It's time to get past the barriers of fear & the unknowns that are keeping you from starting your art business. You can set up a business that's legal & legit and build a career that you love.

We know how intimidating business structure, accounting, and taxes can be!

In this post, we're going to take the guesswork out of starting your art business by sharing our 5 step process.

Ready to set up your art business for success? Let’s get into it…

Step 1. Decide What your Business is and What Products or Services you’ll Sell

The first step to starting a successful art business is deciding what kind of artist you are and how you’ll sell your products or services!

If you’re not sure yet, consider these 7 Ways to Make Money as an Artist, Illustrator, or Hand Letterer, including art licensing and freelancing.

Step 2. Find your Creative Voice and Write your Artist Statement

Before you can leap into getting clients or an agent, you have to understand how your work is different by finding your artistic voice, and then determine how to clearly articulate your value by writing your artist statement.

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Step 3. Choose your Business Name

First, you’ll want to figure out your business name. Don’t overthink this piece too much, you CAN change later if you need to (been there, done that, don’t want to talk about it).

You might want to run your business under your own given name, in which case you don’t need to file any paperwork. If you want to choose another name, you’ll need to file a DBA (doing business as) to make it official. See the next section for more info on that.

Step 4. Choose your Business Structure

In the U.S., self-employed artists typically consider two main business structures: Sole Proprietorships and LLCs. These structures determine how you're taxed and your liability protection.

A sole proprietorship is a business run by one person – a.k.a. you. It's the most popular structure for new businesses because it's the simplest to set up and run. A sole prop is actually SO easy to set up that….you may have already done it without realizing it! You don't have to file any formal paperwork or take any extra steps to form one. You just have to start doing business! Running a sole proprietorship as an artist may be easier than setting up an LLC, but it also means that there is no legal separation between you the person and your business. An LLC can offer more protection for your personal assets and finances.

Sole Proprietorship:

Easy to set up; no paperwork required—just start selling.
No separation between you and your business, meaning personal liability for business debts or losses.
Often suitable for less risky ventures.

LLC (Limited Liability Company):

Separates personal and business liabilities; personal assets are protected.
More complex and costly to set up than a sole proprietorship, but usually under $500 with a yearly fee depending on which state you operate in.

If you’re not sure if you should choose an LLC or Sole Proprietorship, you should consult with a lawyer for peace of mind. It’s important that you consider if your business is something that needs extra liability protection, or if you feel comfortable being tied to your business personally.

In our line of work, we both feel a sole-prop is a good fit for taking on freelance design work, but when we introduced on-going contractors and our partnership, we knew an LLC was a better fit. If this is holding you up, start now as a sole-prop, and you can change the structure to an LLC down the line.

A DBA (Doing Business As) allows you to operate under a different name. It's required for sole proprietors using a business name and for LLCs if using multiple names.

If your art business profits are high, consider an S Corp as it might save on taxes. You should definitely consult a CPA for personalized advice.

Once you’ve chosen your business structure, apply for an EIN (Employer Identification Number) to avoid using your personal social security number. It's free on the IRS website!

Step 5. Setting Up Your Finances: Bookkeeping, Taxes & Accounting

By getting organized from the get-go, you'll save yourself time and probably money.

If you can, we highly suggest working with a CPA (certified public accountant) experienced in working with artists or freelancers.

Sign up for a business bank account

After deciding on which business structure you're going to go with, you'll want to set up a separate bank account for your business. It is so important to keep your personal finances separate from your business finances!

It’s so easy to set up a separate business bank account, and it makes it so easy to track your income and expenses. We use Novo (use our link for $100 bonus!) because it’s 100% virtual, meaning we can both access it from across the country, and we don’t need to go into a physical location.

Start tracking your income and expenses using accounting software

You should start using accounting software like QuickBooks, Freshbooks, Xero or Bench, to help you stay organized.

Your accounting software can help you get paid through sending invoices to clients and making sure you pay your taxes with minimal headache. It’ll also help you track your expenses and income, which you’ll need to have organized come tax time. Most accounting software can sync with your bank account for easy categorization, which is crucial for tax deductions.

You’ve probably seen the Schitt’s Creek reference to write-offs, so let’s quickly make sure you understand what it actually means. Business expenses like rent, utilities, travel, and office-related purchases can be deducted to reduce taxable income. Properly categorizing expenses helps maximize deductions. A CPA will be able to ensure you're taking advantage of all deduction opportunities. This is not free money back, it’s a tax break - got it?

Income & Sales Tax for artists: How to not get audited

Tax season is notorious for being confusing and stressful, so it’s really important that you understand these two types of taxes from the get-go.

Income Tax: Payable by anyone earning money; self-employed must pay manually. Typically involves quarterly estimated tax payments.
Sales Tax: Collected on goods/services at the time of sale; varies by state.

Here are a few tax questions we recommend talking to your CPA about:

Do I need to pay quarterly estimated tax payments?
What sales tax applies to my business?
Which retirement account suits my needs?
What else can I do to streamline tax filing?

Interested in learning more about setting up an EIN, Sales Tax, & Income Tax as an artist? Join our Skillshare course: Setting Up A Creative Business: Let’s Get Legal And Legit

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