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Basics for the Newbie: Do I Need a Business License?

by Carolyn Henderson on 11/22/2011 9:28:54 AM

This article is by Carolyn Henderson, the managing half of Steve Henderson Fine Art. She is a Regular contributing writer for FineArtViews and her  freelance writing appears in regional newspapers, online magazines, and her humor blog, Middle-Aged Plague.

When the Norwegian Artist was in his 20s, he spent a few years bicycling through South America with another buddy who wasn’t ready to confine himself to an office cubicle either. Because they were two typical young males with zero cooking skills, and because they were traveling light, they stopped at restaurants for their meals.

This sounds exorbitantly expensive until you realize that many of these restaurants were actually people’s homes, the matriarch keeping her own family fed by making extra portions to sell to others. In our tightly licensed, regulated and forms-in-triplicate-to ride-a-bicycle society, this is a foreign concept indeed.

While Colombia, and similar nations, are awash in their own regulatory deluge, acquiring licenses for breathing isn’t necessarily one of them. Setting up a business in one’s home or a small kiosk on the sidewalk – selling food, knitted hats, carved wooden figurines, greeting cards, original paintings – is generally no big deal.

Not so here, and that includes selling artwork – out of your home; on your website or online locations like Etsy or Ebay; at festivals and fairs; through galleries – if you’re serious about making money at this, more than one governmental entity that collects revenue wants to know about it.

One of the first things people wonder about is a business license:

What is it, do you need it, how do you get it, and is that all you need?

What is it?

According to the Small Business Administration, “A state business license is the main document required for tax purposes and conducting other basic business functions. Many states have established small business assistance agencies to help small businesses comply with state requirements.”

Do you need it?

If you’re out to make money at what you paint, sculpt, carve, or otherwise create, yeah, probably. The Internal Revenue Service makes distinctions about what constitutes a hobby versus what is a business, but your state or municipality may have different criteria.

Where do you get it?

At the Small Business Administration site, check out the handy License and Permit page, which allows you to fill in your location and business type (I put in General Licensing), after which you’ll receive another page, full of more links and confusing information. You can also click on your state directly and get another, confusing in its own way, page.

You can also Google (Your State) Business Licensing and hit the link that ends in .gov -- .com and .org may take you to for profit sites that sound like the official government site but aren’t, charging you an added fee to act as brokers between you and the government entity.

At Steve Henderson Fine Art, we have a state business license, which we acquired by contacting our state department of revenue, which was no big deal to get, and which we post in plain sight at the studio in accordance with our state’s regulations.

Is that all you need?

Maybe, maybe not. Each state is different, and individual counties and municipal entities may impose additional requirements.

The best way to find out about what you need is
  1. Ask your accountant (Do I sound like Dear Abby here, constantly advising people to get professional counseling?)
  2. Google your business license questions, taking with a grain of salt answers from Wiki, About.com, and other short-cut information sites, as well as any sites that end in .com
  3. Wade through www.sba.gov as well as your state.gov sites
  4. Find a small business assistance organization near you – many community colleges work with these non-profit and/or government sponsored agencies
  5. Pick up the phone and call your county, city, or state auditor, revenue, or business registration office (my least favorite, and least used, option).


Is this confusing?

You bet, we’re talking government here.

Is this overwhelming?

Seems like it, a lot of times.

Is this impossible?

No.

You may feel like moving to Colombia and setting up a restaurant out of your home with artwork on the walls, but you will get through this.

 

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Related Posts:

Art is Business

Some Legal Perspectives on Gallery Contracts

Making a Million is EZ! EZ! EZ! Yeah, Right.


Topics: advice for artists | art law | Carolyn Henderson | FineArtViews | sell art | selling art online | selling fine art online 

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 27 Comments

Nancy Riedell
via faso.com
Thank you very much for this article, Carolyn. I applied for a resale license with the State of California and am currently going thru a nightmare with the state taxes that I owe from my 2010 sales. Such a headache! But necessary. I wouldn't have been able to get into shows like the Santa Cruz Sea Glass and Ocean Festival if I didn't have one.

Debra LePage
via faso.com
This is really valuable information, Carolyn, and may save lots of artists a big headache. Several years ago, the city of Chicago "busted" about 40 people in the arts building where I have my studio. They ranged from voice teachers to artists to musicians. All had to appear in court and pay a $400.00 fine THEN get their business license on top of that. The inspectors simply went from door to door and asked to see the license. I had one, (displayed on the wall) and agree that the first time feels like a hassle but now I am able to renew online every 2 years. In our state, one must first get an Illinois Business Tax ID number, then the license. As a sole proprietor, my business tax is now due once a year so it does mean keeping good records. Thanks for this article!

