are positives and negatives to each option. LLC status would protect me from personal liability in the event of a lawsuit, which was important to me. The paperwork is very easy to prepare and submit, which is also a good thing because I wanted to take care of everything myself.

Filing taxes as a sole proprietorship would be very simple: just attach a Schedule C to my personal tax return each year. Although this filing status is fairly easy, sole proprietors pay a slightly higher tax rate than S-Corporations.

However, filing as an S-Corp means more paperwork and filing quarterly taxes instead of a Schedule C with my annual return. I wasn’t interested in all that paperwork, so sole proprietorship status is fine with me. If my business starts making so much money that I’m interested in a lower tax rate, I can always change my status to S-Corp.

Now that I have determined my legal status and tax status, I had to file my LLC in the state of North Carolina. This involves sending a check for $125 to the Secretary of State, along with the Articles of Organization, which can be downloaded and completed from their website.

It takes 7-10 days for your status to be confirmed, although if you include a note and your email address, it will be emailed to you, saving you a few days.

The state of North Carolina considers photographers to be one of those lucky professions that require a state privilege license. This is an annual license issued to the person, not the business, so if you end up working for a different photography business in the future, you don’t need to get a second license that year. A privilege license costs $200, from the North Carolina Office of Revenue. This must be done in person, but the Department of Revenue has offices all over the state, so there is probably one in a city near you.

While I was there, I also received a state tax ID. This is (thankfully) free, and it will come in handy because, armed with this important number, I’ll no longer have to pay sales tax when I purchase items for my business (assuming I buy from a North Carolina supplier – obviously you don’t). I pay no sales tax when I buy from an out-of-state supplier, such as when I buy glasses online).

The friendly and helpful NC Revenue Clerk explained that two forms must be mailed to the NC Office of Revenue each quarter. One is a form that explains what your income was for the quarter and how much tax you collected from your clients. You will need to include a check for the amount of the tax. The other form shows what equipment you purchased for your business that quarter and did not pay tax. You’ll need to include a check for 1% of the total (well, at least it’s lower than paying full retail tax on your purchases). This includes everything from cameras and lenses to printers, computers, paper, ink cartridges, etc.

Collecting sales tax from my customers is a bit confusing in North Carolina. The law is unclear and lawsuits filed in state courts have had conflicting results. It sounds like you don’t need to collect sales tax on services as session fees, UNLESS the client ends up purchasing copies of the session. Of course, you always hope and assume that the customer will buy copies, but you never know for sure. To be on the safe side, you should go ahead and charge them sales tax on session fees up front, assuming they’ll buy copies.

You forever need to collect sales tax on tangible goods sold. Therefore, any print, album, or other product you sell to your customers should always include sales tax.

The tax rate that applies depends on where the customer took possession of the goods. If the client lives in Gaston County and asks me to mail the prints to them, the Gaston County rate applies. If the bride decides to stop by my house in Charlotte to pick her up personally, the Mecklenburg County rate applies.

Taxes were by far the most complicated part of the business start-up process. Fortunately, the employees at the North Carolina Revenue Office were very helpful, giving me several “reference sheets,” sample forms, and (best of all) their phone numbers to call if I had questions.

If you want your North Carolina state tax ID to be in your company’s name, rather than your own name, you’ll need an IRS Employer Identification Number. I was initially confused by this, because I wasn’t planning on hiring anyone but myself, but it turns out that the Employer Identification Number has nothing to do with anyone’s employment. Luckily it was free and easily handled over the phone while I waited in the lobby of the state revenue office.

Now there is the matter of where you live. I am a Charlotte resident so I am in Mecklenburg County. Fortunately, Mecklenburg County recognizes the State Privilege License, so I did not have to obtain an additional business license from the County.

However, I was required to obtain a Regular Occupancy Permit from the Zoning Office. This is a one-time permit that allows me to work from home. This is a lifetime permit; however, it only applies to this particular address. If I decide to move to another house in a few years, I will have to get a new permit. It costs $125.

Next, I needed a business checking account. I went straight to Wachovia since they already handle our personal bank accounts and I wanted everything in one place for convenience. Wachovia needed copies of my privilege license, EIN, and state tax ID, as well as the normal documents for a new account like my driver’s license. In about a week, I had received my debit card and account checks. This is highly recommended by the CPA I visited, to keep business and personal expenses separate.

The last thing I needed was business insurance. This is recommended in addition to any general liability or homeowners coverage you may already have. It’s not too expensive (less than $200 per year), so go ahead and get it. Any insurance agent will be able to go over the options with you. Business insurance will not only cover your equipment in case any of those expensive lenses or cameras get damaged, but it will also help you in case a guest trips over one of your light stands at a wedding, for example.

A few side notes: If your business is an LLC, you are legally required to have the initials “LLC” or the words “Limited Liability Company” in your business name. This makes it clear to all potential clients and clients that you are an LLC. Also, if you don’t keep your business and personal expenses separate, you lose the protection of an LLC (which means your personal assets are vulnerable in the event of a lawsuit). DON’T RISK THIS – keep everything well documented and separate!

Best of luck with your new business venture! I recommend visiting the North Carolina state business development website and calling their hotline; they gave me a lot of advice that the CPA didn’t mention, and it was free! Fortunately, there is a lot of support out there for people starting their own businesses. It’s free and these people know what they’re talking about. Seize it!