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Small biz for creative types september 5, 2017


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Presentation on the basics of developing a small business for creative business owners. Business formalities, taxes, contracts, and other legal and tax information to get you started.

Published in: Law
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Small biz for creative types september 5, 2017

  1. 1. Small Business Development for Creative-Types Growing your creative business Presenter: Miriam Robeson, Attorney September 5, 2017
  2. 2. Making Your Art Work For You ● Business Plans ● Business Formalities ● Business Accounting ● Tax and your business ● Legal considerations ● Small Business Development ● Creative Cooperatives What We Will Discuss...
  3. 3. Why Be a Business? ● It will help you make money ● It will help you focus ● It will help you comply with legal and tax regulations ● It will give you more credibility ● It will show you weaknesses in your business Five Reasons to “Step Up” the Business Side of Your Art
  4. 4. When Should You ‘Become’ a Business? ●Desire and Determination ◦ You enjoy your art and can spend all day (every day) developing products and skills ◦ You are willing to treat your art activities “like a business.” ●Dollars and Sense (Cents) ◦ You can create enough art (and sell at a price) to support yourself (and family) ◦ You can sell your art for more than it costs (time and supplies – including a fair value for your time) ●Art Takes Over ◦ You spend all your time in search of “more-- better--bigger” ways to create and display your art ◦ You find public venues for your art (display and sell) When Can You Quit Your “Day Job?”
  5. 5. Getting Started ● Trial Run, Ease In, or Dive In? ● 50% of Small Biz fail in the first 5 years. ● Are you ready to be both Art and Business? Start-up Basics Top 10 Start-up Steps Top 7 Reasons Why Poor Businesses Fail
  6. 6. BUSINESS PLANS Fail to plan = Plan to fail
  7. 7. Business Plan ◦ The important elements of ◦ your business plan ⚫Vision Statement (Who You Are) ⚫The Players (Customers) ⚫Business Concept (What’s the Point?) ⚫Finances and feasibility (What does it cost to get where I want to go?) ⚫Success Matrix (How will you know when you have arrived?) What is it, and why do I need one? Why should Artists have a business plan?
  8. 8. Business Plan ● You need a Business Plan if... ◦ You are running a business (not a hobby) ◦ You are applying for a loan (lenders require it) ◦ You are looking for investors (investors want it) ◦ You are working with partners (so everyone knows the plan) ◦ If you run into trouble (legal, financial, etc.) Why do I need one? Top 10 Business Plan Tips
  9. 9. BUSINESS FORMALITIES Government Compliance
  10. 10. Business Formalities ● Protect yourself and your business ◦ Business Entity (Corp, LLC, formal partnership) ◦ Tax ID number (NOT your SS#!!) ◦ State and Federal paperwork ⚫Existence, taxes, creative protection ◦ Business Relationships Paperwork ⚫Contracts for lease of space, use of equipment, display of art (gallery space), sub- contracted work Paperwork = Credibility
  11. 11. Business Formalities ● Sole Proprietor – Easiest entity - least protection ● Corporation – Formal entity - greatest protection ● Limited Liability Company (LLC) - greatest flexibility ● Consult a professional! What Kind of Business Are You?
  13. 13. Small Business Finances ●Keep business income and expenses separate from personal ◦ Separate checking, credit card account ◦ Separate vendor / customer accounts ●Keep stuff! ◦ Receipts, invoices, contracts (scanner is OK) ●Computer Bookkeeping program ◦ Mint - Quicken – Quickbooks – Excel Spreadsheet ◦ Enter ALL income and expenses Tracking the $$
  14. 14. Small Business and Taxes ●Type of business formality determines tax return ● Things you can deduct ◦ Supplies (creative and administrative) ◦ Insurance (business and health) ● Things you can’t deduct ◦ Personal / Living expenses ● Watch Hobby Loss Rules! ◦ More than three years of loss - the IRS calls you a “hobby,” and you cannot deduct expenses! Protecting your business
  15. 15. Small Business Taxes ● Sales Tax Paid to the State– what is it, when do you collect? ◦ 7% - more than 30 days - “in the business of” ● Sales Tax You Pay for Purchases – what’s exempt? – “Direct production of” ● Employment Tax – when do you have “employees”? ● Income Tax – Estimated Payments required ◦ 110% of current income tax obligation ◦ 100% of previous year’s tax obligation Taxes You Pay - Taxes You Collect
  16. 16. Small Business Taxes ● Home Office/Studio – dedicated space ● Utilities (heat, light, phone) – pro-rata share ● Insurance – business insurance, pro-rata share of casualty insurance on home ● Automobile – travel to/from events, exhibits ◦ 2017 IRS Mileage Rate = 53.5¢ per mile *or* actual expenses ◦ Meals and Entertainment – 50% rule for meals - actual costs for lodging, travel ● Art Supplies and Equipment ◦ “Consumables” = immediately deductible ◦ Equipment with useful life = depreciate ● What Do You Want to Deduct? Deductions, Deductions, We Love Deductions!
