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LLC vs Sole Proprietorship for Photographers - YouTube
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(upbeat music)
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- Hey guys, this is Andrew
Jordan with Big Picture CPA.
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In this video I'm going to talk about
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sole proprietorship, LLC's,
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what they mean, what the difference is.
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Before I do though,
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I always have to say I am a CPA,
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but this video is not meant
to be tax or legal advice.
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It's just general information.
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So consult your own advisor.
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Alright, with that being said,
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let's jump into LLC's or
a State Legal Concept.
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So it's something that gives
you legal liability protection,
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so if something bad
happens in your business,
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there's a wall, your LLC
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between your people who
are trying to sue you
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and your personal assets.
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A sole proprietorship, on the other hand,
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is simply a way of being taxed.
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If you file a Schedule C
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you're a sole owner, you
are a sole proprietorship,
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all right so since they
mean different things,
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one does not necessarily
mean you are the other one.
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You can be a sole proprietorship
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and not have elected to be an LLC
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you just don't get the LLC
liability protection that way.
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You can also be an LLC
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and elect to be taxed in
a totally different way
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not as a sole proprietorship,
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or you can be an LLC, sole proprietorship.
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So there's really three options here.
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Now let's talk for just a second
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about the options you
have when you're an LLC
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of how you want to choose to be taxed.
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You can be a sole proprietorship,
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which is the most common
we see for photographers.
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The second most common we
see is an S corporation.
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This is really valuable as you become
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more and more profitable as a photographer
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because it can save you
a ton on your taxes.
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We typically tell people,
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if you are making more than
40 thousand dollars profit
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as a photographer and you're
a sole proprietorship,
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you should look at
becoming an S corporation.
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Another option which we see
rarely is a partnership.
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If you've got multiple owners,
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sometimes they form a
partnership as photographers
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but not very often.
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And then a C corporation.
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Which is even less common.
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Alright, so that was like
a really high level summary
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of the different types of entities.
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Again, for photographers,
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the main to, to be aware
of are sole proprietorship,
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and S corporations.
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Now another thing I want to touch on
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just really briefly is
you can be a partnership,
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an S corporation or a C corporation,
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any of those ones we just talked about.
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You can be one of those
without being an LLC.
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Now why on earth would you do that, right?
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Like this is part of what makes
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this whole topic confusing to people,
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because you can be an LLC
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and be treated as an S corporation.
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Or you can just be an S corporation.
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What's the difference?
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The difference varies a
little bit state by state
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some states treat LLC's
a little bit differently
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than they do, say a true corporation,
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that's not also an LLC.
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So consult someone about your
individual case situation
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based on your state,
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because there are sometimes differences,
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but from a legal perspective,
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there's no legal protection differences
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between the two.
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Being an LLC versus
being a true corporation.
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There's no tax differences.
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As far as the Federal
Government's concerned.
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Sometimes states charge things
a little bit differently.
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So again, check on that.
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I also want to answer for you
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if you aren't sure what
kind of business you are,
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which is actually like
a really common thing.
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The best way to tell
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is by looking at last year's tax return.
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If you file a Schedule C on your 1040,
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so it'll say Schedule C at the top.
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That means you're sole proprietorship.
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Again, like we talked about earlier,
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you might or might not be an LLC,
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but you're definitely
a sole proprietorship,
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if you file a separate tax
return for your business.
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Again, you can look at the
top of kind of the first page
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and it will tell you
1065's are partnerships,
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1120-S' are S corporations,
1120's are C corporations.
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So you can easily tell what kind of entity
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you are just by looking at that.
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In addition to not knowing
what type of entity they are,
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a lot of businesses have
trouble keeping track
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of all those different
numbers that are important
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to their business
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like EINs, state tax ID number,
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sales tax ID numbers et cetera.
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So we created a tool
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and we're happy to share it with you guys
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that just organizes for you
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all of those important numbers,
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tells you where to find them,
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tells you what they should
look like, all this good stuff.
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If you're interested in that,
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just go to our website, send us a line.
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Tell us that's what you want.
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And we'll happily send
it over to you guys.
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This is Andrew Jordan
with Big Picture CPA.
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I hope this video has
been helpful to you guys.
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Take care out there.
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