Sharon Weaver
via faso.com
Nancy
I too am in CA so I have been paying the state taxes for a couple of years and it gets easier each time. I am grateful that the state sends out email reminders and I now get it done in about a half hour online. Of course, keeping good records is essential when dealing with sales. To get the license I had to go for an interview but once there the agenct was quick and nice. All and all not a problem.

Brian Sherwin
via faso.com
I know that many artists avoid the tax issue -- but it is one of those things that you don't want tapping you on your shoulder later down the road.

There are so many myths about taxes within the larger art community. Some will tell you that you don't have to pay taxes until you earn $10,000 a year while others will tell you that you don't have to pay taxes on creative works. Both suggestions are wrong and can land you in deep water.

I know in Illinois artists can file some of the same forms that independent contractors do tax-wise. Technically you don't need a business license in that sense -- but when in doubt I'd go the direction that Debra mentioned... and with what this article suggests -- especially if you are involved with art fairs and the like OR have your own shopfront.

George De Chiara
via faso.com
Thanks Carolyn for writing this. It seems much simpler once someone spells out the steps that have to be taken.

Donald Fox
via faso.com
It's true that states have varying regulations but so do banks that operate within those states. If you want to create a business account to keep business and personal funds separate (recommended by most tax attorneys), you'll probably need a DBA (Doing Business As) through the city or county in order for the bank to set up a business account. This is not the same as a sales tax number that comes from the state. Many cities have an Accountants and Lawyers for the Arts group that does reduced rate or pro bono work for artists. They are a good source of information. Some arts organizations do business workshops for artists, so keep an eye out.

Marian Fortunati
via faso.com
I MAY move to Columbia.... but no.. I do like it here, despite all the ridiculousness of our government. As hard as it is to believe sometimes, it is better than most places isn't it??

Good advice... to all of us... Thanks again!

Donna Robillard
via faso.com
Thank you for the clear instructions.

Susan Holland
via faso.com
I think we should get a discount from the tax people for all the time we spend away from easels while adding up the glue and oil and turps and staples expenses and subracting those from the revenues. For me, the bottom line is that I spent more than I made this time, but I am building a business under my main license and that costs more than it will in a couple of years when my work tool closet is fully equipped.

What I would like to find out is what constitutes a "Cottage Industry"? If I do the work at my place and people come to my place to buy, then I can sell my million dollar product without being taxed?

I know, I know...go see the gov'mnt folks who will be glad to straighten me out.

If I have an art auction that donates benefits from sales to a charity, what then? If the charity is my own 501 c3 does that mean paintings sell to benefit my non-profit are tax exempt?

If those pepper spray people are going to come to my place and go from door to door checking licenses, do I get a lot of publicity?

I'm saying this with a smirk on my face, of course, and I do have a license in the state of WA that covers several off shoots of my main business. It's comforting. But then the forms...well... wish I could bill them for the time.

Margie Guyot
via faso.com
Great article! We artists need MORE information on this type of subject. With galleries now taking 50 percent, a lot of us are considering opening our own studios. That's my goal for 2012 -- and I'd like to do it legally.

Debra LePage
via faso.com
People should check to see what their town or city offers in the way of workshops. In Chicago, there are monthly postings of free business related workshops on the website of the city's Department of Business Affairs-which is where I learned I needed a license and how to get one. MIne is 125.00 a year but is renewed now at 250.00 every 2 years. No one enjoys that extra "bill" but it's better than paying a fine.

Manupupule
via faso.com
You may only need a license if you are using commercial money i.e. Federal Reserve Notes, i do not I use silver and gold coins and refuse to enter into any commercial transaction. I don't pay any taxes because gold and silver isn't income.

Susan
via faso.com
Your site is interesting, Manupupule, but you are more adventurous than I would be, and asking people to send gold and silver coin through the mails is a really bold move.

I will be interested to see how everything develops for you. Your work is very Hawaiian looking indeed.
I especially like the landscape with the grasses in the foreground.

Manupupule
via faso.com
First of all I would like to say Mahalo nui loa (thank you very much) Suzan for you nice compliments.

Referring to my adventurousness and boldness however I would have to respectfully decent from that opinion; in fact it is you investors who are using commercial money aka federal reserve notes on a day to day basis that are the adventurous ones, my hats off to you for that, I could not maintain that kind of lifestyle with all the risk.

