5 Things You Should Do Before Opening Up a Pottery Business
5 Things You Should Do Before Opening Up a Pottery Business
There are 5 things you should do before opening up a Pottery Business. This can really get you off and running on the right financial foot and makes things easier for you at tax time. The time we all dread.
Today I’m talking about the boring and stressful part of running your business. It’s easy to get lost in all the excitement of creating your pieces to marketing them and making that first sale, but what about the financial aspect of your small pottery business?
It’s the part of running a small pottery business that nobody wants to talk about. I know because I’ve searched high and low for videos and blogs explaining the back end of a small pottery business.
All I could find were basic bookkeeping strategies and tips for a small business. I couldn’t pinpoint anything specific or detailed for how to learn the financial side of running a small pottery business.
I had to do it the old fashioned way. Trial and error. I’m writing this blog/article in hopes that someone out there, like myself, needs to learn and understand the financial side before they begin their small pottery/ceramics business.
Admittedly, I did things a little bit backwards. I discovered things I needed to do as I traveled along this small business journey of mine. I wish I had happened upon an article such as this that guided me and gave me some strategies & tips on how to run the back end of my pottery business.
I’m not talking about a business plan. That is something totally different and ties into what I’m discussing, but I haven’t worked on a business plan (on paper) and quite frankly, it intimidates me and scares the bejeezus out of me. I know it is something I may eventually need to work on, but I honestly don’t feel the need to do that unless I want to take out a loan for my business, which I don’t. Not at this point.
I’m also talking mostly from a sole proprietor standpoint in this article. You may find this article I wrote helpful as well, How to Start a Small Batch Pottery Business.
So what exactly should you do before opening up a pottery/ceramics business?
Here are my Top 5 Things You Should Do Before Opening Up a Small Pottery Business
Get a Federal Tax ID Number
Apply for and publish your fictitious name
Register with your county’s Records, Taxes, & Treasury Division
Register with your state’s Department of Revenue
Open up a Business Bank Account & Learn Basic Bookkeeping Skills
I’ll talk about each one in as much detail as it relates to what I’ve learned and put into action.
Get a Federal Tax (EIN) ID Number
I’m a sole proprierter. That means I own an unincorporated business. As a sole proprietor you can operate under your social security number, like I initially did, but later discovered this can open you up to identity theft and fraud.
Obtain an Employer Identification Number (EIN) with the Internal Revenue Service. It is free to apply and you can fill out a form right on the IRS website. You will immediately be assigned your Tax ID number upon completion and approval of the application.
Make sure you are on the IRS website. A site tried to charge me $189.00 to complete the form, but luckily I caught that and did a bit of research then went directly to the IRS website to fill out the application.
Having an EIN is best to keep your personal financials separate from your business financials for tax purposes. It is never a good idea to intermingle the two. It can lead to headaches down the road, and more importantly open you up to auditing by the IRS.
Apply for and Publish Your Fictitious Name within the State in which your business resides.
A fictitious name is also known as Doing Business As (DBA.) This is required if you are a sole proprietor. For example, I own Vanilla Vine Pottery. The owner, (my name,) owns Vanilla Vine Pottery (Fictitious Name.)
I didn’t realize I needed to do this until I wanted to open up a business bank account. Registering your fictitious name with the state is one of the requirements for opening up a business bank account. The bank I wanted to open my account required me to register my fictitious name.
States also require filing fictitious business names because they help inform the public about who actually owns the company. A fictitious name filing puts a business’s name and its owner's identity on public record.
There is a fee (I paid $60.00) for filing a fictitious name application. Once your application is approved you will receive a certificate signed by your Secretary of State that you have registered your fictitious name.
Upon doing that, you are required to advertise a one time publication of your fictitious name in the county you reside in. There is also a fee (around $100.00) for publishing your business. For example, I reside in Broward County and published my business in the Sun Sentinel. Upon publishing I was sent an Affidavit for proof of publishing.
You don’t need the proof of publishing, but trust me when I say you need to publish your business. The state will hunt you down and make sure you adhere to this requirement. You can face a penalty & fine for not publishing your fictitious business name.
Register with your County’s Records, Taxes, & Treasury Division.
