See Heather. See Heather sit. See Heather sit and do taxes.
Yes, it’s that time of year again – corporations, like my photography business, have a tax filing deadline of March 15th, instead of April 15th like individuals do. So while I do have an accountant, I’ve spent the last two weeks getting my financial, um, tornado, into some semblance of organization to give to her. I’m just not one of those people who can hand the accountant a big unruly box of receipts and paperwork to go through. Believe me, sometimes I wish I was!
The finances and tax issues of running a business are thorns in the sides of many Professional Photographers. Many of us are right-brained creative types, and find the financial stuff boring and annoying. I just want to take pictures! I just want to make collages and awesome canvas displays for my clients! But for any business owner, even those who have a bookkeeper or accountant handle everything financial related to their business, it’s still important to know your numbers. Because as I mentioned in the article About Pricing, all of the money that comes in to the business DOES NOT BELONG TO THE BUSINESS OWNER.
So, I collect sales tax, which is 7% in my area, and I submit it monthly as required by state law for my type of business. There’s a corporation fee in my state, whereby I get to pay $150 yearly just for the honor of owning a corporation. Then there’s payroll taxes – I don’t even know what all of them are. That’s why I have an accountant. I know there’s FICA, and Unemployment Tax, and some other stuff. It’s mind boggling and I don’t WANT to devote brain space to keeping track of it all, so here’s what I do: I had my accountant calculate for me all of the various taxes that I owe, and we came up with a percentage of sales that those taxes represent. The number hovers around 25%. So every time I make a sale and the money hits my business bank account, I immediately transfer 25% of that amount to a separate account which is used just to pay taxes. That way the money is there when the taxes come due.
I’m going to repeat that one more time. Twenty-five percent of every sale goes to taxes. Why? Because I am operating a legal business and complying with the tax laws of my county, state, and country.
It should be fairly simple to see how this relates to how Professional Photographer feel about Fauxtographers who are not operating legal businesses. Referring again to the About Pricing article, you’ll note that I said that the most profitable home-based studios took home 32% profit (profit = paycheck), and the most profitable retail studios took home 28% profit. If we adjust down a little bit, since those numbers are for the most profitable studios, let’s take a nice round number of 25% profit to work with. So 25% taxes + 25% profit = 50% of all the money that comes in the door. That leaves 50% of the money that comes in that must be used to cover cost of goods, equipment, studio rent, studio utilities, education, paying employees, supplies, packaging, shipping, etc etc etc, I’m barely touching the list of things that need to be covered with HALF of the money that comes in the door.
Sure would be nice to have not 50%, but SEVENTY FIVE percent of the money that comes in to work with. Oh yes it would! Just think what I could do! I could upgrade my equipment more often! I could have the latest and greatest of everything! I could take more money home in my pocket! – a lot more! Almost double what I’m taking home now!
And that’s what those operating illegal businesses do. It’s one reason why they charge less too. Without those pesky taxes to pay, they can certainly charge a couple hundred bucks less than the Professional Photographer, and *still* come out with far more money in their pockets than they would if they were operating legally.
Some people reading this are probably thinking “Well, so what? So what if my photographer isn’t paying taxes? That’s his problem, not mine. All I care about is I saved some money.” I can’t change people’s opinions about working with illegal businesses if all they care about is saving a few bucks, but I would like to point out that the Professional Photographer who invests the time, effort, and money to operate legally is likely giving you a superior product and experience in so many ways. That Professional Photographer cares enough that she wants to uphold the laws to reflect well upon herself, her business, and the photographic industry. She cares more about you as a client, because she’s following the laws to ensure that she’s able to be around for a long time (as opposed to bankrupt or in jail for tax evasion) and help create a photographic legacy with your family. She doesn’t think it’s right to “cheat” by not paying what she’s supposed to, which speaks to a higher level of character and integrity in my opinion. Simply put, that Professional Photographer cares, and wants to do things the right way. That attitude is likely to extend to your entire photographic experience, from the session to the delivery of your finished products. People who care do a better job than people who are just ‘doing this on the side to make a couple hundred extra bucks each month’.
So I’ll finish organizing my paperwork, try to tame this tornado a little bit and vow once more to not be so darn messy about it next year! And I’ll hope like hell that the illegally-operating Fauxtographers don’t undermine this industry any further, so that myself and other Professional Photographers who truly care about our clients, our work, and the industry can continue to be in business.