Help please : A question for artists

[Shadrok]

For those of you in the US that are artist who take commissions how did you get started?
Also one question that I've been wondering is about taxes do you have to register as a small business? If so does this also mean that you need a business bank account?

I'm some what over whelmed at the moment and I could just be over thinking this, but I'd rather over think then under think and have the IRS stick it to me if you know what I mean. Currently have a second bank account but it's a consumer kind and I was just wondering do I have to change it to a business one.

Lots of questions and little help at the moment.

I was also thinking of talking with a financial advisor on the matter but I don't know.

[Tezkat]

Hmm... I'm not in the US right now, but I am familiar with running businesses on both sides of the border.

A business bank account isn't really necessary unless you incorporate or register a DBA and wish to receive payments in that name. Some people do find that it helps them keep business and personal expenses separate, but the banking fees tend to be higher, and for low sales volumes it's generally not worth it. For online art sales, you'll probably be paid through something like PayPal anyway. Basically, what you want come tax time are very meticulous records of all your revenues and expenses. Art commission fees would be taxed as self-employment income.

There may be places in your area that offer advice/workshops for new entrepreneurs (sometimes even limited free legal/financial services). You might want to look into some of those if you're planning on turning this into a significant source of income.

[Reese Tora]

so far as registering as a buisness and taxes go...

You don't need to register as a buisness on a federal level, and you just have to declare your earnings on your tax form. There's a line for other income at the bottom of the tax form, IIRC.

There may be some sales tax or income tax laws that come in to effect, but that would depend on local zoning and license laws. (I recall that one con was required to have a merchants license for each vendor that would accept money, so had a central registar where all transactions took place, research your local laws!)

Now, you could register as a buisness (or develop a corporation, even!) and there are advantages and disadvantages to each, but as a individual selling commisioned art, I don't think the benifits are worth the drawbacks.

[Zina]

Answering the commission one.
Advertise. Pimp yourself out on art galleries and forums. Let people know you're accepting commissions and offer a sample of your work. Getting your first costumers is always a bit hard, but once you have done a few commissions, others can look at those pictures as examples and you can build a reputation. Hopefully word will spread and you'll be getting more costumers. Maintain a positive and friendly relationship with your commissioners, and hopefully they will commission you again. Repeat commissioners are some of my best costumers.
Be sure to provide a reasonable price list and try not to over charge. Even if you think your art is worth the price, setting it too high might scare away potential commissioners, especially if you're just starting out. Scout around, and find some artists you believe are on the same skill level as you, and see what they are charging.
Don't get discouraged if you don't get any bites right away. It takes some time and a lot of shameless self promotion.
Hope that helps.

[Tapewolf]

Would it be worth putting this in the Library?  I doubt Shadrok is the only person wondering about this...

[superluser]

Also one question that I've been wondering is about taxes do you have to register as a small business? If so does this also mean that you need a business bank account?

I used to work for Block, so I can help with this.  You do not need to register as a business for the federal forms.  You may wish to report this as business income because that means that you can deduct any expenses used in the production of that work, but you don't need to make a separate legal entity or register as a DBA.  You just need to fill out Schedule C.

Another consideration is that if you don't turn a profit within three years, it's considered a hobby and you cannot deduct hobby expenses in excess of hobby income.

I was also thinking of talking with a financial advisor on the matter but I don't know.

Block has a financial advisor division.  Block also gives free tax advice.  I'm not sure if they give free financial advice, but you can certainly get all the tax advice you want for free and with no obligations.

[Zina]

Would it be worth putting this in the Library?  I doubt Shadrok is the only person wondering about this...

It's kind of hard to say, since it's not completely art related, but rather the discussion seems to be more focused on business and financial needs.
If you want, I can create a separate thread about giving advice for commissions.

[Tapewolf]

It's kind of hard to say, since it's not completely art related.
If you want, I can create a separate thread about giving advice for commissions.

I think that would be handy, yes.

[Zina]

Done and done.
EDIT: Actually, now that I'm awake, I think the whole thing should be moved to the library.

[Tezkat]

There may be some sales tax or income tax laws that come in to effect, but that would depend on local zoning and license laws. (I recall that one con was required to have a merchants license for each vendor that would accept money, so had a central registar where all transactions took place, research your local laws!)

That's probably not a licensing issue so much as a tax one (although some places do require permits to park yourself in a booth and sell to the public). Artwork and art supplies are generally considered taxable goods under state and provincial laws, thus requiring you to collect sales tax on them (at least for local sales). Big cons get around that by having a central vendor sell stuff on consignment from individual artists.

