So, you’re an artist who’s looking to take things to the next level? Well, there’s a lot to consider and this is in no way a completely comprehensive guide, but here’s some information to get you started:
What is a professional artist? Is that different than just making art?
A professional artist (emerging or established) is someone who has turned their creative passion and hobby of creation and monetized it. You can be an artist who sells art via websites like Etsy or at a local art market (like ArtWalk Santa Fe!). Regardless, if you’d like to turn your art into a business, the following information might be useful to you.
So, what would transitioning into a business look like?
The following steps explain what you’d need to become a business in New Mexico:
- Choose a business entity type and register your business with the Secretary of State to obtain a business license;
- Obtain Tax ID Numbers;
- Obtaining a CRS Number in New Mexico
Choose a Business Entity Type and Register Your Business
The entity type you choose will affect how your business is taxed, your ability to obtain financing, the transfer of assets and ownership interests, how you manage and run your business and your personal liability. You should consider getting legal advise and financial advice for guidance on determining which entity type is best for you. Depending on the entity type you choose you MAY be required to register your business with the Office of the Secretary of State;
- Entities Requiring Registration: Profit Corporations, Professional Corporations and Associations, Nonprofit Corporations, Limited Liability Companies (LLC).
- Entity that May Register: General Partnerships, Limited Liability Partnerships (LLP) and Limited Liability Limited Partnerships (LLLP) are not required to register with the Secretary of State, however they may register if they wish to.
- Entity Not Requiring Registration: Sole proprietorships (a good start for an artist!)
Choosing a type of business entity now does not mean you are locked in to that forever – you may start as a sole proprietorship when it’s just yourself doing everything, and eventually grow into an LLC, for example.
For artists just starting, a sole proprietorship is easy to establish and gives you complete control of your business. You’re automatically considered to be a sole proprietorship if you do business activities, but DON’T REGISTER as any other kind of business. Sole proprietorships DO NOT produce a separate business entity. This means your business assets and liabilities are not separate from your personal assets and liabilities. You can be held personally liable for the debts and obligations of the business. Sole proprietorships can be a good choice for low-risk businesses and owners who want to test their business idea before forming a more formal business.
Corporations, LLCs and Partnerships:
All Corporations, LLCs, and Partnerships must first register with the Secretary of State. You can register LLCs online, but partnerships and corporations registration forms must be completed and submitted via mail or in person. If you are unsure, please consult a CPA or attorney. Forms available for registering your business are all accessible through the Secretary of State website https://www.sos.state.nm.us/business-services/start-a-business/. Once you have decided on your type of business, you can proceed to register your business here (watching the “How to File online for Domestic Limited Liability Company” video at the bottom of the page really helps in figuring out the website). Rates can be found on page 3 of this document.
Learn more about Entity Types/Business Structures here: https://www.sba.gov/business-guide/launch-your-business/choose-business-structure
Obtain Tax ID Numbers
Federal Tax ID Number (EIN):
A Federal Tax ID Number known as an Employer Identification Number (EIN), is used to identify a business entity. Any entity other than a sole proprietor/individual owner that does not have employees must obtain a Federal Employer Identification Number (FEIN or EIN, same thing). You need it to pay federal taxes, hire employees, open a bank account, and apply for business licenses and permits. It’s free to apply for an EIN, and you should do it right after you register your business. You must apply for this through the Internal Revenue Service (IRS) online. More information and a link to apply online can be found at https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-onlineState Tax ID Number (CRS)
Anyone who engages in business in New Mexico must register with the Taxation and Revenue Department at no cost. Some exceptions are made if your business is exempt from gross receipts, withholding, or compensating by state law. After registering and choosing a filing frequency you will receive a New Mexico tax identification number known as a CRS Identification Number. This number is used to report and pay state and local gross receipts tax, New Mexico withholding tax and compensating tax under the Combined Reporting System (CRS). Your filing frequency refers to the frequency at which you need to make withholding tax payments to the agency. Learn more and follow the steps to apply for a CRS number at https://www.tax.newmexico.gov/businesses/who-must-register-a-business/ (and you can actually apply at https://tap.state.nm.us/). **Vending in many public locations such as city spaces and at the Railyard require you to have a CRS number as part of their permitting process.**
Note: Keep in mind that when registering for a CRS number, the system will ask you how often you will file your state tax returns (filing frequency). You can choose from several options like annually, quarterly, monthly, etc. The gross receipt tax in Santa Fe is the 8.4375% you see added to sales, so make sure to include it in your prices!
To watch a step-by-step video on how to “Apply for a Business Tax Identification Number (BTIN/CRS) using TAP,” go to https://youtu.be/bmm_L8Q7Mo8
Please note that this blog post does not constitute legal counsel or is meant to be a substitute for legal advice. This blog post was designed to be a general guide of the steps someone might need to take to become an art business in New Mexico. Please seek legal and tax advice if you have any questions or need assistance.
NM Secretary of State, Corporation and Business Services: https://portal.sos.state.nm.us/BFS/online/
U.S. Small Business Administration, Choose a business structure: https://www.sba.gov/business-guide/launch-your-business/choose-business-structure
State of New Mexico’s Business Services Division, Steps to Starting a Business: https://api.realfile.rtsclients.com/PublicFiles/ee3072ab0d43456cb15a51f7d82c77a2/4e9b14e8-8eaf-484f-9792-65689f6e5909/Steps%20to%20starting%20a%20business.pdf
IRS, Apply for an Employer Identification Number (EIN) Online: https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online
New Mexico Taxation and Revenue, Who must register a business?: https://www.tax.newmexico.gov/businesses/who-must-register-a-business/