Don’t let your dad who wanted you to major in business administration tell you otherwise – In today’s economy, making a living as an artist is probably more viable than it has ever been before.
Many individuals (including your dad) are under the impression that the only way to succeed in the arts is to become a superstar. Media representations tend to present the arts as an all-or-nothing proposition, with the spotlight only given to the celebrity successes.
However, a viable career in the arts can encompass a broad range of options for those of us who aren’t necessarily nobodies, but whose lives aren’t fodder for PerezHilton.com either. The arts are not a competition, and you don’t need to be a superstar to make a living doing what you love!
Here are some key points, some legal but many non-legal, we try to relay to our artist and creative entrepreneur clients:
- Identify and Maximize Various Revenue Streams
It can’t be denied that those working in creative professions often lack traditional benefits and job security. There is nothing in this post that offers solutions towards finding a tradition 9-to-5-with-health-insurance job in the arts. Instead, those who are able to pursue multiple sources of income and become comfortable (or even thrive) with a lifestyle with no promises of a paycheck can find career sustainability.
Experimenting with a variety of moneymaking options allows artists to discover which methods are the most lucrative. Here in Colorado, we unfortunately do not have a long-established art collector scene like on the coasts. However, traditional gallery art sales and online art sales may be complemented by speaking gigs, public art commissions, publishing, teaching, commission projects, crowdfunding and grants.
In other words, we believe it is a good investment for artists just beginning to establish their careers (but also for those looking to give a boost to current careers) to participate a little in a lot. If one revenue stream (for example, gallery sales) is not doing so well, you ideally should have multiple other sources of income to fall back on. The downside is that your schedule may be very full. The potential upside after several years of pursuing all options is that you’ve found something that really works for your medium, personality, lifestyle and business model, and you have found financial security.
- Be Weird
Being “weird” could be a bad idea at a lot of jobs, but it is definitely an asset in the creative professions. To sell art or become known as an artist, it helps to grab your audiences’ attention by creating works that are distinctly different from what is already out there.
Moreover, artists who devote time beyond their actual artwork to create a unique brand around themselves will likely have more opportunities to engage in various projects and receive more invitations to work, speak, sell and teach (all towards, see above, diversifying income streams!). Individuals who succeed in branding themselves aren’t necessarily the most talented and brilliant artists out there, but they do produce more bankable work. Navigating the fine line of being your authentic self yet making an impression on those around you can be tricky, but finding that balance can yield profitable results.
- Be Professional
Passion, talent and weirdness aren’t the only qualifications for becoming a successful professional artist. A creative individual pursuing a career in the arts should also be able to successfully navigate the business side of their own enterprise.
For example, grants can be a good source of income for an artist or arts organization. There are even some arts grants where, if you’ve received it once and demonstrated you were able to meet the objectives of the grant program, you can receive the same grant several years in a row.
However, groups that award such grants want to ensure their money is going to be used appropriately. They require clear and straightforward descriptions of how the grant funds will be used, and they also need assurances that the funds will be properly accounted for once received. This kind of due diligence is legally required for most of the foundations, endowments, 501(c)(3)s, and other organizations who are in the business of making arts grants.
If you never know the balance of your bank account or choose a casual attitude towards the financial aspects of your business, this is trouble! It is critical to establish, and continually maintain, a high level of professionalism in your arts business. Certain actions that can go a long way include:
- Setting yourself up as a legal business entity with a separate business tax ID (an EIN);
- Having separate business bank accounts;
- Staying on top of deadlines and document requests from grant organizations, vendors, and other collaborators or colleagues;
- Recognizing and protecting your intellectual assets (copyrights and trademarks);
- Having a good professional services contract when you are hired for projects, shows, etc.;
- Maintaining an active and professional online presence (social media and your website); and
- Sustaining a solid network of mentors, colleagues, and professional advisors such as accountants and attorneys who are on your team as you navigate your career in the arts.
A “trademark” is any word, name, slogan, symbol, or combination thereof, including packaging, configuration of goods or other trade dress, which is adopted and used to identify goods or services, and to distinguish them from goods or services offered by others.
