As an accounting major in college, I quickly learned all of the complicated parts of the accounting cycle. I discovered how to input the details of business transactions into a computerized accounting system. At the end of an accounting cycle, such as a month, I became experienced with calculating the revenue for the period. If you’re starting a new business, determining an accurate amount of revenue for each accounting cycle is crucial. You must know how much profit you’re making each accounting period in order to be successful in the long-term. On this blog, you will discover how an experienced accountant can help you keep track of your revenue.
When you set up your art business, you want to create a long-lasting enterprise that protects your interests while also fulfilling your artistic needs. And one of the first decisions you'll have to make is what type of business entity you want to form.
For many artists, incorporating under Subchapter S of the Internal Revenue Code is the right choice for a variety of reasons. If you think that forming an S Corporation is a bit of overkill for your small art endeavors, here are a few reasons why it's not.
1. Liability Protection.
One of the best benefits of forming a corporation is that it is a separate entity from yourself. Artists don't carry quite the liability risks that others — such as construction companies or doctors — do, but they are still at risk from lawsuits and legal actions. If you cannot perform a contract, for instance, and are sued for it, the corporation is at stake rather than your own personal money.
2. Tax Benefits.
Taxation as a Subchapter S (S corporation) business has benefits that a traditional C corporation can't provide. The biggest of these is freedom from double taxation. Double taxation refers to the fact that C corporations pay income tax on what they earn, but then shareholders also pay taxes on dividends from the business. S corporations are 'pass-through entities', where the only income taxes paid are from what you receive as a shareholder/owner.
3. Capital Raising.
When you go into business as a sole proprietor, you are responsible for your own choices but also are the only ones who can provide capital for your business. On the other hand, a corporation can raise capital by sharing some part of the ownership of its business. As an S or C corporation, you can sell stock shares in your business and share some of the profits. This is the easiest way to get investors, branch out, and pay for new ideas while still retaining overall control of the company.
4. Professional Work.
If you want to grow your art business into a professional endeavor, treat it like a professional entity from the beginning. Being a corporation means you follow standard procedure, you are organized for more growth, and your company should be treated like any other artistic business. When you carry yourself as someone to be taken seriously, others often respond in kind.
Are you ready to take your art ambitions into the next chapter? Start by consulting with an experienced accountant who works with artists. He or she can help you decide if it's time to incorporate and how to choose the right entity. Then you can get back to focusing on creating a thriving business for many years to come.
For more information, companies like Agro Accounting can help.
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