I Think it's rather bold putting all of ones financial eggs in one financial basket. Should the "dollar" by this I mean the federal reserve note dollar, go the way of the British pound and loose its world reserve status it will most likely be replaced with some form of Amero like the Euro or a basket of currencies under a super national monetary issuing agency that creates limiting financial instruments called SDRs (Special Drawing Rights) and surely you and everyone else who gambled on the federal reserve note as an investment would loose all but a few pennies on the dollar in the wake of that inevitable collapse that is presently happening in slow motion.

No I am not bold I seek stability, reason, and peace in my life, and fiat systems just aren't stable, rational, or peaceful. They are the primary protagonist for instability, irrationality and wars. And even if the "federal reserve note dollar" remains the world reserve currency the 100 year trend is a downward one with no signs of turning around as measured by the purchasing power of savings in that currency.

No I am not bold or adventurous I am rather boring and old fashioned. But I have a very comfortable living, a lifestyle most rich people only dream of and I jealously guard this freedom with a mountain of legal books from which I have exhaustively studied from and memorized the relevant maxims of law.

But if you were referring to the safety of my shipping methods as BOLD I do offer three methods that are very safe by anyone's standards.

The first and most secure method of payment is via goldmoney.com their transactions are above and beyond the industry standard,their storage fees on my end of the deal are reasonably priced and the company is inside and out 100 percent legitimate with 99.99 percent pure deliverable metal

The second is via my local gold and silver coin dealer, after your painting is reserved by phone or email I send a contract for a purchase order contract for you to sign and fax back to me, my signature is also on the document, and in the event of a breech of contract I assure you a swarm of IRS FBI and State Police would make a big seen of it and make an example of me. They are just waiting for a slip up, I fully intend not to give them that chance. Then with all the legal stuff taken care of I request you contact one of the many local dealers in honolulu that are all licensed established tax-paying businesses, they accept your payment via credit, bank wire, or check or "some kind of commercial money" then you would tell them to hold the payment for me to pick up but only after delivery confirmation tracking is verified and the painting is in route. Then in 7-10 business days the painting will make its way from the middle of the pacific ocean to your address and you can track it all the way, the painting will be insured against loss or damage and theft for its full value and you will be required to sign to accept the package or pick it up at your post office if you miss the delivery truck. You will be required to show a valid govt. issued ID if you want to pick up your mail "the painting"

Lastly one can accept the painting from me in person, if your in the area in Nu'uanu valley on the island of Oahu you may have a tour of my studio where the art is made and perhaps a bit of wine and cheese to toast the painting and perhaps a healthy discussion about philosophy over a coconut shell filled with Kava and then trade for gold or silver coins in your possession for my art.

again mahalo and aloha
I may seem a bit unconventional by today's standards but only a hundred years ago the whole world did business my way, absent the internet of course.

Drew Manupupule
226 Kaimuohema place
Honolulu HI 96817

808 212 3275
FineHawaiianArt@gmail.com
FineHawaiianArt.com

Kay Rideout
via faso.com
@Manupupule,

Investing in precious metals/coins is a fine idea, but be aware, the IRS considers bartered goods taxable. If it were that easy to legally avoid paying income tax many more people would be doing it.



Manupupule
via faso.com
It is true the IRS considers bartered goods income and even gold and silver as a taxable conveyance at its fair market value in fact any transfer of labor for labor is taxable at its fair market value.. Did you mow your neighbors lawn and did that little old lady bake you a pie in return, well that's taxable too! But it matters not what the IRS thinks, it only matters what the supreme court of the United States thinks here is a quote; Wickard v. Filbern 317 US 111 "It is hardly a lack of due process for the government to regulate that which it subsidizes"

Are you being subsidized by the government? YES

How? Your consensual involvement in Social Security, licenses, permits and "free" Municipal services etc.

Can you avoid such things? Yes

Will it be hard? At first the transition is but all good things require work.

Is it worth it? That is a decision you will have to make for yourself, if your an airplane pilot who makes 100K per year its probably not worth it, if your a farmer on the other hand I can assure you it's worth it.

Here is another quote from the Supreme Court of The United States;

HALE v. HENKEL, 201 U.S. 43

"The individual may stand upon his constitutional rights as a citizen. He is entitled to carry on his private business in his own way. His power to contract is unlimited. He owes no duty to the State or to his neighbors to divulge his business, or to open his doors to an investigation, so far as it may tend to criminate him. He owes no such duty to the State, since he receives nothing therefrom beyond the protection of his life and property. His rights are such as existed by the law of the land long antecedent to the organization of the State, and can only be taken from him by due process of law, and in accordance with the Constitution. Among his rights are a refusal to incriminate himself and the immunity of himself and his property from arrest or seizure except under a warrant of the law. He owes nothing to the public so long as he does not trespass upon their rights.
Upon the other hand, the corporation is a creature of the State. It is presumed to be incorporated for the benefit of the public. It receives certain special privileges and franchises, and holds them subject to the laws of the State and the limitations of its charter. Its powers are limited by law. It can make no contract not authorized by its charter. Its rights to act as a corporation are only preserved to it so long as it obeys the laws of its creation. "

so you can see you have rights so long as you don't incorporate or receive benefits from the government other than the protection of your life and property.