[Kenji]

Also, don't forget to actually do the artwork after people have paid you for it... 

[Shadrok]

I used to work for Block, so I can help with this.  You do not need to register as a business for the federal forms.  You may wish to report this as business income because that means that you can deduct any expenses used in the production of that work, but you don't need to make a separate legal entity or register as a DBA.  You just need to fill out Schedule C.

Another consideration is that if you don't turn a profit within three years, it's considered a hobby and you cannot deduct hobby expenses in excess of hobby income.

I was also thinking of talking with a financial advisor on the matter but I don't know.

Block has a financial advisor division.  Block also gives free tax advice.  I'm not sure if they give free financial advice, but you can certainly get all the tax advice you want for free and with no obligations.

Ok I'll have to talk with H&R Block on the tax part. Who knows if I can start taking commissions this year I mite be able to deduct my laptop from my taxes, since I do use it for art and I did buy it this year.

As for the financial advise one of my managers gave me the number of a friend of theirs that works for Ameriprise Financial, and when I get the chance I'm going to call them and ask them some questions.

Answering the commission one.
Advertise. Pimp yourself out on art galleries and forums. Let people know you're accepting commissions and offer a sample of your work. Getting your first costumers is always a bit hard, but once you have done a few commissions, others can look at those pictures as examples and you can build a reputation. Hopefully word will spread and you'll be getting more costumers. Maintain a positive and friendly relationship with your commissioners, and hopefully they will commission you again. Repeat commissioners are some of my best costumers.

Ok looks like I need to get into more galleries.

Be sure to provide a reasonable price list and try not to over charge. Even if you think your art is worth the price, setting it too high might scare away potential commissioners, especially if you're just starting out. Scout around, and find some artists you believe are on the same skill level as you, and see what they are charging.

Already on it.

Don't get discouraged if you don't get any bites right away. It takes some time and a lot of shameless self promotion.
Hope that helps.

understood, and If the number of views on FA are any hint, I'm not even a blip on a commissioner's radar. So I'm really gonna have to kick my introvert to the side and be more extroverted.

Also, don't forget to actually do the artwork after people have paid you for it... 

I wouldn't think of it.

[Tezkat]

Ok I'll have to talk with H&R Block on the tax part. Who knows if I can start taking commissions this year I mite be able to deduct my laptop from my taxes, since I do use it for art and I did buy it this year.

Heh... deducting business expenses...

Computers are generally considered capital equipment for which you deduct the depreciation over their useful life rather than expensing the whole cost in one go. It's possible to deduct the whole thing in the first year (usually under Section 179), but I'd be wary of trying to do so unless your art income is a fair bit higher than the cost of your laptop. There's also a fairly important distinction between personal equipment you use in your business and equipment purchased specifically for business purposes.

Professional advice is a good idea...

You might also want to look into some more general info (books, workshops, web sites, etc.) on entrepreneurship, writing business plans, etc. Even though a lot of it wouldn't apply to you specifically, it would help make you aware of the kinds of issues you need to think about when running your own business.

[llearch n'n'daCorna]

BTW, capital equipment gets written off over the course of three or so years, IIRC. So the depreciation is one third per year, or something.

Note that that's UK and NZ rules. I believe Aus follows the same rules, but cannot confirm that. Likewise, I don't know for sure about the US.

[superluser]

BTW, capital equipment gets written off over the course of three or so years, IIRC. So the depreciation is one third per year, or something.

Oh, goodness.  If it were only that simple.

You have to look it up on the CLADR table to figure out what the class life is, and then you are given an amount of time to depreciate based on that, and then the amount that you can deduct each year is defined by a depreciation system (I think a laptop would have a 7 year class life, but you depreciate it over 5 years under MACRS--and it's *not* an equal amount each year)

That's assuming that it doesn't qualify for a section 179 deduction or you opt not to take it.

[llearch n'n'daCorna]

heh. This explains why people can get away with murder under the tax system.

God. Give me something simple, and you can concentrate on making sure everyone pays it, rather than spending all your time figuring out what needs to be paid...

[Kenji]

Also, don't forget to actually do the artwork after people have paid you for it... 

I wouldn't think of it.

Just a joke. I've known a couple that've done it.

[Zina]

Also, don't forget to actually do the artwork after people have paid you for it... 

I wouldn't think of it.

Just a joke. I've known a couple that've done it.

D:
I swear I'll get yours finished soon.

[Kenji]

Also, don't forget to actually do the artwork after people have paid you for it... 

I wouldn't think of it.

Just a joke. I've known a couple that've done it.

D:
I swear I'll get yours finished soon.

*laughs* Numerous, Ziner.