Mandy is single with no children and is looking to start a photography business as a side business in addition to her day job as a teacher. As a teacher she earns a salary on a W-2 that provides her with her full benefits (healthcare, 403(b) retirement, etc.). It is her long-term goal to make this her sole source of income if she is successful. She will be engaging in the business for profit, and she will need to buy equipment like cameras and printers, she will have start up costs, and she will need to determine a legal form for her business dealings. She will have to use her personal car to travel to events, and she is looking into either converting a room in her house into a studio and office, or renting space that just became available. A sample of the expenses has been provided on the next page, with a few of the options she is considering.

She also will likely hire an assistant photographer to help her at large events like weddings, but that person will not be working full-time, but instead on an as needed basis using her own equipment. She would like to know, however, what should happen if this business takes off and she needs to hire someone on a more regular basis to handle business matters like scheduling, receptionist activities, billing, doing advertising and web set up and working with publishers.

Luckily, the client has come to us to help set her up before she has stated taking any clients. Also, we will assume that there are NO state tax issues or regulations that she will need to comply with as she spends a majority of the year in New Hampshire where there is no personal income tax or sales taxes. However, there are certain documents she will need to file with the Secretary of State to make sure her federal forms are legal.

For this project you are to formulate a plan for the client. You will need to make recommendations to her on how to set up the business, what tax forms she will need to file. There are a few items which are REQUIRED as listed below to get a minimum passing mark:

A memorandum to the client with recommendations which must include:

• Choice of entity with justification;
• A list of the forms that need to be filled out with the federal government and the state Secretary of State and a summary of any fees that need to be paid both at start up and on an annual basis;
• General recommendations on how to keep track of business revenues and expenses;
• A discussion on the differences between the choice of renting or using her house;
• Classification of her assistant and how that classification affects taxes for the business;
• Any long-term planning issues she can take advantage of if this does become her sole occupation (and she loses her benefits form teaching).

Additional items that could earn you a superior score include:

• Any advantages that could result from now having a business that result in expenses that were previously not deductible becoming deductible;
• Options now available to her from a tax and financial planning perspective to reduce taxes in the future or increase her financial strength;
• Any issues that may arising from working in multiple states;
• Anything else you may think is pertinent.

The client needs this information so she can execute on your recommendations before her first big shoot Memorial Day weekend.

Financials are attached by photo.

$600 monthly 10000 one-time $5,000 annual 200 month 275/shoot 300/package 13750 15000 28750 Mandy's Photoshop Space options: Studio Rental Home Office Refurbish Home R/E Taxes Utilities Studio space 1/8 of home Expected Revenues year 1 50 shoots 50 photo packages subtotal Expenses Advertising (web/ads/etc) Props for shoots Purchases Camera Equipment Travel Event shoots Assistant pay Other costs State incorporation fees Accounting fees 100 month 500 one time 5000 estimated 20/hr 1000 miles 2500 annual ? $600 monthly 10000 one-time $5,000 annual 200 month 275/shoot 300/package 13750 15000 28750 Mandy's Photoshop Space options: Studio Rental Home Office Refurbish Home R/E Taxes Utilities Studio space 1/8 of home Expected Revenues year 1 50 shoots 50 photo packages subtotal Expenses Advertising (web/ads/etc) Props for shoots Purchases Camera Equipment Travel Event shoots Assistant pay Other costs State incorporation fees Accounting fees 100 month 500 one time 5000 estimated 20/hr 1000 miles 2500 annual