Last Updated: June 10, 2024, 9:28 am by TRUiC Team


How to Start an S Corp as a Photographer

An S corporation (S corp) is an Internal Revenue Service (IRS) tax classification that may help your photography business save money on its taxes. Photography businesses come in all sizes — from large studios that handle the needs of big corporations to small, independent studios with one person who takes family photos. 

Regardless of your business’s size or years in operation, electing S corp status could save you thousands of dollars on your taxes each year.

Recommended: Save yourself the hassle and use a professional service like ZenBusiness to help you handle the initial S corp election paperwork.

Photographer taking a picture.

What Is an S Corporation?

An S corporation (S Corp), also known as Subchapter S, is a tax status with strict IRS requirements and restrictions. If your business meets the requirements to be taxed as an S corporation, you will be eligible for certain tax benefits such as pass-through taxation and self-employment tax savings, which can be significant. 

Essentially, an S corporation provides the perfect opportunity for business owners to have both the benefits of a default LLC with pass-through taxation and some of the perks of a C corporation without the dreaded double taxation. 

S Corp Requirements

In order to be taxed as an S corporation, your photography business must meet the following requirements:

  • Has 100 shareholders or less
  • Is a domestic LLC or corporation
  • Issues only one class of stock
  • Shareholders are US citizens or permanent resident aliens
  • Is owned by private individuals

What Type of Business Structures Can Start an S Corp?

An S corp designation can be elected by a formal business structure, specifically an LLC or a corporation. Informal business structures such as sole proprietorships and partnerships are not eligible for the S corporation classification. 

How to Start an LLC Tip Icon

Don’t have a formal business structure? If your photography business isn’t currently an LLC or C corporation, our friends at ZenBusiness can form your legal business entity for you and elect S corp tax status in no time.

S Corp Tax Benefits Photographers Should Know About

S corporations enjoy certain tax benefits, such as pass-through taxation (all losses and profit — credits, distributions, deductions — pass directly to the owner). This is similar to how default LLCs are taxed. With pass-through taxation, all profits bypass the company and go directly to the owners, and owners pay on their personal tax return at their regular income tax rate.

Default LLC Taxes Explained

Business owners of default LLCs pay self-employment taxes and income tax on the distributions passed down to them. In other words, both types of taxes are imposed on all the money they receive after paying business expenses. Self-employment taxes include social security and medicare, and these two taxes.

S Corp Taxes Simplified

With an S corporation, owners are classified as employees and are paid in two ways: a salary and distributions.

Reasonable Salary

Since owners are employees, they must receive a salary, and therefore they must run payroll. Business owners pay self-employment taxes and income tax on their salaries. The IRS must consider the salary you pay yourself as “reasonable.” In other words, it must fit the job you do and be equivalent to what someone else would earn for performing the same work. 

Variables like location can change how much you should earn. For example, photographers in cities and large urban areas often make more than those in rural areas due to the higher average cost of living. To find an appropriate salary range for your position and location, use resources like Glassdoor and the US Bureau of Labor Statistics to access the most accurate average for the current year.

In the United States, the average annual salary for a photographer is $44,002. This can vary based on experience, though, with entry-level photographers earning an average of $41,011 per year while senior photographers earn an average annual salary of $53,092. Because location affects salary ranges, remember to factor that in when calculating a reasonable salary for yourself.

Distributions

Unlike with a reasonable salary, the owner only pays income tax on the distributions. This means the business owner does not pay the self-employment tax of 15.3% on money taken as a distribution.

When Should a Photographer Elect S Corp Status for a Business?

This is a subjective question and will depend on your business and your goals. You need to be sure to take enough money in distributions to benefit from the advantages offered by an S corporation and offset the additional paperwork and fee associated with running payroll. In general, you will likely benefit from S corp status once your business makes at least $60,000 in earnings and $20,000 in annual distributions. These numbers are after paying business expenses. The IRS requires S corp owners to pay themselves a reasonable salary to ensure they aren’t lowering their compensation to avoid paying more on taxes — which would lead to loss of S corp status, fines, and even business dissolution.