The primary goal of trademark law is not to establish an exclusive property right in the mark, but rather, to protect consumers from confusion in the marketplace. Thus, your trademark rights are violated if someone else is using your mark (or a mark confusingly similar to yours) in a way that is likely to cause confusion to existing or potential customers.
Technically, “trademark” is the term to use for tangible goods and products and “service mark” or “servicemark” is for non-tangible services, but nearly everyone, even trademark attorneys, use “trademark” for both categories.
“Common Law” Trademark Rights
Many people believe you can only have a trademark if you file for a registration, but this is not true!
Trademark rights can be established under common law simply by being the first use a mark for a business endeavor. Your common law trademark rights extend as far as the geographic area in which you use your mark.
For example, if Roger started a plumbing business called Roger’s Parts & Plumbing in 2002 and has continuously used the name “Roger’s Parts & Plumbing” in the Denver metro area ever since, he will have likely established a legal right to “Roger’s Parts & Plumbing” under common law in the Front Range.
If, in 2017, Judy tries to start a plumbing business in Denver called “Roger’s Parts & Plumbing”, Roger could use his trademark rights to legally stop Judy from doing so. Consumers would be confused about which “Roger’s” business is which. Plus, the new “Roger’s Parts & Plumbing” could unfairly take advantage of the goodwill and reputation Roger has established over more than 10 years of business. These are the very problems trademark law was designed to address.
However, if Judy starts a plumbing business called “Roger’s Parts & Plumbing” in Durango, Colorado instead of Denver, nearly 350 miles away from where Roger operates, Roger might have trouble proving that his common law rights extend that far. Similarly, if someone starts a punk band in Denver called “Rogerzz Plumbing”, Roger would have to prove his trademark rights extend beyond the plumbing industry in order to stop the punk band from using that name to promote music and live shows.
Federal Trademark Registration
Registering your trademark, even if you have established strong common law rights to the mark, is always advised. This allows you to provide notice to the world that you are using the mark, and affords you certain statutory rights and protections as well.
The U.S. has a two-tiered system of trademark protection: federal and state. A federal registration issued by the U.S. Patent & Trademark Office (USPTO) give the registrant rights through the entire United States. A state registration will grant rights within that state’s boundaries only.
Generally, in order to file for a registration with the USTPO, the trademark’s owner first must use or plan to use the mark in “interstate commerce.” This means the mark is used on a product or service that crosses state lines or that affects commerce crossing such lines (for example, an Internet business that caters to interstate or international customers).
At first glance, registering a mark with the USPTO appears to be a relatively simple process. It requires a completed application, a specimen, and a statutory filing fee.
However, doing some research before spending the cash on the filing fee, which can range from $250 to $375 or more depending on the type of application submitted and how many class of goods or services you want to list for your mark, is strongly recommended. This is because all applications will be examined by a USTPO Trademark Examiner for registrability under the Lanham Act (15 U.S.C. § 1051 et seq.).
Some things CANNOT be trademarked under the Lanham Act. You are not allowed to claim the generic name of a product or a service itself as your trademark. Roger cannot trademark “Plumbing” or “Plumber” for his plumbing business.
You cannot register “clearly descriptive” marks, which are those made of dictionary words which describe some important characteristic of your product or service (e.g., “Delicious Apples” if you have an apple orchard business). You also cannot register “deceptively misdescriptive” marks (e.g., “Leather Shoes” for shoes that aren’t actually made of leather).
However, “suggestive” marks only give some vague idea about the products and services covered by the trademark, and are registrable. Sometimes the boundary between unregistrable clearly descriptive marks and registrable suggestive marks isn’t very clear. This can result in long disputes between applicants and the USPTO.
There are many other rules for what is allowed for registration under this Act, and if your application is rejected, you do not get a refund of your application fees. As such, consulting with a trademark attorney is advised before you begin the federal registration process.
