Local artists may receive visibility and earn from their work by exhibiting in art galleries. While the main purpose of a company is to profit from art sales and special events, offering a lively art scene may contribute to a more dynamic neighbourhood. Collectors, investors, decorators, and private corporations are typical clients of an art gallery.
Table of Contents
Follow these ten steps to start an art gallery:
Prepare your Art Gallery
Create a legal entity for your art gallery.
Fill out a tax registration form for your art gallery.
Create a Business Bank Account and a Credit Card
Create an accounting system for your art gallery.
Get the Permits and Licenses You Need for Your Art Gallery
Purchase Art Gallery Insurance
Create a brand for your art gallery.
Create a website for your art gallery.
Configure your Business Phone System
Starting a company entails more than just registering it with the state. We’ve put up this easy-to-follow guide on launching your own art gallery. These stages will guarantee that your new company is well-planned, correctly registered, and legally compliant.
STEP 1: Make a business plan.
A well-thought-out strategy is vital for entrepreneur success. It will assist you in mapping out the intricacies of your organisation and uncovering some unknowns. Consider the following crucial topics:
What are the initial and continuing expenses?
Who is your intended audience?
How much money may you charge your customers?
What will you call your company?
Fortunately, we have done a lot of the legwork for you.
What are the expenses of establishing an art gallery?
Renting your location is a crucial expenditure for your art gallery. This cost will vary by geography as well as certain parts of town: a Soho art gallery may spend as much as $100,000 per month in rent. Meanwhile, in Key West, a tiny three-room apartment with a storefront costs just $1,600 per month. Many art dealers and gallery owners began as artists and may be able to network with artists who rent studio space to obtain the optimum price-to-space ratio. You will also need to invest $99 to $129 on a basic inventory business management system and up to $20 a month on a dependable email delivery platform.
Fees for business licences vary by state but must be paid. You must also spend up to $255 per year to register and maintain a domain name and website for visitors, and you may pay up to $75 per hour for a website designer if you are unable to develop it yourself. Marketing (clever social media marketing is free, though you’ll want to pursue traditional local advertisements), frames and furniture (the cost of which is dependent on the amount of product and the amount of space available), salary for staff (which may be negligible for a small gallery), and utility costs and other monthly operating expenditures are more variable costs. A cash register(s), containers to keep products for sale, proper lighting, and decorations to make the shop appealing are all required. Another item that is required is outside signage. This amounts to an extra $10,000 in beginning expenditures. Finally, a deposit is often requested when signing a long-term lease. The amount of the deposit is determined by the monthly rent and the size of the retail outlet.
What are the continuing costs of running an art gallery?
Paying monthly rent and the salary of any staff are examples of continuing expenditures for an art gallery. You must also keep paying for any special events you organise, such as local art fairs. There will be recurring charges for the safe transportation of the artwork, as well as insurance for your whole company. Finally, you must spend for ongoing promotion in your community and beyond.
Who is the intended audience?
The art collector is often the most desirable customer among the four basic sorts of art purchasers. These customers often have the greatest free time to browse an art gallery and the most disposable cash with which to make purchases. They are also more likely to appreciate debating the finer points of various works of art and artists. Art investors, on the other hand, buy a lot of art but are more interested in purchasing it cheap and selling it for a big profit.
How can an art gallery generate revenue?
An art gallery’s principal source of income is a percentage of artwork sales throughout the year. This proportion is negotiated with the artist, although it is usually no less than 50%. Additional cash may be generated by hosting various events throughout the year or by renting out the gallery space as a particular location for other companies.
How much money may you charge your customers?
The amount you may charge your clients and consumers is determined by variables such as location, competition, and the artists themselves. Artists with a lengthy track record of selling successfully will fetch a higher price and hence represent a safe “investment” for your gallery. Nearby competition’s pricing influence your own, since it’s not a good idea to charge more than, say, $4,000 for a piece of art if no other local galleries charge more. To boost the image of your gallery’s accessibility to the general community, provide a variety of diverse art at varying rates.
How much money can a gallery make?
The profit that an art gallery may earn varies. According to Bloomberg, the average profit margin for this kind of firm is 6.5 percent. Obviously, profit is proportional to the quantity of art sold and the price of that work. It’s critical to negotiate a reasonable pricing with the artist: they want to be fairly rewarded for their materials and time invested, while you want to get at least 50% of the sale.
How can you increase the profitability of your company?
Negotiating a larger share of art sales is an instant approach to increase the profitability of your company. While a 50/50 share is more common in the business, others believe that a 70/30 split in favour of the gallery is more equitable: after all, the gallery is usually responsible for the art’s marketing, production, transportation, and insurance. Finding more reasonable regions to rent is also an option, as is utilising the gallery space for more of your own special exhibits, fairs, and parties, as well as leasing it to others for their own events. Finally, consider a smaller workforce: a few higher-paid individuals do better in gallery-related tasks than paying lower salary to a much bigger group.
STEP 2: Establish a legal entity
Sole proprietorship, partnership, limited liability company (LLC), and corporation are the most frequent business structure forms.
If your art gallery is sued, becoming a formal business organisation, such as an LLC or corporation, prevents you from being held personally accountable.