Use our S Corp Tax Calculator to find out if an S corp is right for your business. Calculate your savings below:

S Corp Savings Calculator

Calculate how much you can save by choosing an S Corp tax classification

Recommended:

Are you a solopreneur looking to start your S corp or convert your existing LLC and start saving on taxes? Get your S corp started today with ZenBusiness.

Six Basic Steps to Start an LLC and Elect S Corp Status:

Step 1: Select a State

Step 2: Name Your LLC

Step 3: Choose a Registered Agent

Step 4: File the Articles of Organization

Step 5: Create an Operating Agreement

Step 6: Get an EIN and File Form 2553 to Elect S Corp Tax Status

Step 1: Select Your State

Step 2: Name Your LLC

If you don’t already have a business, you will first need to form one. You will need to provide your state with a unique name that is distinguishable from all registered names when you file your LLCs formation documents.

Our Business Name Generator and our How to Name a Business guide are free tools available to entrepreneurs that need help naming their business.

Step 3: Choose an LLC Registered Agent

Your S corp registered agent will accept legal documents and tax notices on your business's behalf. You will list your registered agent when you file your LLC's Articles of Organization.

Step 4: File Your LLC's Articles of Organization

The Articles of Organization, also known as a Certificate of Formation or a Certificate of Organization in some states, is the document you will file to officially register an LLC with the state.

Step 5: Create an LLC Operating Agreement

An LLC operating agreement is a legal document that outlines the ownership and member duties of your LLC.

Our operating agreement tool is a free resource for business owners.

Step 6: Get an EIN and Complete Form 2553 on the IRS Website

An EIN is a number that is used by the US Internal Revenue Service (IRS) to identify and tax businesses. It is essentially a Social Security number for a business. 

EINs are free when you apply directly with the IRS.

Elect S Corp Tax Status

During the online EIN application, the IRS will provide a link to Form 2553, the Election By a Small Business form.

Steps to Take After Starting an S Corp

Once you formalize your S corp, be sure to get your financials in line so you are ready to begin operating.

For business banking, check out our guide on the best banks for small businesses.

If you need to build your S corp credit, read our guide on how to build business credit and get a business credit card through Divvy.

Recommended: You’ve worked hard and deserve a break! If you make at least $20,000 in distributions, let ZenBusiness start your S corp, so you can focus on your business.

Photography Business Information

As mentioned before, professional photography comes in all forms from studios, to freelance photography, taking pictures for corporations or for individuals, and the possibilities go on and on. 

Typically, photographers are hired to take pictures of subjects by their clients in high resolution so that they can be used for personal or business use. Just as the work itself varies, photographers can work just about anywhere since they could work from home and travel to clients or operate a studio and have clients come to them. Every state and just about every city has a photographer working there with an estimated 255,238 photography businesses operating in the United States as of January 2023.

Why Most Photography Businesses Should Have a Legal Business Entity

The most important reason you should register your photography business as a legal business entity is to protect you and your employees from liability if a third party ever takes legal action against your business. 

For example, let’s say you accidentally capture some important information in the background of a corporate client’s advertising photos during a photo shoot. This then leads a competitor to patent an idea before your client, which costs that client hundreds of thousands of dollars in lost income. If your photography business is a legal business entity, a client can’t sue you personally — only your business. That’ll protect your personal assets from a lawsuit.

Another advantage of registering as a legal business entity is that it lends legitimacy to your business. Clients are more likely to hire companies with a legal business structure because they appear more trustworthy and professional while avoiding the liability issues discussed above.

Is an S Corp Right for My Photography Business?

While this is a relatively straightforward question, many factors can influence your answer. One of the most important things to consider is what you want from your company and where you see it going in the future. 

In addition to your reasonable salary, you also must run payroll for all of your employees to qualify as an S corp. Running payroll has its own costs, which may not seem worthwhile when compared to the tax advantages of S corp status. If you have several employees and your photography business already runs payroll, this won’t be an issue. On the other hand, the extra cost of running payroll may negate the benefits of electing S corp status if you have a small team or operate by yourself.

If you plan to expand your business by taking on new investors, then electing S corp status likely isn’t right for you. Per the IRS, S corps can’t have more than 100 shareholders. If you’re looking to take on significant outside funding and issue many shares, a C corp may offer a better fit for your photography business.