Lastly as an artist you should know that a very important case was won by a fellow artist on the federal 9th circuit court of appeals

Steven C White "the artist" was trying to sell his artwork in a public park, the city said to him that he needed a vendors license, at this point when faced with the awesome power of the city government most people would just roll over and get the license but not Steven, he decided this right of his was more important than himself and took one for the team, even when there was nobody cheering him on, to the contrary most people told him to just get the cheap license and permits and be done with it. anyway the case worked its way up the court system and finally victory was his, now all artist have a constitutionally recognized right to sell our artwork in public spaces under the protection of the first amendment free speech provision.

for more reading on this case see here

http://caselaw.findlaw.com/us-9th-circuit/1300114.html


Jana Botkin
via faso.com
Okay, this will sound a bit simplistic, but if you are new to art as business, first ask more established artists in your area what is required.

We oldsters usually know what is required for our particular locales - resale permit, business license, certificates of authenticity, proof of legitimacy, whatever the heck all those agencies at all those levels of bureauocracy want to keep themselves employed, feeling necessary and to keep money flowing into their coffers. Sigh.

August Lupino
via faso.com
My personal feeling is for safety sake comply to the various ranks of Government and all their confusing forms. I have found different answers from the different levels of Government. So I choose to comply to the various forms, permits and licenses.. Now happy about it, but feel safer.

Errol
via faso.com
I have a question for you, if you still use the site. A group of us will be running a Medical Game event in Cedar City Utah. We will have an entry fee, and a feast that night if people pay. Would we need a business license? What if we were to sell T-Shirts?

susan holland
via faso.com
Erroll, it seems you are not an art venue from your post.

You need to check with the State of Utah's website to find the city of your planned venue. The city and state will tell you if you need a license.

Andrew
via faso.com
Will any of you artist grow a pair, seriously art especially traditional forms of art such as paintings carvings etchings etc, are protected as speech under the first amendment, even the sale of art can be done entirely outside of commerce and without taxation, only third parties such as a gallery selling someone elses work at a "profit" from the original price are subject to business licenses and permits.

I have been an artist all my life and openly admit to never paying income tax on a single painting sold! I have admitted as much in open court before a judge without any negative ramifications. Seriously how far will you people bow to the demands of big government, will you allow them to tax and regulate your every breath, and every exhale? Do you understand that we the people are in charge not the government, and that they are our public servants?

debate me if you can i dare you!

Susan Holland
via faso.com
Some comments are spurious and don't deserve the kind answer.

Andrew
via faso.com
Quote from former president John F. Kennedy

" Without debate, without criticism, no Administration and no country can succeed--and no republic can survive. That is why the Athenian lawmaker Solon decreed it a crime for any citizen to shrink from controversy. And that is why our press was protected by the First Amendment-- the only business in America specifically protected by the Constitution- -not primarily to amuse and entertain, not to emphasize the trivial and the sentimental, not to simply "give the public what it wants"--but to inform, to arouse, to reflect, to state our dangers and our opportunities, to indicate our crises and our choices, to lead, mold, educate and sometimes even anger public opinion. "

I rest my case, care to counter?



tari tessier
via faso.com
Timely post ! I was fascinated by the points ! Does someone know where my business could get ahold of a blank FL DH 527 example to type on ?

veta
via faso.com
Hi Tari Tessier . my colleague got a blank VAR Form 300 copy using this or http://tax.idaho.gov

Jay El
via faso.com
Please note that if in the US, you have a constitutionally protected right to display or perform certain types of artistic self expression in public parks and on sidewalks, and make sales or collect donations, without a business license or vendors permit.

This is a well settled matter in the courts, but city ordinances governing business licensing has yet to catch up. For more info, please visit www.PublicDisplaysofExpression.org

Sean
via faso.com
Hello!

I'm an art business newbie! I've gathered several clients to start working with but I wanted to take the safe road and make sure that I would have all I need to avoid and future trouble.

The art/work that I'll be doing are drawings and graphic design, maybe shooting raw footage/composing videos. Clients range from being in-city to out of state so most likely I'll be shipping finished art.

So I know that as a sole proprietorship, I need to get a business license and seller's permit. But I feel like I'm missing something and would like anyone to clarify with me.

Thank you!












 

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