Greetings! My sister and I will becoming business partners. I am the photographer with a very low volume studio (because I'm just beginning) and she is going to be doing most of my photoshop work. I will be subcontracting her services and need to know what is the best way to pay her? Do I pay her a flat fee? A percentage of sales? Have her bid the work? Any ideas?

Thanks,
Smile

With respect to the compensation issue, this is more of a business question than a legal one and you need to determine what makes the most sense. From the legal perspective, you might want to consider that the liability and tax issues vary depending on whether your sister is your partner, employee, or an independent contractor. In addition, this raises the issue of whether you want to do business as a sole proprietor, partnership, corporation, or LLC. Determining the appropriate business relationship is more involved that what can reasonably be discussed in a forum such as this one. I would suggest that you read a book or two about how to set up and operate a small business. The background knowledge you will gain will make the time spent worthwhile in the future. Once you have a basic understanding of the issues, you might want to consult a business lawyer about which entity is the most appropriate for your business.

Thanks so much for your input; I will take your advice to heart.

Smile

In the forum you mentioned time spent reading will pay off later. Do you have any good books in mind? thanks

While these books specifically address taxes, they are good reading:

SELF–EMPLOYED TAX SOLUTIONS BY JUNE WALKER -
Walker’s book is an easy–to–read and understand guide to money saving and audit–proof tax and recordkeeping for independent professionals.

SMALL BUSINESS TAXES MADE EASY BY EVA ROSENBERG -
Written by an Enrolled Agent licensed by the IRS and known as “TaxMama,” Rosenberg’s book covers tips and guidelines to cut your tax bill and gain the greatest possible advantage out of each IRS rule and regulation.

Also, your state's website usually has good info on the business entities it allows. Google your state's secretary of state's office and then go to "corporations" or "business organizations."

For example: I just did this for Texas and found this great page on how to select a business structure. http://www.sos.state.tx.us/corp/businessstructure.shtml

Many other states have done this. Also, I have prepared a similar chart on the pros and cons of the different business structures and will send it to anyone who emails their mailing (snail mail) address to me at carolyn(at)photoattorney.com

After you do your research, be sure to talk with your accountant and/or your attorney about what business structure will work best for you.

Best,
Carolyn