As I pointed my camera upwards to photograph a man swinging upside down from a tree 20 feet in the air while playing a violin, my thoughts were first “wow, this is different than boudoir” and second “what is my liability if he falls?”
That session, which was supposed to be a simple portrait session to obtain promotional photos for a violin shop (I was thinking artistic shots of musicians with their instruments) quickly turned into something that I had not expected – something dangerous and risky to me and my business. I was unexpectedly thrust into a position of having to make a split second decision to either accept the risk and proceed or stop the session and waste everyone’s time and potentially ruin my reputation with the client.
I immediately went through my mental checklist: Insurance? Check! Corporate layer of protection? Check! Contract with the client whereby the client and model waive the right to sue me for injury? Um, no. This was a simple portrait session – or so I thought. While it would have been ideal to have all three, I was comfortable enough with the first two and we moved forward with the session.
What do you mean “corporate layer of protection?”
By this, I mean that my business is a limited liability company or LLC. This means exactly what it says – that my liability is limited. A limited liability company is a business structure allowed by state statute that provides a “veil” of protection for its members. This means that creditors may only look to the assets of the LLC in the event of liability. In other words, if the hanging violin guy had fallen and was injured and decided to sue, his relief would be limited to the assets of my photography business and he would not be able to come after me personally. As such, my home, my personal bank accounts and my family’s net worth are not at risk.
Wait, someone can take my HOME?
If you are operating as a sole proprietor – which basically means you started a business and did not file any formal corporate papers with your secretary of state designating your business as either an LLC or a corporation – you are putting your personal assets at risk. When you operate this way, you are personally responsible for the actions of your business. If a person is injured or property is damaged or any other liability arises and you are sued, the person suing can come after you, your home, your cars, your savings accounts and anything else you and your family own and enjoy. EEK! If you think that photography is a low-risk enterprise, consider the above scenario or the unfortunate wedding photographer whose client was swept away in a river current during a photography session and drowned. So sad and very scary.
Well, I have a DBA so I’m good.
A DBA or, “doing business as” is not a legal entity and therefore offers absolutely no protection by itself. For example, if you call your business “Bodacious Boudoir Photography” but you have not filed any corporate paperwork registering this business as a limited liability company or a corporation, it is still just YOU operating as Bodacious Boudoir Photography. Creditors will come knocking at your door ready to haul away your furniture (yes, that waterbed is in jeopardy – come on, with a name like Bodacious Boudoir you know you have one) in the event of a judgment against you.
But I have insurance so I don’t need to incorporate.
Insurance is an absolute necessity. However, you may not be as covered as you think.
Consider the foregoing scenario. If the swinging violinist (that is just fun to say) had fallen from that tree, he would have crashed to the ground head first. He may have broken his neck. What do you think a jury verdict could be in a scenario like that? My liability coverage has a $1 Million limit. There is a very good chance that a jury verdict in a situation like that could be significantly higher than $1 Million, plus attorney’s fees and court costs. Guess where the extra would come from? Visions of a judgment sale of your home and liquidation of all of your assets, including your kids’ college funds should now be bubbling up in your throat.
Further, if you have ever had to make a claim on insurance, you know how difficult insurance companies can be. It is likely that your policy has page after page of exemptions from coverage, including instances where you were “grossly negligent” or committed an intentional act. Unless you know exactly what those exemptions are and only operate within your actual coverage, you may not even have a claim on insurance at all.
Okay, okay, you have convinced me, NOW WHAT?
Once you have made the decision to incorporate, you need to choose which entity is right for you. You can create a limited liability company like I did or you can elect to create a corporation or perhaps a limited liability partnership. The Small Business Association has some great information on its website educating you as to the benefits and advantages of both. (see http://www.sba.gov/community/blogs/community-blogs/business-law-advisor/should-my-company-be-llc-s-corp-or-both). Also, visit the website for your state’s Secretary of State. Usually those sites have a great question and answer section that can provide excellent information. Further, talk with your accountant about tax implications and consult an attorney if you have any questions after reading about the differences in these entities.
Is it difficult and/or expensive to create a business entity?
No. It is actually relatively easy. I created my own LLC in about an hour. I filled out the form and filed it online and paid a small fee to register. Corporations are a bit more involved but considering the protection afforded, you cannot afford NOT to file. Your Secretary of State’s office can provide you all the necessary forms and information on costs involved.
So just filing will protect me and all my stuff?
Well, no. You will need to actually operate as a business entity. This means following all of the corporate formalities such as separate bank accounts, making necessary filings each year, paying taxes and basically ensuring that the general public knows that you are a business entity and not a sole proprietor. Be aware that there is a legal mechanism by which plaintiffs can get around the corporation and hold you personally liable. It is called “piercing the corporate veil.” And it means just what it’s graphic name implies – a plaintiff can poke a hole in your layer of protection and reach you personally if you are careless. However, piercing the corporate veil is extremely difficult, courts do not look kindly on it in most situations and so long as you observe your corporate formalities you will be protected.
So, I clicked away at the swinging violinist with the comfort and confidence that I was protected. Of course, I was still worried for his personal safety but he seemed to know what he was doing and was enjoying himself. (Just so you know, he is a professional and very experienced in repelling). And I can promise you, no other violin shop is going to have photos like these for their marketing purposes!
[For further information on any of the foregoing or for assistance in getting YOUR business incorporated, feel free to contact Legal Photo Pro at Kirsten@legalphotopro.com]