If the Trademark Examiner determines your mark can be registered, it is then published in the USPTO Gazette, and if it is not challenged within 30 days of publishing, it will be registered. The total process can take 1 year at a minimum. After registration, you can use the symbol ® after your mark to show it has been federally registered.
Colorado Trademark Registration
Trademark registration under Colorado law is easier, faster and cheaper than federal trademark registration. It is used to protect a trademark within the state.
A Colorado trademark registration allows for a standard character mark (expressed in ordinary English letters, Roman and Arabic numbers, or punctuation, without any stylization) and a special form trademark (logos, pictures, design elements, color or style of lettering).
To file a Colorado trademark registration, you submit a Statement of Registration of Trademark electronically at the Colorado Secretary of State’s website with an attachment of your mark and the goods/services category your mark will be used in. The current filing fee is $30.
Unlike the USPTO, there is no examiner who is going to look at your application to make sure you have completed it correctly and that the mark is appropriate for registration under state law. Instead, when you file your application, you certify that in your good faith belief, you have the right to use the trademark in connection with the goods or services listed your application, and
your use does not infringe the rights of any other person in that trademark.
Colorado trademark registrations are effective for 5 years and may be renewed before expiration in successive 5-year terms. (Prior to May 29, 2007 however, Colorado trademarks were effective and renewed for 10 years.)
Obtaining a Colorado trademark registration does not authorize the use of the federal registration symbol ®. However you can use “TM” or “SM” (for a service mark) after your mark.
If you are interested in speaking with one of our attorneys about registering your trademark or stopping someone else from using your mark, give us a call.
 Section 7-70-101, et seq., C.R.S.
 Section 7-70-102(2)(f), (g), C.R.S.
 Sections 7-70-104(1)-(2), C.R.S.
 Section 7-70-109, C.R.S.
 Section 7-70-103(4), C.R.S.
As socially conscious entrepreneurship becomes more visible and viable, you may keep hearing the terms “B Corp” and “Benefit Corporation” or “Public Benefit Corporation.” What do these terms mean and how are they relevant to a Colorado small business owner?
Many use the terms “B Corp” and “Benefit Corporation” interchangeably, but they are in fact very different things!
A B Corp is a for-profit entity that has obtained a voluntarily certification from a certain nonprofit organization headquartered in Wayne, Pennsylvania, called B Lab.
As of the date of this posting, there are 1,925 certified B Corps in 50 different countries spanning 130 different industries. Some nationally-recognized Colorado B Corps include New Belgium Brewing Co. and Bhakti Chai.
Obtaining a B Corp certification requires passing the B Lab Impact Assessment, which analyzes a company’s operations and provides a score based on meeting higher standards of transparency, accountability, performance and impact on the community. Passing the assessment test requires a score of at least 80 out of 200 points. There are many workshops and boot camps available in the Front Range area for business owners looking to hit the Impact Assessment’s various benchmarks. After passing the assessment, B Corps must pay a membership fee based on annual revenues.
Obtaining B Corp certification allows a business to join a community dedicated to creating a more just and conscious economy yet still driven by profit motives. B Corps organize various gatherings around the world, including an annual retreat, and such events provide opportunities to network and support other like-minded business owners.
A Benefit Corporation is a type of business entity (i.e., a special kind of corporation) that is authorized by state law. As of the date of this posting, 31 states – including, as of April 4, 2014, Colorado – have recently enacted legislation to allow for these entities. This legislation allows socially conscious entrepreneurs another entity option when starting a business.
The Benefit Corporation movement, largely spearheaded by B Lab, was to fix what many saw to be a major limitation in standard corporate law.
As you may know, the business and affairs of any for-profit corporation must be managed by a board of directors. Traditionally, the individuals on the board of directors have a legal duty to manage the affairs of the corporation in the company’s best interest. If they do not follow this duty, they could be liable to the corporation’s shareholders for breach of their duties.
