You've made the choice to start your own photography-based company. You've determined which niche to set up in (see Part 1), so now it's time to hang out your sign and go shoot, right?
There are some very important steps to be taken before you press the shutter for the first time professionally--some very important legal steps.
Licenses, legalities, and other "L" words.
Do you know what it takes to start a legal business in your community? Just declaring yourself as a business does not a business make. First, your city and/or county will most likely require you to register with them. If you're using your name as your business like "John Smith Photography," there will probably be less paperwork. Using a business name that isn't your own name like "Small Time Shots" will require additional paperwork known as a DBA, or Doing Business As. Your city and/or county clerk will have the paperwork for you and can walk you through these very easily. Generally there is a small fee (possibly at both levels) for the paperwork; mine was only $5, plus the few dollars for the Notary Public, so it was relatively painless.
Have you ever seen those sections of "Legal Notices" in the newspaper and wondered what they were for? Most likely you're going to have to make your own listing in the newspaper as a good-faith attempt at making sure no one objects to your starting a business! I can already hear your astonishment: you mean random people can object? Yes, they can! They'll have to make a formal objection to the city or county about your business and offer proof of why it is objectionable. The good news is, it rarely happens. The bad news is, when it does, it's generally a neighbor who doesn't want a home-based business being next door. If you feel you might have one of those neighbors, it might be good to be upfront with them ahead of time and let them know what you're planning on doing. They'll probably be worried of deliveries or customers visiting your home, so make sure you assure them about the low impact before your file.
In addition to the city and/or county, you'll have to file with your state as well. Most likely this will be limited to just a Sales Tax license. My state required proof that I had a county license prior to a Sales Tax license, so make sure you file for the approvals in the correct order. Your city and/or county clerk may also be able to help you with this.
City, county, state. Next step is federal. While a sole-proprietorship can operate without a Federal Employer Identification Number (FEIN) and use their Social Security Number, I highly recommend getting a FEIN anyway, if for no other reason than to lessen the usage of your SSN. You can apply for a FEIN online here.
Protecting Yourself (and Others).
Now that you're legal, the next thing you need to do is protect yourself legally. No, not a lawyer (that will come later), but that other most hideous thing: insurance.
Insurance is not a luxury. Let me repeat that: Insurance is NOT a luxury.
Let's go back to the example in Part 1 of being an outdoors child portraiture photographer. Sounds easy, right? You meet the parents and the child at some location and shoot away! But you need to have some fill light or key light (overpowering the sun), so you bring your strobe and battery system. It's all set up, and the shoot is progressing nicely. A gust comes from behind you, knocking down your strobe and sending it into your subject! Using sandbags could have prevented that, but you didn't think you'd need them for such a short shoot so you left them in the car (they're way heavy to carry too far). Now you have an injured child, and parents that aren't so happy with you anymore. You can definitely count on their insurance (if they have any) or them suing YOU to cover the costs. Can you afford the medical costs? I didn't think so.
Not only do you need liability insurance (as shown in the example above), but loss/theft of equipment must also be taken into consideration.
If you're a wedding photographer, you may need another type of insurance called Errors and Omissions (E&O) insurance, that pays to completely re-shoot a gig: renting the facility and wardrobe, travel for participants, etc. This would cover causes such as lost/stolen photos (your CF card wallet was stolen) and other reasons that would necessitate a do-over.
And I'm not even going to talk about health insurance!
There are several choices for business insurance, from dedicated photographer insurance companies to your big nation-wide insurance companies. Membership in some professional societies includes insurance coverage or the ability to join (for less money) a group policy.
Finances et al.
Another key part of getting ready legally is your finances. A good bank is a necessity; make sure you check out the small business accounts at both the large branches and your local, town banks. Most banks charge monthly maintenance fees for business accounts, but will waive them for certain reasons. Shopping around can save your fledgling business up to several hundred dollars a year, so don't just pick a bank randomly. Make sure you go in and talk to a business account manager and tell her what your business is about. She should be able to help you tailor your account to your needs. I always advise letting people know you're shopping around, as they're more likely to point out key features that their bank can offer; it helps me get a good feel for what the bank's strong and weak points are.
Lastly, you should look into an accountant. For my first two years, I handled the finances personally, including income and sales taxes. Now, as I prepare to file my federal income taxes once again, I'm dreading the required work. Here is one of those points where I should practice what I preach, and get myself an accountant. I highly recommend getting one as soon as you can; ask other small businesses in your local community who they use, and ask your banker as well. Good referrals go a long way in small business accounting, just as they go a long way in photography as well.