Business Set- up

Define your Business

Position Yourself

Define your position in the market and work it into a tag-line. Examples...

• Illustrator/Animator

• Children's Illustration

• UX Designer

• Turn-key marketing & design for small business

• Etc.

Create Your Business

Overview

If you are billing clients for work ... you are by default a sole-proprietorship business. You can operate under your social security number and personal checking account, but there are advantages to setting up a separate business.

Register a Business Name

(if you will not be operating under your own name) register a name with the county administrative offices where you will be living. In GR that is the on the 2nd floor of black building directly behind the Calder. It costs $10-$15. This kind of business is a 'Sole Proprietorship' and is the most common for free-lancers.

Once you have a registered business name, you can set up a separate checking account called a DBA account. DBA stands for 'doing business as'.

Search Names and download the form

Set Up A Separate Checking Account!

Having a separate account will make t is easier to do taxes because your business and personal transactions will not be mixed together. It also puts a more substantial 'store front' in view of your clients and that can effect your billing rate. Also if you get audited you will have a more legitimate business structure. Set up the account under your business name if you are not operating under your own name. That is called a DBA (Doing Business as) account. If you are operating under your own name, you can just set up a separate account under your name. You can loan money to the business from your personal account to get started, then pay yourself back later. Handle all income and expenses for the business in that checking account. Maintain a separate personal account and pay yourself a 'draw' from the business account as needed. For tax and accounting purposes it is important to keep these separate. Your 'draw' is your personal income for which you will pay personal income tax. The money remaining in the business account will be considered business income. These are taxed at different rates, so it is important to think about them separately.

Trademark

You are not required to obtain a trademark for your company. If you are going to invest in and sell a retail product nationally or internationally, it may be worth protecting that name with a trademark. Trademark is different from Copyright. It is for registering product and company names, marks and logos. More than one company can claim a trademark on a name as long as they are not in a competing enterprise. For example, EPIC is a name for which many enterprises are claiming a trademark. Find out more about and search trademarks.

Obtain an Employer Identification Number

You can use your social security number for all of your tax forms (not recommended) or you can obtain a (free) EIN number from the IRS for use in place of it. It is one thing you can do to protect against identity theft.

Print Business Cards and Set up an Online Presence

Make sure that it does not look like you are job searching with your website. Make it lookS like you are 'in business'. One way to do that is to list 'services' a 'client-list' or 'capabilities' instead of a resume and bio.

Set up a Home Studio

Create a space in your home where you can leave your work out. It should be comfortable and productive. The space should be separate from your living room, kitchen, bedroom, etc. In order to count the space as an operating expense, it must be dedicated to your professional work.

Mileage Log

Keep track of your car milage for all business activities. Keep a log with dates, trip description and distance. This can add up to a substantial deductible expense.

Forms

Set up a file folder for storing forms you will be receiving and sending (these are described and available for download in Turbotax , Outright and similar software):

• • 1099 Form

This is an income reporting system for the contract employment world. You will receive these from clients that have paid you $600 or more for contract work. They will also send a copy to the IRS. This informs the IRS that you have received that income. If you sub-contract to another artist or designer and pay them $600 or more, you will need to submit a 1099 to them and the IRS as well. These are required to be mailed no later than Jan 31. Download Form

• • W9 Form

This is used by your clients (or you) to request the name, address, and taxpayer identification information of a contractor. The tax ID number can be a Social Security Number or Employer Identification Number - either number is considered a Taxpayer Identification Number or TIN (as it is commonly called). The form is never actually sent to the IRS, but is kept on file by the person who will be creating 1099 forms for reporting the payment. Download form

• • W2 Form

This is the standard wage and tax statement that you will receive from an employer that paid you through a payroll check or direct deposit (not through a contract). Employers are required to send those to employees no later than Jan 31. Download form

Quarterly Income Tax Payments

You can use a program like Turbotax , Outright, and similar software to figure out how much to pay, where to send it, and download all the required forms. These software programs make it simple by giving you form fields to fill in, then directing you how to proceed. If you have set up a separate checking account, logged milage, and have kept your 1099 & w2 forms, This will be a fairly quick and easy process. You do not need to need to be a master of accounting methods. The software will direct you where to distribute your expenses and income for the tax calculations.

Sales Tax

You do not charge sales tax to your clients for art and design services nor for deliverables such as printing or other physical objects unless it is a retail product and they are the end-user (like greeting cards, wall art, crafts, etc.). Everything you need to know about charging and filing sales tax in the state of Michigan is available here.

Health Insurance

This is an expensive, soon as you can afford it, necessity. The key to finding an affordable rate is to buy into a group insurance policy. Many organizations and contractor unions have these available. You can also purchase through the 'National Small Business Association'. Local options include Priority Health, Blue Cross and United Health Care Golden Rule.

Now, with the Affordable Health Care Act in place, you have a variety of lower cost insurance options that you can purchase from an exchange. See details here: https://www.healthcare.gov/