So…what does “in the company’s best interest” actually mean? Some perceived it to mean only the maximization of shareholder value. This would severely limit the goals and the general ethos of the socially-conscious business/B Corp assessment movement. If a board of directors was trying to decide between two options, with Option 1 promising high profits but harm to the environment and Option 2 resulting in lower profits but no harm to the environment, the maximization of shareholder value theory would require the board of directors to pick Option 1.
Benefit Corporation legislation has thus been enacted to address this limitation in traditional corporate law.
Beyond corporate doctrine, however, forming a business as a Benefit Corporation may be important for reasons of marketability, relaying a message to current and potential employees and customers, and signaling participation in the socially-conscious business movement.
Colorado Public Benefit Corporations
The Public Benefit Corporation Act of Colorado (“PBCA”) contains the relevant provisions for those electing to operate their corporations as a Public Benefit Corporation (a “PBC”). A Colorado PBC is a for-profit corporation that is “intended to produce a public benefit or public benefits and to operate in a responsible and sustainable manner.”
What would be considered a “public benefit”? The PBCA defines public benefit as “one or more positive effects or reduction of negative effects on one or more categories of persons, entities, communities, or interests other than shareholders in their capacities as shareholders, including effects of an artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific, or technological nature.”
A key thing to realize is that PBCs are still subject to the rules and requirements contained in the regular corporate statutes, including the Colorado Business Corporations Act and the Colorado Corporations and Associations Act. The PBCA merely imposes “additional or different requirements, in which case such additional or different requirements apply.” The primary differences are:
- A PBC’s Articles of Incorporation must list one or more public benefit which the company must strive to achieve.
- A PBC’s name must contain the words “public benefit corporation” or the abbreviation “PBC” or “P.B.C.”
- A PBC’s board of directors must manage the company to balance (1) the pecuniary interest of the shareholders; (2) the best interest of those affected by the company’s conduct, and (3) the public benefit(s) listed in the Articles of Incorporation.
- A PBC must prepare an annual benefit report with (1) a description of how the company promoted the benefits listed in the Articles of Incorporation and any obstacles the company faced in promoting those public benefits and (2) an assessment of the overall social and environmental performance of the company against a third-party standard. This annual report must be provided to each shareholder of the PBC and posted on its website.
- Any share certificates of the PBC must consciously state the company is a public benefit corporation.
A PBC is formed the same was a traditional Colorado corporation would be formed – by filing Articles of Incorporation with the Colorado Secretary of State. Thereafter, all other documentation used to organize a PBC is extremely similar as what is used to organize a traditional Colorado corporation.
The PBCA specifically protects directors of a PBC from lawsuits by third parties who are interested in the public benefits listed in the Articles of Incorporation and by people who may be affected by the PBC’s conduct.
This section is meant to be a general summary of the PBCA and if you are thinking of creating such an entity or converting your current corporation to a PBC, consulting with an attorney is strongly advised.
 Section 7-101-501 et cet., C.R.S. Added by Laws 2013, Ch. 230, § 1, eff. April 1, 2014.
 Section 7-101-503(1), C.R.S.
 Section 7-101-503(2), C.R.S.
 Section 7-101-502, C.R.S.
 Section 7-101-503(1)(a)-(b), C.R.S.
 Section 7-101-503(4), C.R.S.
 Section 7-101-506(1), C.R.S.
 Section 7-101-507(1)(a)-(b), C.R.S.
 Section 7-101-507(4), C.R.S.
 Section 7-101-505, C.R.S.
 Section 7-101-506(2), C.R.S.
Individuals who are engaged in creative pursuits often maintain other employment to supplement their income. For example, a painter might work full-time as an art teacher or college professor, or may moonlight as a theater stagehand. Many artists also slog away in professions completely unrelated to their creative endeavors. Nevertheless, they may devote evenings, weekends and summers to making, promoting and selling their art, thus running a business enterprise apart from their “day job.”
However, these individuals may find themselves owing thousands of dollars to the IRS should their creative business pursuits be classified as merely a “hobby.”
This happened to Susan Crile, a painter and multimedia arts whose works have been displayed in top museums like the Metropolitan Museum of Art and the Guggenheim. Susan’s art business came into question with the IRS because she is also a tenured professor of studio art at Hunter College.
