If You’re Self-Employed as an Artist, These 5 Money Moves Are Essential
If you’re a self-employed artist, you’re also a business—even if you don’t quite see yourself that way. How you handle your finances should reflect this dual role.
Elisa Balabram, who leads business-for-artists workshops at Baruch College’s Small Business Development Center (SBDC), says her attendees would certainly rather be in their studios, but her message to them is that business and art aren’t in conflict—one can support the other. “It requires a shift in mindset,” she says. “Put a regular time on your calendar for the business side,” she urges, whether it’s setting up systems or educating yourself about some aspect of finances. The rewards: Tax time will be less painful, you’ll have more insight into how to get paid what you’re worth, and you’ll generally be able to create a more sustainable livelihood.
1. Get expert help up front.
One consulting session with a savvy financial or legal professional can have big payoffs. A good accountant can explain your tax obligations and set up simple systems to track your payand your business expenditures. A tax preparer well-versed in the dance world can make sure you are taking all the deductions dance professionals are entitled to. A lawyer can advise you on the most appropriate form of business entity (sole proprietor vs. LLC, for instance). Sounds expensive, you’re thinking. Plenty of small business organizations offer free expert help, says Balabram, including the college-affiliated network of SBDCs like the one she works with, the SCORE network of retired executives and volunteer experts, and more than a hundred Women’s Business Centers around the country.
2. Separate personal and business finances.
“When working alone, it’s all too easy for your personal and business lives to get tangled up,” says Barbara Weltman, an attorney who’s president of Big Ideas for Small Business. During the pandemic, when self-employed people became eligible for the PPP forgivable loan program, having a business bank account (and a business credit card) was often a condition for getting those rescue funds. Even in regular times, a separate business account is essential to track income and business expenses for tax purposes.
You may need an employer identification number to get a business bank account, depending on the bank and what kind of business you are. (It’s easy to apply online, at irs.gov.) Either way, getting onewill protect your Social Security number from identity theft and help establish your independent contractor status.
Business banking fees can be stiff. New online banking platforms like Novo, BlueVine or Kabbage offer no-fee business checking, but even some bigger banks offer ways to waive monthly fees.
3. Track the money flow.
With a business bank account, it’s easy to see how well you are doing and what cash is on hand to pay bills, Weltman says. She points out that tax law requires anyone in business to keep books and records; a shoebox with receipts won’t do. Software and cloud accounting solutions designed for freelancers make it easier to track income and expenses (and send invoices). Some options are free; others have a modest monthly cost: $7.50 a month, for example, for QuickBooks Self-Employed. Balabram also suggests tracking cash inflow and outflow on a calendar—a graphic way to see where slow periods (or big payments) might be occurring so you can plan ahead.
4. Set aside money for taxes.
U.S. income taxes are pay-as-you-go, and since an employer won’t be withholding them, you’re responsible for paying federal and state taxes quarterly (or paying a penalty) if you expect to owe more than $1,000 intaxes for the year. There are ways to estimate the payments from the amount you paid last year and your projected tax bracket this year. “At a minimum, set aside 10 percent of your earnings,” says Weltman, “because it has to cover income taxes (federal and, if applicable, state) as well as self-employment tax.”
5. Don’t undervalue yourself.
Your fees need to cover more than your salary. You’re now the employer and the employee, so you’re paying both sides of social security tax (that self-employment tax mentioned above), your health insurance and so on. And don’t forget to factor in a profit. You’re not being greedy; it’s a buffer for slower times or funds to invest in new training or a side gig.