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Q: Several of us are thinking about starting a design and art studio/gallery with the goal of wholesaling handmade decorative accessories to galleries, museum stores and other retail outlets. We're also thinking about selling original art. I currently work in a museum store and see a potential income opportunity. How do we legally go into business? What steps are necessary in order to create a studio or company?
A: To begin with, every city and state has its own rules and regulations for obtaining business licenses, paying taxes, establishing businesses under fictitious names and so on. These are legal matters and since I'm not an attorney and don't give legal advice, best procedure would be to check with your state and local tax and resale agencies for specifics. As for agreements or contracts, hiring an attorney or mediator who specializes in the arts is the best way to go. They can review or assist you with formulating arrangements while pointing out areas of potential difficulty.
You're moving a bit fast here though. None of you have experience being in business for yourselves or working with each other and your monetary situations don't sound particularly great either. Since lack of experience and lack of funds are two major reasons why new businesses fail, consider approaching this venture a little more gradually and without too much structure.
Think about renting a modestly priced space for a trial period of six months to a year where you can create, show and sell your work. Have at least six months of rent money in the bank before finalizing agreements with a landlord. Share everything equally. Each person pays equal rent, receives equal gallery and work space, and spends an equal amount of time and effort maintaining the operation during business hours.
Remaining contractually independent in all other areas is recommended when you're just starting out. Each artist is responsible for their own supplies, raw materials and production processes, with all revenues for sold art going directly to the artists who produce it. Another option might be for all revenues to go to the artists who produce the sold work, but with a fixed percentage going toward operating expenses for the gallery. Generally, it's better not to get involved with commissions or referral fees at this point. Arrangements in those areas can come later. Right now, you simply want to survive and do everything you can together to make that happen.
Since each artist owns all of his or her art, best procedure is for them to be the sole recipients of money generated from the sales of their art, even though someone else may be running the store at the time of a sale, with a fixed percentage going to operating expenses for the gallery. If you start complicating matters by acting as agents for each other or trying to figure out who gets how much for selling whose work under what circumstances, relationships can get strained and complicated fast. The point of this trial period is not to see who can make the most money, but rather to sell enough art and objects to stay in business, get a feel for how you all work together, and figure out how to be maximally productive while avoiding conflicts.
During the test run, see which types of art and design items sell best, which sales or display techniques work, who has special talents in areas like selling or curating or managing finances, and pay close attention to all customer feedback. Address problems as they arise and experiment with different exhibition models. Maybe having shows and sales at the studio/gallery will be best; maybe having shows at various outside locations in your area will work; maybe participating in fairs or open studios will be productive; maybe making cold calls or visiting prospective clients in person will generate the most sales. Keep all options open at the outset.
Be aware of your fellow artists at all times. Don't let animosities build up until it's too late to settle them amicably. Failure to express or take up grievances in a timely manner can result in a premature break-up. Have an advance plan for how you'll all proceed when issues come up between artists.
And don't limit yourselves to wholesaling to retail outlets. A sale is a sale and anywhere you can make one is good. Additionally, retail outlets tend to buy from more established businesses and they also tend to buy in quantity. Think seriously about whether you will be producing in any kind of quantity and if not, focus your attentions more on individual buyers and sales. You can still consider approaching retail outlets, but make sure you have the merchandise on hand (or easily produceable) just in case someone shows interest. In the meantime, make as many sales in as many different areas and ways as possible in order to make a name and build a reputation for yourselves.
If you decide after a trial period that you fare better as a group than you do as individuals and can make a profit while still enjoying working together, then you'll be ready to develop a more formalized organization and business plan. You'll know much more about each other and you'll have a much better idea of how the business needs to be set up in order to make a go of it. That's a great time to hire an attorney or mediator, work through remaining differences, define job duties, delegate responsibilities, structure commissions, decide who gets paid how much for which services, and finalize a contract.