Session 5: Finance and Legal

Focus in on the continuation and sustainability of your artistic profession or creative venture. Explore funding options; leverage and record how you use the funds; build financial strategy and security.

5.1 Raising Money

Raising start-up capital takes strategy…Grants, Venture Capitalists, Fiscal Sponsors, Small Business Loans…Learn what is out there and think through where you should start based on your own circumstance and vision.

5.2 Accounting and Finance

Tracking, planning and achieving your financial goals is the bottom-line of your business. It sounds gross to a lot of artists, but it is a necessity to keeping your artistic or creative venture operating and eventually thriving. Everything you do is to support your bottom-line, and your bottom-line (being a profitable creative entreprenuer) helps you make a living doing what you love.

5.3 Taxes

Often, artists are best suited to find a tax professional to help with filing taxes, and they can quickly become complex. However, it’s helpful to organize your documents and understand what questions to ask your accountant.

5.4 Contracts and Clients

Contracts can be complicated. Get insight on this firms client strategies and avoid the all to prevalent discussion of why you won’t offer your services for free.

5.5 Insurance

“Insurance policies are too complicated.” Many artists have inventory, liabilities, electronic files, equipment, studio space and risk. If a flood or storm ruins your computer, a neighbor is affected by the material you use or any other unpredictable circumstance you never expect to find yourself in, you need to be covered. Without insurance, even a small risk could be devastating. Learn some of the basics and link off to learn more at CERF+.

Raising Money

Strategies for Successful Grant Writing (Erika Gentry)

Methods of Crowd Funding

Reflection Questions

1. Keeping the for-profit and nonprofit models in mind, name three options for seeking funding or models for investment that you are considering.

2. Many artists face difficulty in obtaining conventional loans because of variable income and lack of collateral. Even if an artists’ income is high, it may vary significantly throughout the year, making them a “volatile” loan prospect.  If you face these types of challenges, how can you make yourself more bankable?

3. Are there ways to even out your income stream over the course of the year?

4. What collateral do you have that could be used to secure a loan? Do you have assets (such as an automobile, a home or business space) that would offset risk for the lending institution making the loan?

5. Do you know your credit score? How will it affect your ability to obtain funding in the future?

6. Write down three strategies for how you might improve your credit score in the coming year.

7. How much ownership of your business would you be willing to give away for startup funds? Investors typically choose a great idea, and more importantly one that is well managed in exchange for a portion of ownership and subsequent profits.

8. Where in your community can you find out about additional information regarding grants or other special funding programs for artists?

Accounting and Finance

Marketplace 101 –  Small Business Accounting & Finance Made Easy (Market to Market)

Activity: Create and Manage a Budget

  1. Enter your budget and track actual income and expenses using the worksheet below. It may seem intimidating. Take it one number at a time. The totals will automatically calculate as you enter each number. The first column, Fiscal Year Budget is what you think you will earn and spend in each category from January 1 – December 31. Once you enter your budget, you won’t typically edit it until next year.
  2. At the end of every 3 months, type in what you actually earn and spent that quarter in each category.

The last column is the total amount you spent over the year. You can compare this to what you thought you would spend in the first column.

At the very bottom, you will see a profit $ or loss ($). Your goal is obviously to make a profit, but this is a difficult feet, especially starting out, and will often vary from season to season in any artistic discipline. If you are starting a nonprofit organization, change the “profit/loss” to “surplus/deficit”. The goal is still to maintain a surplus of income that you can feed back into the organization. Nonprofits may be trickier in that if you don’t spend funds from some foundations or other supporters, you are asked to give the money back.

AEI Budget Template

Reflection Questions

. Are there certain expenses that increase as you sell more work? Which ones?

2. Are there times of year when your expenses are relatively high and relatively low? Based on this information, what strategies can you employ to plan for times of year when your profits are lower or higher than average?

3. Build a sales spreadsheet. Consider including additional information, such as basic information regarding where the customer resides, how they found out about your work, how long the purchase occurred after their initial contact with you, whether they have made a purchase from you in the past and where they made the current purchase.

  • How can this information inform the market research work you began?
  • Are there any trends regarding what work sells the best, where and to whom?
  • Is there additional information you would like to gather about your sales to inform your market research?

4. Because of the sometimes complicated nature of accounting and finance, we recommend consulting with a Certified Public Accountant on such issues. Are there any challenges or questions you have regarding your accounting and finance? For instance, are there any items that you are unsure how to categorize as an expense, or are you unclear as to when you should record a sale? How could an accountant assist you with these issues?

  • Which accounting and bookkeeping functions do you feel comfortable addressing yourself?
  • Given your budget, and the scope of your business, which accounting functions are you most concerned about having addressed by a trained accountant?

Paying Taxes

Tax Write-Offs:

Reflection Questions

Reflection Questions

1. Business-related taxes are issued at a variety of levels (municipal, county or parish, regional, state and federal) and through a variety of methods (sales tax, income tax, property tax, capital gains tax, social security withholdings, etc.). Find the name of the taxing agency at each level of government, their filing deadlines and their website address.

https://www.sba.gov/starting-business/filing-paying-taxes

Ohio: http://www.tax.ohio.gov/ohio_taxes.aspx

  • Which taxes relate to your artist business?
  • Are there contacts at any of these agencies that can assist you with your questions regarding filing procedures and your specific tax compliance responsibilities?

2. Review your expenses spreadsheet. At the various levels of government, are there specific taxes for which you may be able to claim a business deduction?

3. What are the documentation requirements for your eligible deductions (e.g. a travel log, receipts, invoices, etc.)?

Because of the complexity of filing taxes at a variety of government levels and the specific knowledge required to correctly identify business income and expenses, we recommend consulting with a Certified Public Accountant on such issues.

1. What questions do you have for your accountant or tax preparer related to tax compliance?

2. What is your timeline for obtaining answers, given the filing deadlines that your business faces?

3. Are you aware of any services that provide low-cost or free consultation with accountants in your community?

Contracts and Clients

If you are doing work for hire, you may feel like a small fish in a big pond. You have more power than you think you do.

Our speaker at the March 2011 San Francisco, CreativeMornings (www.creativemornings.com) was Mike Monteiro, Design Director, and co-founder of Mule Design Studio (www.muledesign.com). This event took place on March 25, 2011 and was sponsored by Happy Dog and Typekit (who also hosted the event at their office in the Mission).

Mike’s book “Design is a Job” is available from A Book Apart (www.abookapart.com/products/design-is-a-job)

A big giant thank you to Chris Whitmore (www.whitmoreprod.com) for offering to shoot and edit the video. Photos were graciously provided by Rawle Anders (twitter.com/rawle42).

The San Francisco chapter of Creative Mornings is run by Greg Storey (twitter.com/​brilliantcrank).

Follow us on Twitter at twitter.com/​SanFrancisco_CM

Insurance

Reflection Questions

1. Different types of insurance cover different aspects of an artist and their creative practice. What types of insurance do you currently have? Are there any that you are considering?

2. Refer back to your expenses spreadsheet. How much are you currently spending on your insurance? How can you best leverage your insurance to minimize cost and minimize risk?

3. With an assortment of insurance types available, it can be overwhelming to know where to start. What advice would you provide to another artist if they were seeking home/studio, health, liability and/or automobile insurance based on your experience?

4. Are there any resources that have helped you in selecting your insurance?