Since well before obtaining her teaching position, Susan devoted a substantial amount of time and money earning a living primarily as an artist. In addition to the costs of supplies and studio space, it took a great deal of promotional efforts to have her pieces noticed by curators and art dealers and to be displayed all over the world. Through such efforts over 40-plus years, Susan was able sell 356 works to art collectors and buyers, including a number of large corporations like AT&T, Exxon-Mobile, Bank of America and Charles Schwaab. These successes sustained her business to some degree, but not enough to provide for Susan’s living expenses entirely. Her teaching career filled that need, but as a dedicated artist, she has always continued to put in the time at her business.
Like countless artists before her, Susan wrote off expenses related to her making and selling art on her personal income tax returns. Such expenses included supplies, travel, the costs of reaching out and maintaining communications with galleries and collectors, and hiring assistants to help with social media.
Unfortunately, in 2010 the IRS accused Susan of underpaying her taxes by more than $81,000 from 2004 to 2009 because it claimed her efforts as an artist were not a separate profession or business, and not something she intended to make money from, but something she did as part of her job at Hunter.
To make this argument, the IRS invoked a set of tax code provisions often called the “Hobby Loss Rule.” Under Section 162 of the Internal Revenue Code, a taxpayer is allowed deduct all of the ordinary and necessary expenses of carrying on a “trade or business.” However, the taxpayer must show that he or she is engaged in the activity with an actual and honest objective of making a profit. If an activity is not engaged in for profit, it is a “hobby” under the meaning of Section 183.
The kicker of the Hobby Loss Rule is actually when a taxpayer loses money. Taxpayers can deduct expenses of a “trade or business” in excess of earnings, thus allowing them to claim a net loss. A “hobby” may only deduct its expenses to the extent of the profits of the activity, and cannot generate a net loss. In other words, net losses from a hobby may not be used to offset income from other sources, like a professor’s salary, but net losses from a trade or business can.
Susan’s 2004 through 2009 tax returns reported earnings from sales of her artworks on her Schedule C, but also reported a number of expenses that ultimately resulted in large overall losses for her art business, which she then used to offset other income.
When the IRS looks at whether a taxpayer’s enterprises is a “trade or business” or a “hobby,” a number of factors are considered:
- The manner in which activities were carried on;
- The expertise of taxpayer or her advisers;
- The time and effort the taxpayer expended on the activities;
- The expectation that assets may appreciate in value;
- The taxpayer’s success in carrying on other similar or dissimilar activities;
- The taxpayer’s history of income or loss; and
- The taxpayer’s personal motives.
Accordingly, Susan’s attorney stated that her goal was to show the tax court that “art is not a business like other businesses.” During trial, she called a number of art industry experts, including the dean of the Yale School of Art, Robert Storr, and a 40-year curator, gallery director, and art dealer, Renato Danese.
These experts explained that an art career, and the prices for which an artist can sell his or her work, can be highly volatile. They explained it is not uncommon for artists to make no money for years at a time, and so it is reasonable for artists to have other jobs or careers apart from their own art businesses.
In October 2014, the Tax Court Judge finally made a determination, and it was hailed as a victory to artists everywhere. Judge Albert G. Lauber held that Susan had met her burden of proving that her activities as an artist carried her actual and honest objective of making a profit, and therefore under tax law, should be considered a professional artist entitled to report her full losses on her Schedule Cs.
Despite Susan’s success, artists and creators are wise to still be wary when it comes to the Hobby Loss Rule. Under Sections 162 and 163, there remains a fuzzy line between a hobby and a business venture, especially when taking all the 7 factors outlined above into consideration of a particular creative industry. A tax advisor or attorney familiar with these nuances can help you distinguish between the two and ensure you are compliant with tax laws. If the IRS initially disagrees, a tax professional can also help you work with the IRS to support and substantiate your positions.