You are required to apply for and obtain within your county a business tax receipt. For example I applied for my business tax receipt at Broward County Records, Taxes & Treasury Division.
A business tax receipt is proof that your business is cleared by local government to sell products and services. There is a fee for this (I paid $45.00) and you are required to renew your tax receipt license yearly. They will mail you a copy of your tax receipt and you are required to display it in clear view if you are operating out of a brick and mortar business. In other words, a physical business address.
Although I work out of my home, it is not a physical business address. Most of my sales come from online purchases on my website. I’m not talking about something like an Etsy website. I’m talking about if you own and operate your own online store.
Register with your State Department of Revenue
You are required register with your state’s Department of Revenue in order to file and pay any state sales tax whether it be from your website sales or if you are operating out of a brick and mortar store. This includes all sales transactions at any art shows, fairs, and farmer’s markets. You must collect and remit states sales tax.
In my case, I file and pay my state sales tax quarterly. This is something you should calendar because if you are late, there is a penalty.
State sales tax laws and regulations are constantly changing and you should have a basic understanding of what they are and how to comply with them according to your state and in some cases, any state in which you are operating your business in in addition to the state in which your business resides.
You may want to hire an accountant when it is time to file and remit your state sales tax. The Florida Department of Revenue has been very helpful to me whenever I have called. They even walked me through filing my very first quarterly taxes. It was easy, as I only had to file zero, since I hadn’t officially sold anything on my online shop at the time of my first filing.
It you have an Etsty website, which I also have, Etsy takes care of all of this for you. It isn’t something you have to worry about. So if you don’t own your own website, this isn’t anything you need to worry about. However, if you own a brick and mortar business or you’re selling at art shows and fairs, you still need to collect and remit state sales tax.
I may hire an accountant for this in the near future, but at present I’m able to handle it on my own.
Open a Business Bank Account & Learn Basic Book Keeping Skills
Open a business bank account immediately and keep your business finances separate from your personal finances. Intermingling the two can lead to headaches and financial problems. It took me a while to grasp this concept.
Having a business bank account can also help you to acquire loans and business lines of credit if you need to in the future. You have to be able to show a record of what your business has been doing financially in order to get loans or credit cards for your business.
I recently received my business debit card in the mail, and it was one of the best feelings aside from making my first pottery sale. I was only required to open the account with $50.00 but I deposited money from some sales transactions as well that were hanging around in my personal and PayPal accounts.
I should have had this in place from day one, but I didn’t. The more sales I made, the more I realized I really needed to have a business account. It keeps everything in one place and now when I purchase supplies for my business it can all be deducted from my business account & tracked.
This also makes things easier from a bookkeeping standpoint. You need to have basic knowledge of bookkeeping skills. You can’t run your business effectively or efficiently if you don’t know what’s coming in and going out. Bookkeeping is simply recording what you have coming in versus what is going out. It really is that simple.
Easier said than done though. Discipline yourself to record transactions and expenses at a time designated specifically for admin work. Keep a system that allows you to track every penny whether you do that daily or weekly. Don’t wait until months down the road to record your income and loss reports.
Being financially organized will decrease stress and worry and will allow you to focus on other aspects of your business like creating and marketing. If you’re a one woman show like myself, it’s important to stay organized in all aspects of your business.
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I recommend getting yourself an Income & Expense Tracker Log Book. I’m sure there are some very good apps out there that also do the same. As for me, I’m teaching myself by using a physical log book I can have easy reference to and carry with me.
Recording all business expenses and Income will make things easier at tax time. You’ll thank yourself later or your accountant will thank you.
In addition to recording your weekly income and expenses make sure you are saving all your receipts. In the event you get audited you will need these receipts. According to the IRS, you need to hold on to your business receipts for at least 3 years.
Paper can definitely clutter things and make you feel bogged down, but there are apps you can use to scan and organize your receipts if you don’t like having paper clutter. Just make sure you have backed up your digital receipts by saving them to an external hard drive as well.
While not a comprehensive or exhaustive list to organizing the financial end of your business, I hope this article has helped you in some way and given you a basic understanding of what you financially need to do before you get your business off the ground and running.
