Deborah Thompson on tue 4 feb 03
I know all the arguments for the different business forms (sole proprietorship, LLC, C-Corp, etc.), liability issues, ease of bookkeeping, taxes, etc. My question is: what form do most potters use for their businesses? I'd like to do a sole proprietorship, but is litigation a real concern? (I'll be doing decorative, not functional ware).
Any insight would be appreciated!
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J. B. Clauson on wed 5 feb 03
When we had our pottery, we carried insurance just in case. As I recall, it
was just over $500/year. However, that was 8 years ago, so price has
probably gone up. We never had a claim filed against us, but felt better
with the insurance, mainly because our studio was open to other potters who
could either rent a work space or pay by the hour to work the "floor".
Since you are doing only decorative work, you shouldn't have any trouble. I
am not familiar with your work, but I would recommend that any pieces you
make that could conceivably be used as a vessel be stamped "Not Food Safe"
or "Do Not Use for Food" (something like that), just to be on the safe side.
We were a partnership and used accrual accounting (the cost of what you use
gets expensed during period it is used). For most potters, especially at
the start, I would suggest sole proprietorship and cash accounting (the cost
is expensed when you buy it). I would invest in a consultation with an
accountant for better advice on this. A good deal depends on business
volume, whether you retail from your studio, etc. While I've taken lots of
accounting classes, I find they don't school you in some of the more
practical issues like the legal (as opposed to accounting) difference
between current and fixed assets, which items are expenses and which are
current assets (hand tools, stamps, etc.), and the like. A working
accountant will be familiar with the laws governing these things and be able
to help you set up your books. I don't know what this will cost, but it's
better than having the IRS on your back at some future date.