3 Legal Roadblocks That Help To Protect the Personal and Business Assets of Professional Photographers
You may think of yourself as a professional photographer, making a living shooting photos all day; however, you are also a business. Whether you’re a sole proprietorship, corporation or other legal entity, you are just as vulnerable as all large and small businesses (and maybe more so) to lawsuits and the seizure of your personal or business assets to satisfy judgments against you.
The very nature of the photography business presents any number of scenarios that could lead to litigation. A client or model trips on a light stand and breaks an arm and can’t work for two months. You accidentally cause a wedding cake to fall just as you are arranging the bride and groom behind it. You mistakenly photograph a model with a car in front of the wrong house, the one you didn’t receive written permission to use, and the homeowner is not happy when they see the photo, or an ad, published!!! You can make a long list of the reasons you could be sued.
Approximately 80 million lawsuits are filed every year in the U.S.; and there are many hunger lawyers thinking of creative ways to apply the law to bring a suit you would never expect. Tens of billions of dollars are awarded to people who suffer personal injuries due to the negligence of others, even when they’ve consciously tried to a make a building, a car or a photo shoot environment safe.
This is a litigiousness society, so whatever financial or physical assets you’ve worked hard to acquire are at risk unless you erect strong legal roadblocks. You can’t stop someone from suing you, but you can stop them from collecting anything and causing at the very least a major disruption in your life, but also maybe the loss of your business, all your equipment, even your home. You may be one of the many photographers that operate from your home, making it your “place of business” and, therefore, more directly vulnerable than having a separate studio or rented workspace.
As has been mentioned in other PhotographyTalk.com photography business articles, when your business is located in a commercial property, it is a very good wealth-building strategy to buy the property with the profits from your business, instead of renting it. Many small business owners are able to retire from their professions and live a very high quality retirement because they started to buy commercial real estate when they were young. It’s an idea you should discuss with your attorney and/or accountant.
This may be an excellent wealth-building strategy, but it also adds one or more assets that become vulnerable to lawsuit judgments. To protect these real estate assets, you want to create a series of three legal roadblocks that will make it virtually impossible for a litigant’s attorney to gain access to your assets. These roadblocks are a land trust, a limited partnership and a corporation. The corporation becomes the general partner of the limited partnership, and only has a minor interest in it for the purpose of control.
When a lawsuit is filed against the limited partnership, the general partner (a corporation) is only liable for any judgment, and you’ve purposely reduced its assets to virtually nothing. The partners of the limited partnership could buy the assets of the general partner, and then dissolve it. It is simply a matter of incorporating a new entity to serve as the general partner again.
The third roadblock is to title the commercial real estate as a land trust. The limited partners are the beneficiaries and, once again, the general partner, with a very minor interest, is a corporation.
The option, which may be more applicable to a photography business, is to incorporate as a LLC, or limited liability corporation. The laws of the state in which you do business will determine whether an LLC is a good choice.
These legal roadblocks don’t just protect you from asset seizures, but when recognized as being in place by potential litigants’ attorneys will reduce the number who will actually sue. They know they will get nothing for their clients, or it could takes years, and then only a very small amount of the claims would ever be collected.
(PhotographyTalk.com does not provide legal or financial services or advice, and this article should not be construed as such. It is for a general informational purpose. You are encouraged to contact your attorney and/or accountant to discuss the exact legal roadblocks you can use to protect your personal and photography business assets.)
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Why not also check out our 12 Tips To Create a Photographer’s First Home Studio article
Photo by PhotographyTalk Member Ruben Besaliel