The stereotype of the starving artist, one who endures a life of poverty for a labor of love, is a common cultural conception. Indeed, many creative individuals ultimately choose to forgo any professional pursuit of their creative endeavors because of a perceived uphill battle of “making a living” in the arts.
However, today a growing “do-it-yourself” mindset is allowing artists, designers, engineers, architects, and other creators to invent jobs for themselves that didn’t exist a decade ago. More now than ever, business- and technology-savvy individuals are branding, marketing and networking their way into successful creative careers.
Creative Industry Companies
Brian De Herrera-Schnering is the founder of Colorado-based video production company, Pinto Pictures. Prior to moving to Colorado in 2007, he was employed full-time as a video editor at a company that produced healthcare education films, but was unable to find similar full-time work upon relocating to Colorado. Nevertheless, upon establishing his own business he found Denver housed a robust, collaborative community of film, animation, and video design professionals, and his business has thrived ever since. His company now specializes in a wide range of film-based projects and has worked with a number of local companies and nonprofits in Colorado, as well as national major entertainment brands like Discovery Channel, TLC, Root Sports, and Dish Network.
Another success story is LA-based entrepreneur KamranV, who has mashed technology, marketing and music to build a diverse creative industries company called CyKiK. CyKiK has successfully undertaken a wide range of creative business endeavors, including developing Interscope Records’ mobile business; designing POP-AUT, a payment system for music, games art and other creative projects; producing DVD-Audio projects for artists like Beck and Nine Inch Nails, and taking over the production of Moogfest. KamranV is also one of the founders of Bedrock.LA, a converted manufacturing building that houses music rehearsal and showcase rooms, recording studios, and an equipment rental and repair shop.
As these two examples show, there are many opportunities to thrive as a creative entrepreneur, whether pursuing film, music or technology and a mash-up of multiple mediums.
The emergence of the “creative entrepreneurship” movement has been fueled by several factors. By far the biggest is the emergence of technologies that unbundled creators from the traditional hold of studios, book publishers, concert promoters, record companies and museums. Artists today have the ability to distribute and make money from their works in ways that were never available to prior generations.
New, web-based technologies have also generated innovative ways of project collaboration. One clear example of this is crowdfunding. Sites like KickStarter and IndieGogo have made the process of raising capital significantly easier for artists and startups.
Finally, the national economic slump that began in 2009 led to a lack of good-paying employment opportunities for millions of young people and recent college grads, and also resulted in layoffs for other workers who had been working their way up the traditional career ladder. A number of these individuals realized they could no longer rely on an employer or a large established company to train and mentor them towards their dream career.
Business Planning and Awareness of Legal Issues
Today, designers, artists and creators mix artistic expression with business skills in order to thrive and sustain their endeavors. These individuals recognize they can utilize new resources and platforms to form their own businesses that contribute to media, arts and culture. However, there are many legal pitfalls that could take a fledgling creative-industries business owner by surprise.
One of these is the unfortunate receipt of a Cease and Desist Letter for either trademark or copyright infringement. When forming a new business, people may spend a lot of time and energy coming up with a great brand name, designing a great new logo, and planning an interactive website, only to learn, after a large investment has already been made, that the name is being used by another company. This happened to Judith Mendez, an entertainer who went by the name Dita de Leon. Ms. Mendez decided to expand her business by offering jewelry, clothing and leather goods featuring her stage name “Dita”, but was sued for trademark infringement by luxury sunglasses brand, Dita, Inc.
Another pitfall for new businesses is improper business planning or the incorrect reporting or calculation of taxes. This topic certainly isn’t very exciting or sexy, but extremely important. For example, running a business a certain way, especially if there are two or more owners, or misunderstanding the filing and deposit requirements from having employees can have huge financial repercussions. Even if you acknowledge your mistake to the taxing authorities and try to work something out to resolve it, the impacts of not knowing the intricacies or administrative rules of the tax system can be devastating and shutter an emerging business altogether.
Do you need help starting a new creative business or dealing with a tax problem under your current enterprise? Contact us today to schedule a consultation with an attorney.