Self-employed: From business to accounting | Become a model #6 - MAO

Become a model in cities like New York and Los Angeles is very difficult, especially when you finished your first jobs. Today, we talk about: Self-employed: From business to accounting! Registering your business, running your business and being successful. That is what we will talk about within the next chapter. New faces, newcomer and younger models will ask themselves which legal form is the best for them. Once the first jobs are done within the agency, it is about the payment.

In short: go to your local trade office (take your ID with you and some money), register your business (which will take about 10 minutes), receive your tax number, collect invoices and by the end of the your you will compare your earnings to your expenses in a simple list.

Overview

1 Step by step: Let’s start your modeling business

2 Your own business as self-employed model

2.1 Legal form for new faces in the beginning

2.2 General accounting for models

3 Fulltime or part-time job?

3.1 Private liability

3.2 Accounting of your income and outcome

4 Financial statement at the end of the year

4.1 How to do a financial statement

4.2 How long is a small business for models suitable?

4.2.1 Short calculation: Small business

4.2.2 Not a small business anymore

5 Insurance for modeling jobs

5.1 Help and tips for young models

Step by step: Let’s start your modeling business

We will look at all steps in detail:

Becoming a model – the best legal form for models
Founding – small businesses for models, that easy
Accounting – you have to do it
Financial statement – profit and net income method
How long is a small business advisable for models?

Notice > this chapter will just give you an idea. If you decide to work as model talk to your parents first, or if you are already older talk to an accountant.

Your own business as self-employed model

Why do you need your own business? In general, there are two forms: being employed or self-employed. As an employee, you will get your regular salary, monthly and always the same amount. If you are working for a company you have set conditions like working hours, holidays. However, self-employed people have different companies they work for. Depending on the projects the factors of payment and working hours will differ. As a model, you are self-employed. And once you are earning money, you have to register your business within the local trade office. Sounds complicated but it is not if you get a bit into the topic “being self-employed“.

Legal form for new faces in the beginning

The suitable legal form for young models and self-employed models?

When you register your business, you will be asked if you want to pay and apply VAT or if you want to have a small business without VAT. What is the difference? Well as a small business, you don’t have to do the complicated accounting and financial statements. Just the general accounting is enough and the profit and net income method is sufficient. Which means: you collect your invoices, and at the end of the year you calculate your earnings and expenses. As a small business, it is suitable for models who work part or fulltime and you are more flexible when it comes to your living.

General accounting for models

Instead of a complex financial statement, general accounting will be enough in most cases worldwide. In Germany for example, you are not obliged to do accounting, to do a financial statement and you may calculate your annual profit with a simple profit and net income method (profit vs. expenses). It may sound complicated but it is simple and easy. You just compare your earnings to your expenses in a list and calculate the profit.

If you need information about your tax system, ask your parents! They know the system and will help you quick.

Fulltime or part-time job?

As a model, you may keep your flexibility with regards to work. At the beginning, you can still work somewhere else or concentrate onto your modeling career. A small business is allowed besides school as well.

Private liability

Be careful (!) you are always held liable with your private assets. Don’t take any financial risks. Don’t borrow money, rather save money from the very beginning (from your payments).

Accounting of your income and outcome

One work regarding accuracy. Accounting is not complicated. You only have to collect your earnings and expenses. Just get a classy folder for that and collect all invoices and specimen copies and keep them chronologically.

Every time you spend money, get a receipt and keep it in your folder. Online invoices you will have to print, of course. If you earn money yourself, write an invoice and keep it in your folder. Bookkeeping with your computer is not advisable, because receipts might get lost or you might delete them unintendedly or they could spam your hard drive. The tax office needs you to keep all receipts and invoices for a couple of years, for the event of an audit. So, in short: a folder, with all receipts and invoices kept chronologically.
Now, you only have to keep some things in mind as “small business“ when you are writing invoices and when it comes to taxes:

Financial statement at the end of the year

By the end of the year you will have to make your profit and net calculation, and present it to the tax office. If you have any questions you can always contact your tax office.

How to do a financial statement

The profit and net income method is the simple form of profit determination by the end of the year. For freelancers and small businesses like you, the perfect way to compare earnings and expenses. The basis for all calculations is the money in your account. If you are about to do your first calculation, contact your tax office, because you have two possibilities: you could either use the appendix EÜR in your USt-declaration or (as a small business) you may also just hand in an informal profit determination, for example with Excel. But pay attention to invoices before the end of the year! If you are invoicing someone before the end of the year but get the money in the new year, it will have to be included in the calculation for the new year.

How long is a small business for models suitable?

With just two well paid campaigns you might have earned that. You will then have to charge VAT and have to change your legal form. This is an advantage for you! Your acquisition costs will rise once you have more earnings. Which means: more jobs, more expenses. Maybe for a car, a Bahncard/Railcard or a second mobile phone. As soon as your expenses rise, VAT gets even more interesting for you. Why? Because you can offset it.

Short calculation: Small business

Some countures allow “small businesses”. You have an easier tax system for the start. You are getting a model cell phone and pay 600 Dollar. That’s it.

Not a small business anymore

You are getting a model cell phone and pay 600 Euros. But wait, there is more to that! You will get the VAT back from the tax office by the end of the month. So, worldwide with a VAT of 15 – 20% that is almost 100 Dollar, which you will get back for just a little bit more work. And your expenses decline from 600 Dollar to 500 Dollar.

Insurance for modeling jobs

Important! You must insure yourself if you are not covered by a family insurance or not still at school or University.

Quest Author: Stephan M. Czaja / CM Models (Head Booker) from ‘The Model Book’

Self-employed: From business to accounting | Become a model #6