starting a business in california is $800 / yr minimum???

[bobsmiley]

My CPA says in order to start my wife's photography business off - which is about breaking even now - is going to cost another $800 / yr for the LLC. Is this a good idea or is there some other way?

[bobsmiley]

I should note that the main reason we are looking into this is because with newborn shoots there's some risk and potential liability. The families come into our house now for the sessions and we're trying to reduce the liability there if something happens to the baby.

[RecoveringCarClown]

Every state is different, I think mine is $120 one time fee and then you will have whatever tax comes along with making money.  $800/year seems steep.

[protostache]

An LLC does not reduce your liability if a baby gets hurt. All it does is protect you from the business's financial liabilities, and in most cases also protects the business from yours. For example, if some parents didn't like your work and won a lawsuit against the business, damages would effectively be limited to the business's assets.

Oh the other hand, torts are always personal. To protect yourself and your business from torts like injuries and other non-financial liabilities you need to buy insurance. Especially if you're operating a business like that out of your home, you should look into professional liability insurance on the business side and umbrella insurance for your family. Talk to a broker about how much you need and get some quotes.

Also, you should think about talking to an attorney about getting a standard liability release form drawn up. This doesn't necessarily prevent someone from suing you and winning, but it's another layer of protection.

[Catbert]

Yep, LLCs are expensive in California. 

I'm not an attorney but as outlined above by protostashe she probably doesn't need one.  If she had employees an LLC could protect her assets outside the LLC (e.g., your house) if an employee somehow injured a child.  If your wife causes the injury, the LLC won't help.  (Think about it, if an LLC could protect an individual from being sued then all physicians would just become individual LLCs and not need malpractice insurance).

Save your $800. and buy insurance instead.  Plus get a good contract/liability release form.

[bobsmiley]

thanks all, I ran a business in MI and the LLC was $50 / year so it was worth it. I really don't think $800 / yr is especially knowing we'd still need insurance on top of that. Is there a way to get another business type license to open a bank account with that doesn't cost so much? I know DBA's in MI were $20 but my CPA is saying the cheapest way to do it is $800

[protostache]

thanks all, I ran a business in MI and the LLC was $50 / year so it was worth it. I really don't think $800 / yr is especially knowing we'd still need insurance on top of that. Is there a way to get another business type license to open a bank account with that doesn't cost so much? I know DBA's in MI were $20 but my CPA is saying the cheapest way to do it is $800

California charges a franchise fee, which is a tax on net income. Nolo has a nice breakdown of what it entails. The reason why LLCs cost $800 is because that's the minimum franchise fee for any type of formally-organized business. You can't get around it by registering the LLC in a different state because the tax applies to the amount of net income earned in California, and the franchise tax board is extremely aggressive about collecting.

Looks like DBAs in California are by county and/or city, but for example they are $45 in San Francisco. I believe you can open a business bank account with a DBA registration, just using your social security number instead of an EIN. You might not even need the DBA, but you'd have to talk to a bank about it.