Maintaining the Protection of Your Photography Business
Many photographers form a corporation, limited liability company, or similar entity for their photography businesses. The company creates a “corporate veil” between your personal and business assets to provide personal liability protection against lawsuits, creditors, and other disputes. But if you don’t honor the formalities of the business, you can lose those advantages.
Unlike a proprietorship or a partnership, a corporation or company is a legal entity separate and distinct from you as as individual. When you establish the corporation or company, you must do more than register it with the state. You also must follow a host of ongoing legal requirements. That proves that you have a bona fide business entity instead of a sham created to dodge personal liability. Otherwise, your opponents will be able to “pierce the corporate veil” to set aside the corporation and then use your personal assets to satisfy the business’ obligations.
Here are ten ways to maintain the protection of a business entity:
* Follow all state and federal requirements such as annual registrations and annual meetings with minutes (additional information is available from your Secretary of State and the IRS);
* Keep personal and company assets separated, such as in different bank accounts;
* Set up the corporation so that it is not dependent on assets that it does not own or control;
* Don’t conduct business that may constitute a conflict of interest;
* Use your company name rather than your name on all marketing and business materials;
* Treat yourself as an employee of the company and the company as a different “person” or entity;
* Sign your business materials as the employee, not as you, such as “Carolyn E. Wright, President, Law Office of Carolyn E. Wright, LLC”;
* Avoid corporate debt when the business is insolvent;
* Don’t use the business assets to benefit you personally;
* Conduct your business within the scope of the incorporation or company documents (i.e.; don’t run plumbing services as part of the photography business).
Forming a corporation or company for your photography business is only the first step to protect your personal assets. Treat and operate your business as a business so that your customers and creditors will, too.
Take my advice; get professional help.