via: Artist as Entrepreneur - 7 Oct., 2007

  Stop Playing, Get Real

   via: Artist as Entrepreneur

Many artists must maintain either full- or part-time employment in addition to their art activity to earn income. In this case, artists may find it difficult to claim expenses related to their art as business expenses because the IRS may consider the art activity to merely be a hobby. The artist, then, must be aware of the IRS criteria for establishing their activity as a business. In this lesson, students will learn what the IRS criteria are and list ways they might be able to demonstrate that their art activity (present or future) is actually a business venture.

Be a Business:

• Do you carry on your activity in a business-like manner? First and foremost, be sure you have complete records of your business transactions. Open a bank account in the name of the business. And, be sure you look like a business. Create a logo for your business and use it on letterhead, business cards, and brochures.
  

• Does the time and effort you spend on the activity indicate that you intend to make it profitable? Record the amount of time you spend working on your art. The more time you spend on your art business, the more likely you will be viewed as having a serious dedication to promoting your business.
  

• Do you depend on income from your art for your livelihood? An apparent need for income will support your case. Keep records of the ways you sought income.
  

• Are the losses you sustain in your art business due to circumstances beyond your control? Your losses may be due to heavy investment in start-up costs.

• Can you change your methods to improve your profitability? You should review your methods of production and marketing regularly. Look for ways to acquire your materials more inexpensively, or find alternative materials that suit your purposes. Seek alternative ways to market your art, or seek new markets. Consider creating additional goods that would be purchased along with your art. Goods that are purchased together are referred to as complements. For example, if your art includes production of ceramic plates, you might consider designing stands for the plates.

• Is your art business ever profitable? If you are able to show that you earned a profit in some years, your claim as a business is more credible. Is there one particular aspect of your business that is profitable? Examine each type of product you make to determine if one or more of your lines is profitable.

• Do you, or your advisors, have the knowledge needed to build and sustain a successful art business? If your legal and accounting skills are not adequate, get some help. Entrepreneurs are devoted to providing their product. It is rare to find entrepreneurs who are skilled in all aspects of business development. It is important to hire the services of experts, particularly in taxes and contracts. As your knowledge in these areas improves, you will need expert services less.

  In some localities, you may be able to find such services free of charge. Check to see if your community has a Volunteer Lawyers and Accountants for the Arts (VLAA) organization, a Service Corp of Retired Executives (SCORE) office, or a Small Business Development Center (SBDC). The VLAA is a non-profit group in support of the arts. SCORE and SBDC are supported through the U.S. Small Business Administration.

• Have you been successful in making a profit in similar activities in the past? Cite teaching, jurying, curating, and writing in addition to examples of your previous art businesses.

• Can you expect to make a future profit from the appreciation of the assets used in your art business? If your sales and selling prices have increased, then you can demonstrate a reasonable expectation of future profits. Because an artist’s reputation typically grows over time, your unsold work should also appreciate in value.

South Florida Artist Entrepreneurs Meetup Group

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