Congratulations! As an Artist you are a small business owner!
10 Steps to Starting Your Small Business
*This article is adapted for artist from Small Business Administration (sba.gov). For more information on any of the steps visit article.
1. Market Research
- Is there a desire for your artwork?
- Participating in shows (juried or invitationals) will help you gain exposure for your work.
- Apply to galleries that have good social outreach.
- Who are your customers?
- Gather demographic information to recognize opportunities and limitations for growth.
- How many people might be interested in your work?
- What is the income range of your demographic?
- Where are they located?
- What makes your audience unique? How can you address them specifically?
- Ask people their opinion and pay attention to how people react to your work or web presence. You are not looking for approval from everyone, you are looking for information about what kinds of people are interested in what you do.
- Who else does what you want to do?
- How do they do it? Gather a lot of examples and strategies.
2. Write a Business Plan
- Start with a Lean Startup Format business plan.
- In the beginning a lot will likely shift so more than creating a rigid structure this will help you grasp the financial realities of your dream to make attainable goals.
- You have to be as creative with your business model as you are in your studio.
- The heart of your business plan is how you make money.
- What is your overhead?
- What is your strategy?
- What will be your milestones?
- If you don’t set goals, you won’t reach them.
- Keep track of your progress from the beginning. Be specific like what pieces sold, invitations to shows, workshops offered, website traffic, followers ect.
- Project where you want to be and what you think is attainable for a short amount of time so that you can analyze what went right and what went wrong. Learn from failure.
3. Fund your Business
- Determine how much funding you need.
- What do you need?
- Kiln and furniture, installation fees
- Studio space
- Equipment, tools
- Packing materials
- Where will you get the funding?
- Self- Funding
- Small business loan
- You will need a Business plan, expense sheet and financial projections for next 5 years to assure the bank that you are a good choice for a loan.
- Contact multiple banks and credit unions to compare offers.
4. Pick your Business Location
- Your location will effect your…
- Zoning laws
- Property value
- Insurance rates
- Government licenses and fees
- How much you are required to pay employees
- Government incentives
5. Choose a Structure
You need to choose a structure before you register your business with the state. It will effect your taxes and liabilities. Artist should research the following types of business structures. This article is targeted for artist. Should I open a Corporation for My Art Business?
- Sole Proprietorship (SP)
- Banks are hesitant to lend to this type of business structure.
- You are held personally responsible for debts of business.
- Good choice for low risk businesses.
- Partnerships – Limited Partnerships (LP), Limited Liability Partnership (LLP)
- Most simple way to co-own business.
- Less Liability than SP.
- Protects owner (and assets) from liability (like having a business baby).
- Corporation- (C-Corp)
- Double taxation as the owner – you pay income tax and corporate taxes on the businesses profits.
- Unless you pay yourself all of the profits as income.
- Not best choice for artist.
- Limited Liability Company (LLC)
- This disconnects your personal assets from your business in case you face bankruptcy or lawsuits.
- Profits and losses can go through personal income without being subject to corporate taxes.
- Owner is considered self employed and pays taxes accordingly.
- S Corporation (S- Corp)
- Avoids the double taxation of C- Corp.
6. Choose Your Name
- Choose a name that allows your business to be flexible and grow.
- Register a domain name so that you own your brand identity online.
- Register your business name with the state.
7. Register your Business
You need the following information to register federally and in the state. Your structure will determine what forms you need. Visit sba.gov to find out more.
- Business name
- Business location
- Ownership, management structure, or directors
- Registered agent information
8. Get Federal and State Tax IDs
- Apply for an Ein with the IRS
- Find out the state requirements for your registration
9. Apply for Licences and Permits
- Depending on your location, you may need permits or permission from local fire authority to operate your kiln. I t is a good idea to be friendly with the fire authorities if you operate a gas or wood kiln.
10. Open a Business Account
- Open a business bank account with your ID Number to keep your funds and records separate from your personal account.
- This will help with taxes and measuring growth.
- Keeps you compliant and protected.
- Find an account with low fees and good benefits.
Tax Preparer for craftspeople, Linda Metzger, provides her tax tips for new businesses.
Bookkeeping/Tax Tips for New Business
- Open a separate checking account for your business – pay all expenses from it and deposit all income into it. If you need to invest money in your business make a deposit into this account and label it owner investment. Use a separate credit card for business expenses as well. If you get into this habit you will have a more accurate accounting on the status of your business AND you will be less likely to miss business expenses or forget business income. Try to avoid using cash for business expenses. If you do use cash keep all your receipts in a separate envelope/folder to record as well. Get in the habit of marking receipts as soon as you receive them as to what they were for and that it is a business expense – example:”Bus/office supplies”.
- If you use/buy something to be used in your business it is probably a business expense. Taxes are paid on your profit which simply put is:
Income – Expenses = Profit
- If you are “computer” person consider using a software program to track your business records. It can be a simple program for most businesses – such as Quicken – at least to start with.
- Find a bookkeeper/accountant who can help you set up your books and answer questions.
- Keep good records on your vehicle – business miles driven are an often overlooked deduction that adds up very quickly. Keep vehicle information such as purchase price/lease terms, actual costs, total mileage driven, insurance, etc. Your tax adviser can recommend the best way for you to account for auto expenses, depending on your circumstances, but they will need the above data. Get in the habit of recording miles driven for business reasons – going for supplies, making a bank deposit for your business, seeing your bookkeeper, or even trips to the post office when mailing for your business.
- Consider taking an accounting course if you are so inclined. Just getting one entry level class will help to give you an understanding of basic accounting principles that will serve you well in life – even if you don’t go into business for yourself.
Linda Metzger Accounting
Phone: (585) 374-2152 Fax: (585) 374-8865
PO Box 69; 118 N Main St., Naples, NY 14512
Here are some other links with Tax information:
For General art business practices;
Art / Work by Bhandari & Melber is an excellent book about being a professional in the art field.