In this week’s guest blog post, The Pen Woman Editor Rodika Tollefson illuminates what creatives need to know about business.
If you’re one of those creatives who enjoys the business side of things, congratulations! You are part of a very small group of people who love accounting and marketing as much as they love creating their art.
For the rest of us, the business aspects of paid creative work are tedious—which means we put them off for as long as we can.
You may be able to procrastinate when it comes to posting your receipts or updating your website. But there are a few things you should not postpone, and that is to make sure that you are conducting business according to the applicable local, state, and federal laws.
As soon as you decide to sell your work, you are a self-employed owner of a business. Even if you’re a solopreneur—without an incorporated business—and you don’t have a business name, you’re still liable for licenses, permits, and taxes.
Here are a few things you need to know:
Business licenses: Requirements vary from state to state and, in some cases, you don’t need one until you meet a certain revenue threshold. Even if you don’t reach that number, a business license is a good idea for those planning to do public commissions, sell to the public, and so on.
In addition to the state, some local jurisdictions such as cities require business licenses. Some must be renewed every year.
Income taxes: The IRS may consider your business a hobby for the first few years if you don’t have net income, but your state may not.
In Washington state, where I live, the business and occupation tax is based on gross income, which means businesses have to pay taxes whether they actually net anything. There are very few deductions, and none of them apply to the typical writer or artist. Instead, the state has credits, on a sliding scale, for businesses that earn up to a certain amount.
Sales and personal property taxes: If you’re selling tangible items like art, you will likely be liable for sales taxes. That means you have to collect them from your customers, keep track, then remit them to your tax entity (typically the state).
In some states, sales tax is based not on where the sale originates, but on the shipping destination. Talk about an accounting nightmare if you’re selling and shipping to customers in other locations!
Some jurisdictions also tax businesses on their inventory and personal property like equipment. My county does this, though luckily the total of my equipment value is low enough to meet the exempt criteria.
Home business permits: Some local jurisdictions require a special permit for conducting business out of your home, especially if customers will be stopping by or the business will generate noise (a chainsaw-carving artist, perhaps?). Check with your city or county.
There may be other odds and ends for you to consider based on your own location. Penalties and back taxes are no fun, so make sure you do your research.
No one dreams of having to study tax code and business regulations in order to sell creative works—but if that’s what it takes to have the freedom and privilege of pursuing one’s passion, I’d trade a little accounting headache for punching a time clock in an office tour any day.
“Business Woman Writing Job” image by Feelart/FreeDigitalPhotos.net
Rodika Tollefson is a member at large who lives in the Seattle area and serves as the editor in chief of The Pen Woman and the national Public Relations Committee chair. An award-winning journalist as well as a writer, graphic designer and video producer, she’s owned her own communications business for 15 years.
WANTED: GUEST BLOGGERS! Pen Women are invited to submit guest posts for two new series: Creative Inspirational Wisdom and It’s A Creative Business. Please visit this link for more details. We look forward to reading your material!