Steps to set up a legit creative business in Texas.
Anybody can do this, right? Well, that’s NOT how I felt about creating my own business. I mean, who am I to think I could set up, much less run, a business? I’m a graphic designer, a creative type. Not a business type. Many, many years ago, I tried freelancing on the side, and I failed miserably. Keeping track of who had paid for my services and who had not was utterly soul sucking. Picture, if you will, the Dementors sucking out your soul , or the Sanderson sisters sucking out your life force. This is how I felt about freelancing. And then I had to pay what seemed like more money in income taxes than what I earned. I gave up freelancing in no time. So, I didn’t really want to or think I’d EVER set up a business. Gross.
Fast forward a few years. After purchasing and participating in several online workshops showing how to make money with your art, I still wasn’t a believer. These awesome teachers made it sound like it’s “no big deal”, “easy peasy”, “anyone can do it”. Well, it IS a big deal, it IS NOT easy peasy (Do I sound like Rachel Green from Friends?), but yes, now I do think that it’s do-able and anyone can do it (if you really want to).
While I knew what I had to do to have a surface pattern design business (create, promote, license or sell), I didn’t know the first thing about forming a business in Texas. So I Googled it… a lot. I listened to podcasts of other creative entrepreneurs for a year plus, and was able to get tid bits of information here and there about legal issues, bookkeeping, social media, SEOs (what?), and on and on. Those things would scare me to death, and I would retreat back into the safety of my turtle shell. But, other-worldly powers kept (and keep) pushing me forward.
After 18 months of Googling, listening, workshopping, this is what I did. Please know that this is what worked for me. Not everyone has to do it in this order. This is what I felt was the right order for me. So for those needing a LIST of what to do to create a legit business, I give you my list.
Name your business. This was difficult but also so FUN! They say that this isn’t all that crucial, you can always change it later. But I knew that after going through the very difficult motions of setting up a business, I did not want to think about making changes. I wanted to do it right the first time. I had been thinking up names for my business for at least two years. Even before I knew what type of creative business I wanted. I came up with all types of names, most of which were already taken, before I decided to use my own name. First and middle to be exact. It’s as original as it gets, especially my first name (which is Aztec and means flower, btw). And I am named after my maternal grandmother, who was a seamstress. Xochitl Angela. That’s me. Hard to pronounce. Hard to spell. But so very me.
Create a logo. This is also one of those things they say isn’t necessary right away. Branding can wait for when you get a better feel for your business and/or can hire a professional to do it for you. But, once I decided on a name, I couldn’t wait to design my own logo. I was excited! After all, I am a graphic designer. I designed high and low, up and down, sideways and longways, backwards and forwards. Perhaps I should’ve hired it out. But I feel good about the final result. The name is in my own handwriting (not hand lettering, just my own handwriting), so again, it doesn’t get more original than that. Simple and original.
Vision statement. Somewhere between naming my business and creating a logo, I started to think about my vision, my mission, my why and my ideal customer. This was so hard. SO HARD! According to those that know more than me, I needed to write it down. So I did. But, like I said, So hard!! But I found something that made it easier for me think and write. I just sat myself down and wrote down my own story. I wrote about my mother, father, and grandparents. And in writing it, I realized they all have one thing in common, they were all makers! This made me feel better about my calling to make and create. And then my vision just flowed, followed by my why and the description of my ideal customer.
Choose a business structure. You’d think that this one was a tough choice. But once I learned the different types of business structure, it was an easy choice. The structures are sole proprietor, limited liability company (LLC), and corporation. I won’t go into the definitions of each structure, as I am not the best or most accurate source. But I will tell you that I chose to form a sole proprietor LLC. I wanted my personal and family’s assets to be separate and protected from my business venture. I’m willing to risk my time on creating and running this business, but I am not willing to risk my or my family’s assets. An LLC offers that protection.
Register your business. Okay, this involved a lot of research, listening to podcasts, and talking to my own friends who have formed businesses. I knew I had to form an LLC through the Secretary of State in Texas. I looked at their website along with the Comptroller’s office website so many times. Each time I came out more confused and scared. I retreated to my turtle shell many times during this process. I spent many months trying to get the knowledge and courage to do this by myself, because after all, I consider myself a smart person. I should be able to do this on my own! But nothing was getting done. I spent so much time being worried that I might do it wrong, that I decided it was worth the money to hire a registered agent to do this for me. And once I made that decision, I didn’t look back. This made me so happy. Within three days, I had a registered LLC in the state of Texas. They also obtained for me an EIN (Employer Identification Number) through the IRS, along with the Franchise tax number (through the Comptrollers office). Furthermore, they drafted an official operating agreement (so much legalese!). Best money I’ve spent so far! Thank you Texas Registered Agent!!