STEP 3: File your taxes
Before you can begin for business, you must register for a number of state and federal taxes.
To register for taxes, you will need to get an EIN. It’s really simple and completely free!
Taxes on Small Businesses
Depending on the business form you choose, you may have multiple choices for how your company is taxed. Some LLCs, for example, may benefit from being taxed as a S company (S corp).
These guides will teach you more about small company taxes:
Taxes on LLCs
LLC vs. sole proprietorship
Corporation vs. LLC
S Corp vs. LLC
How to Form a S Corporation
S Corporation vs. C Corporation
There may be state taxes that apply to your company. In our state sales tax guides, you may learn more about state sales taxes and franchise taxes.
STEP 4: Establish a company bank account and credit card
Personal asset protection requires the use of distinct business banking and credit accounts.
When you combine your personal and business accounts, your personal assets (your house, vehicle, and other possessions) are at danger if your company is sued. This is known as penetrating your company veil in business law.
Furthermore, understanding how to develop corporate credit may help you get credit cards and other financing in your company’s name (rather than your own), lower interest rates, larger lines of credit, and other benefits.
Establish a business bank account.
Opening a business bank account is not only required when asking for business financing, but it also:
Separates your personal assets from the assets of your firm, which is required for personal asset protection.
It simplifies bookkeeping and tax reporting.
Create a net 30 account.
Net 30 accounts are used to develop and grow company credit while also increasing cash flow. Businesses use a net 30 account to purchase items and refund the whole debt within a 30-day period.
Many net 30 credit suppliers submit information to the main business credit agencies (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how firms establish business credit in order to get approved for credit cards and other lines of credit.
Apply for a business credit card.
Obtaining a business credit card benefits you in the following ways:
Put all of your company’s costs in one location to separate personal and business spending.
Build your company’s credit history, which will be important for raising funds in the future.
STEP 5: Establish business accounting
Recording your numerous costs and sources of revenue is crucial to assessing your company’s financial status. Keeping precise and thorough accounting also makes yearly tax filing much easier.
STEP 6: Obtain all required permissions and licences
Failure to get appropriate permissions and licences may result in significant penalties or possibly the closure of your firm.
Requirements for State and Local Business Licensing
Certain state permissions and licences may be required to run an art gallery. Visit the SBA’s reference to state licences and permits to learn more about licencing requirements in your state.
Most states, in particular, require art dealer firms to get a seller’s permit. A seller’s permit enables governments to record and collect taxes on sales of products (and occasionally services).
Furthermore, local licencing or regulatory restrictions may apply. For example, if you want to provide gratis alcohol at special events or showings, you’ll require an Art Gallery Liquor Permit, the specifics of which vary depending on where you live. For additional information on local licences and permissions, please visit:
Check with the clerk’s office in your town, city, or county.
Contact one of the local organisations mentioned in the US Small Business Associations database of local business resources for help.
Consignment Contract
When working with artists, it is usually a good idea to establish a typical contract outlining the terms and circumstances under which you may sell their work. A consignment agreement is another name for this sort of transaction.
A example gallery-artist agreement is available here.
STEP 7: Obtain commercial insurance.
Insurance, like licences and permits, is required for your company to operate safely and legally. In the case of a covered loss, business insurance protects your company’s financial well-being.
There are several sorts of insurance plans designed for various types of companies with varying risks. If you are unaware about the hazards that your company may encounter, start with General Liability Insurance. This is the most popular coverage required by small companies, so it’s a good place to start for yours.
Workers’ Compensation Insurance is another important insurance product that many companies need. If your company will have workers, your state may require you to purchase Workers’ Compensation insurance.
STEP 8: Establish your brand
Your company’s brand is what it stands for, as well as how the public perceives it. A strong brand will help your company stand out from the crowd.
How to Market and Promote an Art Gallery
Television and newspaper commercials, as well as leaflets and other promotional materials at cafés and other cultural venues that promote the local art scene, are examples of traditional marketing for an art gallery. Local companies may also appreciate being affiliated with the art scene via your company. As previously said, social media is an important technique to reach a wide audience at no extra expense.
How to Keep Customers Returning
Staying in touch with current clients is one of the greatest methods to keep them. Make a mailing list of prior customers and keep them up to date on new artwork and events that will keep them coming back for more. To attract new clients, use a mix of the aforementioned marketing strategies as well as cooperation with your artists on ways to promote their work. This relieves some of your stress and allows you to use their inherent ties to the group you want to target.
STEP 9: Create your company’s website.
After you’ve defined your brand and designed your logo, the next step is to build a website for your company.
While developing a website is an important step, some may be concerned that it is out of their grasp due to a lack of website-building skills. While this was a fair concern in 2015, online technology has made significant advances in recent years, making the lives of small company owners considerably easier.
The following are the primary reasons why you should not put off developing your website:
Every genuine company has a website, period. When it comes to bringing your company online, it doesn’t matter what size or sector it is.
Social media accounts, such as Facebook pages or LinkedIn company profiles, are not a substitute for your own business website.
STEP10: Install your company phone system.
Getting a phone for your company is one of the finest methods to keep your personal and professional lives distinct and private. That isn’t the only advantage; it also helps you automate your company, provides it legitimacy, and makes it simpler for prospective clients to identify and contact you.