You also need to factor in the distribution requirement for S corps. As the owner, you’ll need to take a distribution from your business’s net profits each year — in addition to your reasonable salary — in order to qualify as an S corp. To fully benefit from the tax incentives offered by S corp status, you should take at least $10,000 as a distribution. If this sounds appealing, then electing S corp status may suit your business. If you’d rather put that money back into your business, remaining a regular LLC will probably benefit your business more.

With all of these factors to consider, only you can decide if electing S corp status is right for your business.

Photographer S Corporation Examples

Not all photography businesses will benefit from electing S corp status. Below are two examples to help illustrate when this tax designation can benefit a photography business.

Scenario 1: 

Imagine you own a photography business that recently opened in a large city. Your business has a studio, but also does on-site work for clients who pay extra. You recently began running payroll for your seven employees, including yourself, and are pleased with your growing number of clients. 

If this situation seems satisfactory to you, then becoming an S corp could prove advantageous. Because you already run payroll, you’d just need to ensure your total number of shareholders doesn’t exceed 100 and remember to take an annual distribution of at least $10,000.

Scenario 2: 

On the other end of the spectrum, let’s say you’re an independent photographer who works out of your home. You have a small group of loyal clients and hope to expand your client base. In the next five years, you aim to rent your own studio, upgrade your equipment, and hire a few more photographers to turn your small business into a much larger company. 

In this case, electing S corp status makes much less sense. While your small business likely has fewer than the maximum of 100 shareholders, this limit on your investors may hinder your ability to grow your company. Moreover, because you want to upgrade your equipment and find a new space in which to expand your business, the money you’d have to take as a distribution could instead go toward these priorities. 

You can always reassess your situation after your business grows a bit, but S corp status likely won’t benefit you right now.

Start an S Corp FAQ

An S corporation (S corp) is a tax classification that an LLC or a corporation can apply for that provides self-employment tax savings on distributions.

If you already have an LLC or C corporation, you can form an S corp by filing Form 2553 with the Internal Revenue Service (IRS).

S corps offer businesses tax advantages, and owners of S corps can save thousands of dollars on self-employment taxes.

While both LLCs and S corps benefit from pass-through taxation, they are not taxed the same way.

With an S corp, owners pay personal income tax and self-employment tax on a predetermined salary. They may then withdraw any remaining profits from the business as a “distribution,” which isn’t subject to self-employment tax. With an LLC, all company profits pass through to the owners’ personal tax returns, and then the owners must pay personal income tax and self-employment tax on the entire amount.

Both LLCs and S corps benefit from a provision in the Tax Cuts and Jobs Act of 2017 that allows qualifying owners of pass-through entities to deduct 20% of qualified business income (QBI) from their tax returns. However, for S corps, the deduction doesn’t apply to profits paid out as wages.

Ultimately, your reasonable salary will depend on how much experience you have and where you conduct business. Data from Glassdoor shows that the average salary for an entry-level photographer in the United States is $41,011 per year. In comparison, an intermediate photographer earns $44,002, on average, while a senior-level photographer earns $53,092.

Photographers in large urban areas typically earn more to compensate for the higher cost of living in those locations — regardless of their experience. For example, an entry-level photographer in Green Bay, Wis., makes an average of $31,688 per year while a senior-level photographer In Omaha, Neb., earns an average of $65,702.

A distribution is a dividend that a shareholder/owner can take from the business profits that remain after a company pays all of its employees' salaries. Shareholders must pay personal income tax on distributions, but distributions aren’t subject to self-employment tax.

There’s no corporate tax rate for S corps. Instead, owners of S corps pay personal income tax on the company’s profits. This rate depends on each owner’s personal income tax bracket. 

In some states like California and New York, S corps may pay some form of tax at the corporate level.

No. While we typically recommend you avoid electing S corp status if you plan on reinvesting your profits in your business, it’s not a firm rule. If your business generates enough income so you can take your minimum $10,000 distribution and still put money back into your business, then you’d still qualify to elect S corp status.

One simple option involves hiring an accountant or enlisting the services of an accounting business. For a fee, you can have a professional look over your business and get payroll running for you. Alternatively, you could use a software program like QuickBooks to assist you with the process yourself. You also could turn to an online resource like Gusto, which helps automate the process and handles everything digitally.