Generally, businesses need an EIN. If you don’t want to provide your Social Security number as a sole proprietor, you can use your EIN number for tax forms related to online sales and royalties.
Additionally, having a business license is a legal requirement for selling artwork. This license allows artists to operate legally, collect sales tax, and file taxes appropriately.
Legal Steps for Artists
Artists should consider forming an LLC for liability protection and easier dispute resolution. Written contracts are also recommended for commissions to clarify timelines and expectations.
Tax Considerations for Artists
The IRS differentiates between a hobby and a business. Artists selling their work regularly for profit are considered a business for tax purposes. Artists must report earnings, file taxes, and claim eligible deductions.
Starting Out as an Artist
Early planning is crucial for a successful launch as an artist. Important steps include researching legal requirements, forming a business entity, obtaining licenses or permits, setting up record-keeping systems, and establishing an online presence.