Freedom Through Rituals

If you are your own boss, do you need to do an employee check in with yourself? YES!

Lots of people start their own business because they want to be their own boss. What is often forgotten in that statement is that they are still an employee, they just happen to have a very strong connection (hopefully a loving one) to their boss.

Knowing where you are is power.

“Where are you?” Is probably the most caring question anyone can ask another human being. It is also what a boss wants to know about their employee. Knowing the context of someone else allows us to support them in the best way possible. 

“You are shoveling the driveway. I will have some tea hot for you (and if you’re old like me, with a few Advil on the side).” 

“You are installing your show. Do you need help picking up the materials for the opening?”

In business knowing your metrics is how you know where you are at. The metrics can tell us a lot about what is or is not happening in the studio. They can guide us to do more of what is effective, to adjust what is not working, or to abandon what might be a waste of resources. Knowing where you are at in business allows for effective management. You will know where to put your time, your energy and your money.

Relationships first, then revenue.

The known and easy metrics in business are financial. How much revenue/income did you make? What is the value of outstanding invoices due to the studio? These are great metrics to know but they are LAGGING. Getting paid is often the last step in business. If something is wrong with the money numbers it usually means there is an issue happening prior to a client sending dollars to your bank account. 

Before money is handed from one person to another, a relationship must exist. Similarly if collaborations and opportunities are part of your plan, they likely involve other people. Building relationships can be tracked. Have you connected with patrons this week? Did you complete a grant application? How many events were you at this week to meet fabricators? Your connections and the work you are doing to make those connections are a significant indicator of the wealth that will come your way in the future.

Time is a measure of progress.

Business takes time. Meetings occupy hours and flow in the studio is the intimate presence of time or not. Knowing where your time is going will give you a strong indication of progress toward a desired outcome. Are you doing work that can be billed to a client? Did you spend time in the studio, the reason you are in your business? Seeing where your time is going will indicate where you are going!

Good managers want to know where money, energy and time are being utilized. They help understand how the studio is functioning and where the studio will go in the future.

As a bonus, being your own boss also allows you to check in personally on the employee. If someone is having circumstances that occupy time, energy and even money, there is a good chance it has an impact on the work. A good boss is aware of where an employee is at in life.. They can offer grace or they can encourage to pursue work to the fullest potential. 

Good management is knowing where you are at! Do you know where you are at?

 

If you need support figuring out where you business is at, we offer resources to help you do that. We have free virtual professional development sessions to work on your business and offer free tools to help manage the studio. And of course our calendar is open for a coffee to talk through the joy and tribulation of being your own boss.

Banner Art Credits: German Joust of Peace (c. 1512–1515), German 16th Century, stages a ceremonial clash where pageantry and restraint share the same saddle. The scene feels both playful and disciplined. The tournament reads less like spectacle and more like a reminder: some tensions are rehearsed on purpose, allowing the real work to stay focused. (Rosenwald Collection; National Gallery of Art Open Access/public domain.)

Best Legal Structures for an Art Business

Art Business Legal structure was likely not taught in art school. This short post is a quick overview of the topic. 

We are NOT lawyers! This is not legal advice, but may help you converse with your future lawyer, possibly a volunteer lawyer for the arts.

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If you’re an artist, photographer, writer, or any other type of self-employed creative worker, you are required to register as a business.This will actually help you in the long run. Registering a business entitles you to a number of protections and benefits, including (but not limited to):

  • Reducing your personal liability in case of a lawsuit
  • Potentially reducing your tax burden
  • Access to public grants and funding (PPP during pandemic required registration)

 

Although there are a variety of legal structures possible, some of them are a better fit for a creative business than others. Let’s take a brief look at the three most popular ones and discuss the advantages and disadvantages of each.

 

Sole-proprietorship

This is the simplest business structure and is a good place to start for artists just beginning to sell their work. A sole-proprietorship treats the artist and the business as a single entity.  The government (both state and federal) utilizes your social security number as your “identity.” With this basic type of business, you can deduct business-related expenses such as your materials, travel costs to work-related events, studio rent, subcontractors etc. 

That said, because you and your business are considered a single entity, you are personally liable for all business debts or damages should someone bring a lawsuit against you and win. Additionally, all business income is considered personal income and will be taxed at your personal income tax rate, including Federal Insurance Contributions Act (FICA) taxes, i.e. social security and medicare contributions. This may end up increasing what you owe in taxes, though it will depend on how much you make. 

 

Limited Liability Corporation (LLC)

An LLC is the next step up from sole-proprietorship, though depending on the type of LLC you choose, it can be very similar. LLCs are generally very flexible when it comes to how they are taxed and grant you additional liability protection in case of business debt or lawsuits. To date, there have been very few cases where liability has penetrated the LLC, but usually this is the result of abuse of the structure. 

Another advantage is that an LLC enables you to hire employees, which a sole-proprietorship doesn’t allow. Both a sole-proprietor and an LLC can hire subcontractors. There are very particular laws on the difference between the two and it is worth getting familiar with the nuance between a contractor and an employee to ensure you are operating within the law. You can also deduct business expenses from your taxable income under an LLC.

LLCs can be considered single member, meaning you’re the only owner, or multi-member, meaning you have partners. Like a sole-proprietorship, income is only taxed at the individual member level as personal income for each member, regardless of the number of partners involved. Income under an LLC is treated as personal income, and as such, you are required to also pay a self-employment tax that goes towards things like social security, Medicare, etc. 

LLC’s cost money to register and maintain depending on the state in which they reside. Filing taxes is also slightly more complicated than sole-proprietorship.

 

S Corporation 

S corporations (S corps for short) are significantly different than the previous two structures in that they are a tax classification rather than a business structure. To receive this classification, you need to register as an LLC first. 

Once you obtain S-Corp status, business income is treated separately from your personal income. That is, anything the business earns is taxed as a business, while you will pay taxes on your personal income separately. Owners of S corps who operate or run their business pay themselves a salary as an employee even if they are the only person in the business.

Like LLCs, S corps shield personal assets from liability in case of business debt or lawsuit. Additionally, S corps can hire employees, deduct business expenses, and they enjoy all the benefits of an LLC and greater liability protection for the owners of the company.

Generally speaking, and very much a back of the envelope calculation, it’s a good idea to switch over to an S corp if your take home income from your business is greater than $100,000. This will help lower your personal tax rate, any additional income beyond your salary is taxed at the corporate rate which is lower than higher level personal income tax rates. Yes, that last sentence was complicated, but if your business is at this point it is probably a good idea to hire an accountant and possibly a lawyer to ensure you are making the most prudent business decisions.

S-Corps have registration fees as well as annual maintenance fees (depending on the state of residence, and expectations for corporate governance like meetings of shareholders and board members. Filing taxes is more complicated as more forms must be filled out to appease government agencies. 

 

Choosing the right business structure is crucial to your success. It’s a good idea to consult with an accountant or tax lawyer before you file any paperwork with federal or state governments. 

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Join a future coworking session where we often engage in topics like business structure, finances, and taxes.