Is it time to
incorporate your Face Painting
by Gary Cole
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I'll start off by stating I'm not an attorney and I do not play one in the movies. Every few months on the discussion list people bring up the thought of incorporating their face painting business. There are pros and cons and due to the many laws it can be quite complicated. There is no simple answer to this question but I'll try to cover a few points that you can consider and then go and seek further advice. If you think you want to incorporate you really need to be serious about taking your earning potential from part-time to some serious money. If you are a part timer then you should probably not incorporate. Either way take what I'm telling you and then talk to an attorney, your CPA an others for further advice.
I have long took the stance that a face painter (or other family entertainer) should not incorporate until they are NETTING about $10,000 a year. You always can claim your earnings on your taxes. Incorporating is not mandatory. Once you incorporate you have a great deal of reporting that is required from the government. In Texas you then need to start making quarterly filings on payroll, sales tax and earnings and you must do this even if you have no employees other than yourself, no sales tax and no earnings. If you fail to file in a quarter then you will start accruing penalties and I'm telling you the government is very unforgiving. They do not buy "I didn't know as I'm a small time face painter". You still will get kicked in the proverbial teeth.
The negative is certainly the costs of incorporating. You can do it online for as little at $350. When I incorporated I used an attorney and it cost me about $1000. Every state and country has different laws so check out "the rules" to make sure you are not over or under paying. Unless you are a CPA which I doubt, you darn well better be able to file all of the required quarterly reports and do it correctly. For my face painting business, I use an accountant to keep me right with all of the various government entities that are very eager to put their multiple hands into my pocket. To me it is easier to pay her than put up with the paperwork. I only pay her about $600 a year and to me that is money well spent. You do what works for you. I hate tax and other legal filings. I have the money to pay a trained professional and my ego allows to say that is not my strength. I toss that monkey to my accountant and all are happy. What I pay for these services is fair to get rid of that area of the business.
A lot of people think that if they incorporate it will give them "protection" in case of a lawsuit. Well I hate to break it to you but since you are the owner of the company they can come after you anyway. I simply think it is a fallacy and offers, in the end, little protection. Contact your lawyer but either way they can come after you. It also can be complicated. Do you want to be a LLC, S-Corp, sole proprietor, partnership or what? I think going as an incorporation an as a sole proprietor is the way to go but talk to your CPA as each have different rules. Again, it gets complicated. As a false painter I certainly suggest you do not do a partnership. Face painting partnerships rarely work out. We are a fickle group. Yep, I'm talking about you.
One of the advantages is it makes you look like a "big guy". Well let's just say a "bigger guy". You should be able to pick up a lot more corporate accounts as Party Faces Inc. instead of Gary the face painter. Mentally it just gives you some credibility. I see that as a big plus. One of the reasons I incorporated Party Faces Inc. was I wanted to legally separate my face painting business (Party Faces Inc.) from the product side of the business (Ruby Red Paints USA Inc.). I figured at some point I might wish to sell one or the other companies or even pass one of them along to one of my son's if I wanted to. These days we never really know what life will deal us. Since we target corporate accounts (another story and another faq) being incorporated was a distinct advantage. I did not incorporate our face painting business until it was netting us about $15,000 a year. When I did we instantly got more corporate accounts. It also looks much better on your business card.
Another positive thing is you can start to write off all of your expenses. This can be everything form supplies, to advertising, to face painting classes at a convention to your gas. Keep excellent records and do not fudge the books. I'm telling you it will work against you. We even wrote off my wife's laptop as she actually primarily uses it for the business. When it comes to keeping track of your expenses get a receipt for everything. You will want to be a perfectionist or you will either miss write offs or get your self in trouble with the government tax man. What I do is I have a separate credit card I use for each business and never cross charge. If I pay out of pocket, I put the receipts in a box and from time to time write myself a check to pay myself back so there is a record on the books.
Well that should be a good start for you. Do an internet search for loads of more information. As your peers what they think. Either way do some serious thinking before you incorporate as a face painter.
Gary Cole who incorporated back in 1994.
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