Sales tax permit. This one was tricky. I thought that once I had a Franchise tax number, that was all I needed. And good to go. WRONG! Luckily, one of the other things I did (see next step) was talk to an accountant. She told me that the Franchise tax number is different than the sales tax permit. And that I needed to get that through the Comptroller’s office if I intend to sell products with my artwork on it, or if I’m going to render design services. Oh Lord. I almost panicked. Okay, I panicked. I felt I needed to resolve this urgently! So I immediately went to the Comptroller’s website, and this time, I was able to easily figure out how to obtain a sales tax permit. I do confess that I did call (and waited and waited) to speak to a real person at the Comptroller’s office to discuss what a sales tax permit is and how often you need to file. It wasn’t so hard (just emotionally hard). It got done. Another thing to check off my list!
Consult an accountant. As I said before, I really felt I needed to talk to an accountant to figure out how all this might affect my and my husband’s income tax. Our family has an accountant. My husband works with her on our income taxes. I reached out to her first to discuss my new business venture. But it was tax season, and she didn’t even respond. Disappointed and tired of waiting, I reached out to Amy Northard, who is recommended by many creative entrepreneurs whose podcasts I listened to. She (or someone on her team) actually responded, but said she was not able to take on any new clients. She is full up. She does have an awesome website with helpful resources. Still, I needed to speak to someone to get all my questions answered. I then reached out to another group of accountants in Austin. They were able to do a free 30-minute consult, which turns out was all I needed (for now). She explained about the schedule C, and that I would file with our personal taxes given that I’m just starting out. She told me about the sales tax permit and recommended I speak to the good people at the Comptroller’s office to better orient me on sales taxes. So that was that. Come tax season, I will work with our family accountant. As for bookkeeping, I have yet to figure out a process, but I have a plan. I think I will use Amy Northard’s “Be Your Own CFO” course to create a bookkeeping system. To be continued…
Open a business checking account and credit card. All the creative entrepreneur podcasters recommend having a separate business checking account and/or credit card. I waited until I had all my ducks in a row (name, logo, EIN, etc) before opening a business checking account. The accountant said it was an absolute necessity to have a separate business checking account to make things easier for everyone, especially at tax time. I opened a checking account online. Looking back, I would recommend going to a your bank of choice and doing it in person. There was a lot of back and forth with the online process, and I think it took longer than it would have otherwise. But, the convenience of doing it online was too alluring. It seemed easier at the time. Now it’s done and fully functional. Hooray!
Separate PayPal account. This one I did not know. The accountant and the podcasters all agreed that along with a separate business checking account, you also need a separate business PayPal account (for the convenience of your clients). The accountant said NO VENMO! Venmo is great for personal, but not (yet) for business. I’m not sure why, but that is was what the accountant highly recommended. So that’s what I did. The more I can make it easy for the accountants, the better it’ll be for me. No doubt.
Create a website. This is less business and more creative (maybe). The hardest part was to choose a host. SquareSpace. Shopify. WordPress. The options are really endless! HOW TO CHOOSE??? It just depends on your comfort level with website design, and what you need your website to do. I already had a WordPress website that showcased my graphic design work. But I wanted something separate , different, and frankly easier (than WordPress) for my surface pattern design business. So, after weeks of mulling and researching and comparing, I decided to go with SquareSpace. It felt like the easiest and yet still robust enough for my needs. Now, this is the hard part of creating a website… the legal stuff. Oh. My. Gawd. I didn’t consult a lawyer, but I listened to most if not all the podcast episodes by lawyers Annette Stepanian (Office Talk) and Brittany Ratelle (Law and Wit: For Creative Entrepreneurs). Now, I feel mostly protected using the resources that Annette Stepanian sells on her website, Your Legal BFF. This is another one of those things I think is a good investment for my business and my protection. I purchased the “website terms of service” and the “privacy policy” templates. And eventually, I will also purchase the licensing agreement contract. At some point, I probably will hire an attorney or some kind of legal representation. But for now, I will use these handy dandy templates.
Business Insurance. Specifically Business Liability Insurance and Errors and Omissions Insurance. I don’t recall any of the podcasts I listened to nor the online workshops I worked through mentioning this part. This I learned from my very good friend Fernando, who is partner in a boutique design firm, Zoticus Design, in Austin, Texas. He advised me to get insurance to cover liability and errors and omissions. WHAT? What in the world is that and what is it for? Well, I still need to do more research on this. But from what I learned from Fernando, errors and omissions insurance covers you in case you make a mistake and your client wants to sue you for it. Business liability insurance protects you from a variety of claims including bodily injury, property damage, personal injury and other things that can arise from your business operations. Hopefully these things will never happen, but it is wise to be covered. I have not taken the step to purchase business insurance, but it is high on my list of things to do.
Because, after all, I am now an official, card-carrying creative entrepreneur!! I haven’t made any money yet, but I feel like I HAVE ARRIVED! :D
Let me know if you find this useful. Perhaps it will help to advance you in your process in becoming a creative entrepreneur. Cheers!