  17. 17. Small Business Tax Traps ●State Tax Traps ◦ Failing to file sales tax returns ◦ Failing to file employment tax returns ◦ Failing to file Secretary of State documents ●What to do if you have trouble ◦ Memory Devices ◦ Hire a professional The IRS is watching you... Remember: Keep records! Top 10 Audit Triggers
  18. 18. Small Business LAW ● Personal Risks ◦ Personal assets at risk from business practices ⚫Financial Issues ⚫Liability Issues ● Business Risks ◦ What is your business worth? ◦ Protect your business reputation ● Work Product – See Intellectual Property Legal Risks
  19. 19. When You Don’t Own What you Create: Work For Hire ● “Work For Hire” is owned by the hiring agent under three conditions: ◦ (1) Meet “Commissioned Works” definition in the law: ⚫Contribution to a larger work, such as a magazine ⚫A part of a motion picture or audiovisual work ⚫A compilation of existing works ⚫Instructional texts or graphic works ⚫A translation of an existing work ⚫A test ⚫Answers for a test ⚫Supplementary works, such as a graph for a book ⚫An atlas Sample Work for Hire Agreement
  20. 20. ● Work For Hire belongs entirely to hiring agent IF: ◦ (2) If the creator is an employee and the work was created on company time or with company resources; ◦ (3) If the creator specifically relinquishes all rights prior to commencement of work. Sample License Agreement When You Don’t Own What you Create: Work For Hire (con’t)
  21. 21. Contracts: Protecting Your Work ●Contracts = Professional = Credibility = Protection of the relationship ●Contracts set expectations ◦ What – When - Where – How Much ◦ Rights – Responsibilities ◦ Timeline for payment and performance ◦ Ownership of work product ● Contracts help manage conflict ● Always have a contract ● Always start with YOUR contract
  22. 22. Releases – Use of private likeness ● Types of Releases ◦ Model Release ◦ Minor Release ◦ Property Release ● When do you need a release? ◦ If the subject is recognizable ◦ If the subject is used for commercial purposes Sample Model Release When you want to use someone else’s image
  23. 23. Releases – When Not Needed ● Public Places ◦ Images taken from the street of publically visible property ◦ Public buildings (visible to the public, located in public) ● When is a release not needed? ◦ Educational purposes ◦ Editorial illustration ◦ Non-commercial purposes
  24. 24. SMALL BUSINESS DEVELOPMENT Grow Your Business
  25. 25. Small Business Development ● Financing growth ● Know why you need $$$ ◦ Investors - want to see profit ◦ Patrons - want to see your art ◦ Business (loans) - want $$ + interest ●What is your time worth? ◦ When is it worth hiring it done? ◦ Administrative details ◦ Gal/Guy “Friday” ◦ Share administration with a partner ◦ (artist or business) Planning to Grow Your Small Business
  26. 26. Small Business Practices ● 8 things you must do when selling a piece of art ● 10 Principles of Success for Artists ● Top 10 Tips to Grow Your Art Business
  27. 27. CREATIVE COLLABORATIONS Collaborations for Success
  28. 28. Creative Cooperatives ● Sharing a business - increase profitability ◦ Like Kind of Art ◦ Compatible Kind of Art ◦ Diverse Kind of Art ◦ Mixing Art and “Other” ● Investment Limits – when is enough too much? Art Teams that Succeed
  29. 29. Creative Cooperatives ● Tips For Partners ◦ Discuss expectations - then write them down ◦ Written agreement for sharing costs and income ⚫Sharing store space, studio space, equipment ⚫Sharing costs and sharing time ⚫What happens if it doesn’t work out? ◦ Feeling of Fairness - MOST Important! ◦ Must be willing to spend time on the relationship ◦ Not for friends or the faint of heart! Art Teams that Succeed
  30. 30. Employees ● Employees increase business complications ◦ Employment taxes and rules ⚫Full time and part time ⚫Over time and benefits ◦ Training Employees to read your mind ● Can you succeed without help? ◦ Employees allow you to be in two places at once ◦ Employees can be hired for business management ◦ What is the “marginal benefit” of an employee? Do I Need Employees? What Do I do with Them?
  31. 31. Employee or Independent Contractor? ●Tax issues for you ●IF YOU are an independent contractor ◦You have to pay your own taxes ◦You are hired for your expertise and product, not to put in time ●IF you HIRE an independent contractor ◦Make sure you report on IRS 1099 ◦Make sure they aren’t “really” an employee
  32. 32. How to Succeed at (Art) Business ● Make a Plan - stick with the plan ● Formalize Your Business - act like a business, not a hobby ● Keep up with the paperwork ● Keep up with taxes (and keep receipts!) ● Watch and protect your rights ● Watch copyright issues ● Enter partnerships with eyes wide open ● Don’t forget to MAKE ART! Plan, Work, Time, and Art
  33. 33. Resources for Small Business ● US Small Business Administration ◦ ● Indiana Small Business Development Corporation ● ● Google is our Friend Finding Help for what you need
  34. 34. Thank you for your attention! Questions? Answers? You can find this presentation At “Law Basics for Artists” You can find Miriam at: