Gallerella

I’ve been asked a lot lately to help artists find gallery representation.

I’ve always shied away from these types of clients simply because it’s an extremely difficult task to accomplish with a consistent level of good results. Typically galleries make decisions on which artists they are going to work with on various factors but more often than not they make this determination based on their gut.

But I’m all about problem solving and analytics so I decided to approach this task from a purely statistical perspective to see what would happen.

Keep in mind this is an experiment and completely untested and quite possibly way too narrow to produce any real conclusions albeit successful results for my clients. But what the hell, let’s try it anyway.

I took a handful of galleries from Los Angeles and New York. I broke down the raw data by categories and looked at both the program and the gallery itself. First I looked at the program and listed all of the artists. Then I looked at the CVs of each of the artists and broke them down by age, race, schooling, gender, location, other gallery representation, any significant museum exhibitions and price point. 

Then I looked at the work (now here is where it gets tricky) and categorized based on medium and style. Then I looked at the gallery itself and broke it down by age of gallery, age of owner, gender of owner, location, sub-location and participation in which art fairs.

The results are quite interesting. And maybe strangely enough prove a preconceived conclusion that there isn’t much variety within a given program. Owners tend to stick with artists that they have always represented. There are an insanely high proportion of male artists compared to female artists. I guess that’s not so surprising. Depressing but not surprising.

But the real question now that I have this data is what can be done with it. Does it have any purpose or meaning to the artist seeking that gallery or to the gallery itself? Would this information inform new programming decisions? Would an artist decide not to work with a particular gallery after learning some of this information?

Be regular and orderly in your life, so that you may be violent and original in your work. - Gustave Flaubert

Most artists have a serious distaste for the topic of art and money. And most graduate art programs typically steer clear of the issue in order to keep artists free to create without the specter of the looming art market. But I’m proposing a different type of workshop about art and money that revolves around the relationship between an art gallery and the artist rather than about the art market.

This workshop is not about how to make money with your art or how to make your art more sellable or palatable.  This workshop is not about wealthy artists and how they achieved their success. This workshop is about understanding the dynamic between a gallery and an artist, i.e. what an artist should expect from a gallery and how to understand that representation without exploitation.

Some artists think it's okay if a gallery doesn't tell them who the work sold to, some artists have no idea that they can get production materials and labor reimbursed by the gallery, some artists don't know that they shouldn't have to pay for storage or labor costs for their exhibition, some artists don't know that galleries shouldn't charge them for equipment rental when showing their work at an art fair. There are numerous examples of financial and legal transgressions that happen every day between an artist and a gallery. This workshop is about protecting the artist, letting them know their rights, exposing that fine line between an artist, the gallery and money and helping them understand the unspoken industry standards.

The format of this workshop maps an artwork's trajectory through each step from its conception to collection.  By following the life cycle of an artwork from its creation in an artist's studio to the exhibition in an art gallery and finally to its sale into an art collection, this workshop breaks down the subtle relationship between the two entities, revealing the flow of information and the flow of cash with each transaction. This is the first workshop of its kind that deconstructs the relationship between artist and gallery by focusing on the nuanced financial and operational aspects of these interconnected worlds. 

Artists! Did you know that you can avoid paying sales tax on supplies used to produce your art when you have a resale certificate?  Take a minute to think about how much you spend annually on materials and production.  What if you didn’t have to pay sales tax?  This could be a huge savings!  If you’re spending $15,000 in a given year, you could save $1,350 per year.

 Today’s post discusses one of the lesser known facets of Resale Law in California, and as always, underscores the importance of keeping good records, getting organized, and treating your artistic practice like a business!

 What is the law?

 According to the State of California Board of Equalization’s Publication 103 – Sales for Resale, “Purchasers who are engaged in the business of selling tangible personal property may issue resale certificates when purchasing items they will sell in the regular course of their business operations. When a seller accepts a valid resale certificate in good faith and in a timely manner, the seller does not owe tax on that sale. A form BOE-230, General Resale Certificate, can be issued by purchasers when purchasing goods they will resell in the regular course of their business operations.”[i]  

 Since art is considered tangible personal property, this law pertains to artists who purchase materials that will eventually be repurposed into a brand new product; i.e. artwork.

 What can I buy with the resale certificate?

 One important facet of this law is that you may only avoid paying sales tax on materials that will physically become part of the tangible final product.  Specifically, the law says that “resale certificates may be used when buying materials that will become a physical part of an item that will be held for resale.”  For example, let’s say you are a painter.  You may issue your resale certificate at an art supply store when buying things like paint, canvas, or gesso, which will all be incorporated into the final painting.  You may not use your resale certificate to waive sales tax on supplies such as easels, brushes, or pencils, however, which, although they support your artistic production, are not physically part of the final product.    

 What is the catch?

 The law stipulates that when purchasing materials with a resale certificate, an artist must have the intention to sell the finished product.   In other words, purchasers may not “use rather than sell, use in their business before they sell it, use for a personal purpose, or hold as an investment for appreciation in value and for sale in the future.”[ii]  This can either mean that the artist sells the artwork directly out of her studio, consigns it to a gallery to sell on her behalf, or sells it some other way.  

 Either way, you are required to file a yearly sales tax return. If you sell directly out of your studio and you sell a work to someone in the state of California, then you have to charge and collect sales tax. Once the collector has paid you, save the money that you've collected for the sales tax because at the end of the year you're going to have to file a sales tax return and pay the sales tax that you've collected.  Now, if you sell through a gallery, then the gallery is actually collecting the sales tax on the sale of your work. You still have to file a yearly sales tax return but it would be a "zero" return because you didn't actually collect any sales tax yourself. 

 Who will accept the resale certificate?

 It is also important to note that stores are not required by law to accept your resale certificate just because you have it.  Certain stores, such as Dick Blick, Artists & Craftsman, Nova paint, Home Depot, Lucius Hudson, Black Widow among others, will generally accept it. However, keep in mind that it is ultimately the store’s prerogative whether they decide to sell to you wholesale rather than retail.

 What do I need to do to make sure this law can work for me?

 Keep good records!  This law can be extremely beneficial for artists, but it still requires you to maintain records of everything you sell.  For minimal effort, you can reap maximum savings. In addition to keeping records of items you purchase and resell yourself, artists must have invoices for all items resold by galleries with the gallery’s resale number on them, in case of an audit by the Board of Equalization.

 One easy way to do this is to use the ArtSmart app to keep track of invoices and sales tax, so that when it comes to filing your return, you have everything organized and in one place.

 How can I get a resale certificate?

 Registering for a resale certificate is simple and can be done online through the Board of Equalization website.  When you apply for a resale certificate, one of the questions you will be asked is your best guess of your average sales per month.  Depending on your answer, the BOE will determine how often they want you to file taxes.  If your tax liability is less than $100/month, you will generally file yearly. If your tax liability is $101/month or more, you will file quarterly.  

 Instructions for Obtaining a Resale Certificate:

 https://efile.boe.ca.gov/ereg/index.boe

Register a business activity with BOE

Click all that apply

Selling Items or goods in California

Maybe Employing 10 or more people

Click Next

My business activity includes – none of these will apply

Sales and Use Tax Seller’s Permit – check box register and click next

Declaration of Intent – Accept

Enter name

Email Address

Create User ID and password

Select a security question and answer

Record all of this information for future use

What type of company is this – LLC

What is your role – Member and/or Manager

Are you going to register for multiple business locations – no

Are you applying for a Temporary Seller’s Permit – no

E-Client registration confirmation

Print page and save as pdf for your records

Company Information

Company Address

Contact Information

Business Reorg – are you changing from one type of business org to another – no

LLC Principals – Add a member, select individual in drop down menu

Relationship – Member /Manager, name of owner of business

Driver’s license number and California

Social Security number

Date of Birth

Home Address

Save and Next

Sales Activities – no to all

DBA leave blank

Start Date- today’s date

Business address

Are you buying or transferring an existing business – no

NAICS Code: 711510 – for artists

Are you making internet sales – no

Do you have other BOE accounts – no

Books and Records contact person – bookkeeper, same for business activities

Banking info, bank name and location

Will the business be accepting CC – no

Projected monthly sales

Projected monthly tax sales (depends on if selling out of studio)

Add Suppliers – look at who you mostly buy supplies from

Review information

Submit

Record the Account number and the Express login code

Click the link for Registration Information Packet and print out a copy of the resale certificate so you can bring it with you when you make art supply purchases

 [i] https://www.boe.ca.gov/formspubs/pub103/

Today we take a break from our regularly scheduled series with a real life example, highlighting the importance of setting up your studio to operate like a business.  In addition to all the benefits we have already discussed, the case of Crile v. Commissioner underscores the significant tax benefits of keeping records, getting organized, and, as Flaubert advised, “be[ing] regular and orderly in your life, so that you may be violent and original in your work.”

 Just over a year ago, the US Tax Court ruled in favor of Susan Crile, a professional artist and full-time tenured professor at Hunter College, stating that she may take tax deductions on her artistic output even though she had other full-time employment as a professor.[i] Previously, the court had ruled that she was not eligible to take a tax deduction, arguing that her primary occupation was as a professor, not professional artist, despite the fact that she had worked as an artist for 40 years, had gallery representation, had work in many museums, and had been reviewed by prominent publications.[ii]

 Seen as a victory for artists, the October 2014 Crile case ruling set a judicial precedent for the tax security of artists.  According to Yale School of Art dean Robert Storr, “…the right to claim deductions on such expenses was “one of the last remaining areas where the federal government cuts artists any slack to allow them to do what they do.”[iii] Here, the categorization of her artistic activity as a trade or business rather than a hobby, had significant tax ramifications for her.  

 Paramount to Susan Crile’s success in this case was the fact that she treated her artistic practice as a business, and kept detailed records to back it up.   Without these records, the tax court could have easily considered her practice to be a hobby.

 So, what can you do as an artist to make sure your practice gets the same consideration by the IRS?

 The IRS considers nine factors to determine whether an artist’s activities are classified as a business rather than a hobby.   According to CPA Tony Nitti, who writes about tax policy, court decisions and planning opportunities for Forbes, first make sure you can answer “yes” to each of these nine questions:

 1.   The manner in which the taxpayer carries on the activity. Does the taxpayer complete accurate books? Were records used to improve performance? 

 2. The expertise of the taxpayer or her advisers. Did the taxpayer study the activity’s business practices? Did she consult with experts?

 3. The time and effort expended by the taxpayer in carrying on the activity. Does she devote much of her personal time and effort?

 4. The expectation that the assets used in the activity may appreciate in value. Is the plan to generate profits through asset appreciation?

 5. The success of the taxpayer in carrying on similar or dissimilar activities. Has she converting similar activities from unprofitable to profitable?

 6.  The taxpayer’s history of income or losses with respect to the activity.  Has the taxpayer become profitable in a reasonable amount of time?

 7. The amount of occasional profits. Even a single year of profits can be a strong indication that an activity is not a hobby.

 8. The financial status of the taxpayer. Does the taxpayer have other income sources that are being offset by the losses of the activity?

 9.  Does the activity lack elements of personal pleasure or recreation? If the activity has large personal elements it is indicative of a hobby.

 Also, hire a bookkeeper, set up a business bank account and get a separate business credit card! For detailed information on how to do this, check out our previous blog posts.

  [i] Mostafa Heddaya, “Judge Overturns IRS on Artist Tax Deductions,” Hyperallergic, October 7, 2014, http://hyperallergic.com/153951/judge-overturns-irs-on-artist-tax-deductions/ (accessed October 28, 2015).

[ii] Tony Nitti, “Artists Rejoice!  Tax Court Concludes Painter’s Activity Isn’t a ‘Hobby,” Forbes, October 4, 2014, http://www.forbes.com/sites/anthonynitti/2014/10/04/artists-rejoice-tax-court-concludes-painters-activity-isnt-a-hobby/2/ (accessed October 28, 2015).

Creating a Studio Manual is key to being a responsible employer. Spend some time establishing protocol for how you want to run your business and what you expect from your employees and put it into writing. You can present this Manual to any new hire to set your expectations as well as cover yourself legally. Below I have listed out a sample table of contents so you can get a sense of what a Studio Manual should include.

Confidentiality Agreement

Employee responsibilities / expectations

Attendance and Punctuality

Studio hours of Operations

Appearance and Conduct

Studio procedures

           Credit Card Charges

           Expense Reporting

           Travel Reporting

           Per Diem

           Electronic Communications

           Communication Systems Policy

           Prohibited Acts

           Personnel Records and Employee Data info

           Daily Maintenance

Orientation

           Trial Period

Compensation

           Pay Schedule

           Direct Deposit

           Payroll Deductions

Employee Benefits

Health Insurance

Continuation of Coverage

Worker’s Compensation

Vacation / Paid time off

Performance Evaluations

Warnings

Separation from Employment

Work Product

Maternity / Paternity Leave

Sick Days

Holidays

Bereavement Leave

Jury Duty

Studio Structure

           Job Descriptions

                       Studio Manager

                       Production Manager

                       Production Assistant

                       Studio Assistant

                       Personal Assistant

Disclaimer / acknowledgement

As Flaubert said, "be regular and orderly in your life, so that you may be violent and original in your work.”

In the previous two posts we covered how to get a FEIN number and a Secretary of State number, in this post we will detail how to get a Business License which in LA County is the same as registering for Business Tax.

Why do you need this license?

"every person engaged in any trade, calling, occupation, vocation, profession or other means of livelihood in the City of Los Angeles, must obtain a Tax Registration Certificate (TRC) and pay the required business tax due."

All businesses must register, but when it comes time to pay you may qualify for an exemption:

"Starting on January 1, 2007, a small business with $100,000 or less of taxable and nontaxable gross receipts within and without the City, may qualify for a Small Business Exemption (LAMC Section 21.29).”

Applying for City of LA Business License

1.  Download the Business Tax Application and fill it out completely: (see step-by-step instructions below) http://finance.lacity.org/form/TaxRegistrationV4.pdf

You can also complete the application process online by filling out the New Business Registration Questionnaire: https://latax.lacity.org/oofweb/eappreg/eappreg_criteria.cfm

A temporary business tax registration certificate will be issued for you to print and display at your place of business. A permanent certificate will be sent via mail (4-6 weeks).

 Instructions for Filling out the Business Tax Application Form:

Select the business type: Individual, Partnership, Corporation, LLC, or Trust

Legal name of the business (must be the legal name, not a DBA)

Business Name – here is where you would enter the DBA if you have one (this is optional)

Mailing Address – enter the address where you would like to get mail for your business

Starting date of business – should be in the current year.

SSN or FEIN – see the first blog post in this series for information on setting up a FEIN

Sales tax number – (if you have one please provide it)

Description of business – artist studios

Primary Business / Professional Activity Code – this is a 6-digit code reported on your Federal tax return.   Enter 711510 – Independent artists, writers, and performers.

Business phone number

Gross receipts – if you started doing business prior to the current year, enter the gross receipts from each year here.

Enter the name of the Contact Person

Title  

Phone Number

Then sign, date, and add your phone number and email.

  You have a few options for submitting the form:

 1.    Print the completed form and mail it in to the City of Los Angeles Office of Finance, 200 North Spring Street, Rm 101 (4-6 weeks until you receive license in mail).

2.    If you are in a rush to get the license, print form and bring it in to the Office of Finance in downtown LA (they will immediately provide you with a temporary license while the official one is mailed, 4-6 weeks).

The next series of blog posts will be dedicated to helping artists establish a working studio. Setting up your studio can be a daunting task from a business standpoint.

 I’ve broken down some basic to do’s for artists who are starting to think about how to create a professional environment. In order for you to be freed up both time-wise and mentally to make art you first have to set up the studio to operate like a business. Here are some key things that need to be put in place. Each topic below will be detailed in subsequent blog posts:

 ·      Federal Employment Identification Number (FEIN – basically the SS# for your studio) – see last blog post for more details

·      State ID number (for California it is called SOS Secretary of State ID number) – see below

·      Business License – from the city you are operating in

·      Business checking / savings account set up – you have to have your FEIN and your SOS Secretary of State ID number from California or respective state you’re doing business in

·      QuickBooks or other accounting program set up

·      Studio Manual

·      Payroll set up

·      Sales tax set up

·      Website set up / design

·      Archive database

·      Consignment / loan agreements

·      Hiring / Training Personnel

·      Confidentiality Agreement

·      Employment Contract

·      Hiring CPA and / or lawyer

·      And more…

 Applying for State of CA ID number – SOS

http://www.sos.ca.gov/business/be/forms.htm

Select LLC

Select 1. LLC-1 Articles of Organization for LLC

Fill out form for Articles of Incorporation

Print and sign

Submit by mail with $70 check

 Applying for CA Employer ID number

https://eddservices.edd.ca.gov/tap/open/ezreg/_/#1

Employer Type: Commercial

Organization Type: Corporation, LLC or Individual /Sole Proprietorship

First Quarter and Year Wages Exceeded $100 – usually the current quarter you are in

Reason for Application: Hired Employees or Other – banking purposes

Number of Employees working: # signing up for payroll

Number working outside CA: 0

Responsible Party isn’t the Corp or LLC, it’s the owner of the business

Must add the DL number

Business Information – information for the Corp / LLC

Industry Activity: Other

Explain Other: Artist Studio

Describe Product / Services: Making Art

Declarations – Artist first and last name, Title CEO or Owner,

The next series of blog posts will be dedicated to helping artists establish a working studio. Setting up your studio can be a daunting task from a business standpoint.

I’ve broken down some basic to do’s for artists who are starting to think about how to create a professional environment. In order for you to be freed up both time-wise and mentally to make art you first have to set up the studio to operate like a business. Here are some key things that need to be put in place. Each topic below will be detailed in subsequent blog posts:

·      Federal Employment Identification Number (FEIN – basically the SS# for      your studio)

·      State ID number (for California it is called SOS Secretary of State ID number)

·      Business License – from the city you are operating in

·      Business checking / savings account set up – you have to have your FEIN and your SOS Secretary of State ID number from California or respective state you’re doing business in

·      QuickBooks or other accounting program set up

·      Studio Manual

·      Payroll set up

·      Sales tax set up

·      Website set up / design

·      Archive database

·      Consignment / loan agreements

·      Hiring / Training Personnel

·      Confidentiality Agreement

·      Employment Contract

·      Hiring CPA and / or lawyer

·      And more…

 Applying for a Federal Employment Identification Number (FEIN)

https://sa.www4.irs.gov/modiein/individual/index.jsp

Select the type of entity – usually LLC or Sole Proprietor

If LLC – select how many members – usually 1

Select State – usually CA

Select Single Member

Why are you requesting an EIN – usually banking purposes

Responsible party is Individual

Name

SS#

Select I am one of the owners

Street Address

Phone number

Legal Name of LLC

Start Date – this month and year

More about the LLC – all are No except maybe last one about employees            

Artist Studios – Manufacturing, type of Manufacturing - artwork

Galleries – Retail

How would you like to receive your EIN Confirmation Letter – online

Review and submit

I’ve had a few issues come up lately where galleries are charging artists for expenses that do not normally fall under reimbursed production.

 Typically galleries and artists split production 50/50. So if an artist pays for production up front then they are reimbursed half of their production when they are paid for the work. If the gallery fronts the production then they take the production off the top of the sale thus reimbursing themselves for half of the production they spent.

 However sometimes galleries will lump other expenses into this reimbursed category. Don’t assume something sneaky. I worked in galleries for many years and people do make mistakes. Galleries are busy and often some rules apply to certain artists and some do not so it’s up to the artist to double check they are getting the correct amount due to them.

 Shipping / Crating – when a gallery invites you to do a show, make work for an art fair, or generally asks for work for them to sell, they are covering the shipping and crating of the work. This is a gallery expense and shouldn’t be split with an artist. The only time I’ve seen an artist bear this burden is when a work was returned because of damaged due to failure of the work itself.

 Storage / Insurance – when a gallery invites you to do a show, make work for an art fair, or generally asks for work for them to sell, they are covering the storage and insurance for the work. This is also a gallery expense even if it’s additional storage at an art fair. The only time I’ve seen an artist pay for this is when there was a special circumstance of the work going from one location to another that didn’t benefit the gallery in any way. In this case the work had to be stored temporarily for the artist to pick up.

 Art Fair Expenses – when a gallery shows your work at an art fair, they are covering the expenses of the fair. If you have a video installation, the equipment rental costs are not production. These costs associated with showing the video are exhibition expenses and should be considered gallery expenses not production. These costs would only be considered production if the equipment was purchased and will be sold with the work. Most of the time in this case the cost of the equipment is past along to the collector at cost. Either way they shouldn’t show up as a reimbursed expense on an Artist Statement.

 Installation / Exhibition Expenses – same goes for shows in a gallery. No expenses incurred whether they be equipment rental, equipment purchase, or installation labor should be considered production unless it is part of the work getting sold with the work. Rule of thumb: If it follows the work then its production unless the cost is being past along to the collector.

I recently worked with an artist client who has had some issues with damaged works. It’s been an ongoing struggle for him in his studio. He’s experimental and likes working with unpredictable outcomes. He often works with materials that have the illusion of being indestructible. He rides that line with all of his work, but his sculpture has risen in price to a level where the gallery and collector rightfully want these objects to last.

What happens when work gets damaged and who is responsible for the costs associated with retrieval, repair, replacement and return? Here is how to parse out responsibility and burden of cost.

 Damage at the gallery – Damage can happen when the work is being installed. The gallery usually hires professional art handlers, as they understand the headache and expense that goes along with damaged artwork. If damage does occur on the gallery’s watch then obviously the gallery covers the cost to repair or replace the work.

 Damage at the studio – Damage before a work has left the studio is obviously the burden of the artist. However, it could be argued that this expense be rolled into the cost of production. In my opinion artists should bear the cost of research and development. If an artist is experimenting with new materials then the studio should absorb those costs and not split them with the gallery unless it has been discussed ahead of time. However if the gallery is encouraging an artist to delve into a certain level of experimentation or they want a “higher” quality of materials or if the gallery has procured a fabricator for the artist, then the burden should be shared more equally.

 Damage in transit – When work gets damaged in transit, the burden is typically on the shipper, the art handler, and/or the crate builder depending on what has gone wrong.

 Damage at the collector – Damage at the collector is where things get a bit stickier. Because the gallery and the artist have to take the collector’s word on what transpired and because in many instances the collector is in a power position, the gallery and the artist often times end up splitting the burden when something has gone wrong with the work itself, i.e., the work coming off its cleat, falling to the floor and cracking. Barring an earthquake, in this case the work itself “failed”. Either the cleat wasn’t installed properly or the weight of the work was too heavy for the apparatus. If the cleat was installed by the artist as part of the work then the burden would be on the artist (or split with the gallery as part of production). If the cleat failed because it was installed improperly, then the burden would be on whomever installed it and/or possibly the gallery if they hired said installer.

 How can an artist protect themselves against the responsibility and cost of damage? I highly recommend that artists make manuals for their works. I highly recommend that the manual have explicit crating, installation and maintenance instructions (pictures are always good because let’s face it not a lot of people are going to read a 10 page document). If there are only certain art handlers, craters and shippers that you are comfortable working with and that are trust-worthy, state that in the manual. I highly recommend that you never under any circumstance use FedEx. And always have a consignment agreement with the gallery, institution or collector that states that their insurance is responsible from “nail to nail”, meaning their insurance covers any damage from the moment a shipper or art handler arrives to retrieve the work until the time that it is returned.

For the last month I’ve implemented yet another one of my financial experiments. I’ve been putting $5 a day into my savings account. It’s my version of a piggy bank. I know what you’re thinking: $150 bucks…what’s the big deal? But I tell you it’s more than I had 30 days ago. I would have easily blown that amount on espresso and parking in that coveted spot right in front of the coffee shop.

Over the last 20 years I’ve lived in some of the most expensive cities: San Francisco, New York and now L.A. The cost of living has taken its toll and now when I look back over the last 2 decades, I have a very meager savings to show for it. The time is now. I have to start getting serious about saving. I wish I had had the forethought to do this when I was 20 years old. But what the hell, I ate well.

Micro-savings has been implemented all over the world where people are making almost nothing and living well below the poverty line. I kept thinking that I needed to start saving but it’s been difficult for me because I don’t have a steady flow of income like a paycheck that comes every 2 weeks. I don’t get paid in a predictable, systematic way and neither do most artists. Cash flow is the single biggest issue with almost every artist that I work with. Not only do most artists not know when they will get paid, but they often don’t know how much they will be receiving in any given period of time. This makes saving simultaneously critical and extremely difficult.

But what if miniscule amounts are taken out in such a way as to not disrupt cash flow. The results would be tremendous. Five dollars a day for 365 days equals $1,825. Multiply that times 20 years at 7% growth and the total saved is over $78,000.

So here’s the challenge: start saving now, even if it’s $1 or $5 a day. Maybe it comes out daily or monthly but figure out a way to make it automatic and seamless so you’re not thinking about it. It shouldn’t impact your life in a major way whether you make a lot or nothing at all. When the big payday comes then you can take a chunk and throw it into your IRA but until then $78,000 isn’t nothing. And if you are going to spend it on something insignificant anyway then what are you waiting for?

WHAT’S YOUR ARCHIVE WORTH?

I’ve blogged in the past about how crucial archives are for artists, but here is a story about how archives are critical for collectors and galleries as well.

This week there was a crazy restitution story of a $20 million painting by Matisse to the daughter of Jewish art dealer, Paul Rosenberg. The painting was taken by the Nazi regime in 1941 and only until now was it discovered in Cornelius Gurlitt’s apartment. Gurlitt’s father, Hiderbrand Gurlitt was ordered by Adolf Hitler to deal with works that had been seized from Jewish families; over 1,280 piece from the Gurlitt’s collection are now under investigation.

After almost eighty years of being lost how was the “Seated Woman” finally recovered? Of course, successful arbitration helped but what ultimately allowed for the lawyers to plead their case was the careful, meticulous documentation that was kept by the collector. The archive single-handedly restored a $20 million to its rightful owner.

According to Christopher A. Marinello, the representing lawyer, The “Seated Woman” was recovered because the family had kept over 250,000 documents that proved their connection to the painting! Obviously, 250,000 documents is a bit overkill but you get the point.

This story has a happy ending but according to the report there are families and even small museums throughout Europe that don’t have records to prove their ownership of works of art. They unlike, Ms. Rosenberg, have been unable to get their works back due to the uncertainty over where to go for information. Even with the German government investing over 13 million euros in provenance research to restitute objects, many await for any documentation to appear that might help them recover their lost treasures.

It’s that time of year again when I teach at the Sotheby’s Institute at Claremont University’s Drucker School of Business. The direct interaction with other like-minded, soon-to-be business owners always makes me think of new and interesting ways to say the same things.

Since you already know my interest in particle physics and all things mysterious in the known universe, I hope this new comparison will be familiar yet strange enough.

Just as there are 4 fundamental forces in the universe, I believe there are 4 key forces in business. In our world there are four conventionally understood laws of interaction: gravity, electromagnetic, strong nuclear and weak nuclear. Gravitation and electromagnetism are forces over great distance, unfathomable distances. Yet we can easily relate to them in our every day life. But strong and weak nuclear interaction dominates the subatomic world. The strong interaction is responsible for binding an atom’s nucleus, and the weak interaction is responsible for radioactive decay.

Similarly the 4 forces of the laws of interaction within business are: grit, opportunity, fearlessness of failure and acceptance of your assets.

Like Gravity, Grit is what binds you. Perseverance is the key to success. “Grit is passion and perseverance for very long-term goals. Grit is having stamina. Grit is sticking with your future, day in, day out, not just for the week, not just for the month, but for years, and working really hard to make that future a reality. Grit is living life like it's a marathon, not a sprint.” Angela Lee Duckworth

<http://www.ted.com/talks/angela_lee_duckworth_the_key_to_success_grit>

Like Electromagnetism, seeking out and recognizing Opportunity is what pulls you in one direction versus another. Having a good gauge, a good radar of what is going to work, what isn’t, what holes are there to fill, what gaps are there to close, this is what makes for a savvy entrepreneur.

Both the ability to seek out opportunity and the ability to stick it out once you find it, are big concepts. They are the fundamentals of being in business and making it succeed. But what about the subatomic part of business?

Like Strong nuclear force, Acceptance of your Assets is about really understanding and appreciating your nucleus. You have unique talents and strengths, and you have to embrace them. I know a lot of people who undervalue their talents because they reject what comes easy to them. They don’t believe it has worth because they aren’t in some kind of struggle to make it good.

I recently spoke with a few artists and randomly asked them what they would like to see in a future relationship with a gallery or what they would like to change in their existing relationship with their gallery. I thought the answers were quite interesting and surprisingly a lot of the artists said the same things.

These artists have been around the block and have worked with several different galleries both in the U.S. and abroad. Here’s what they had to say about potential and ongoing relationships with galleries:

  Understanding of the Market - I wish that my gallery would treat me with a little more respect. I am not a complete novice, and I understand the concept of supply and demand. What my gallery tells me regarding my work and the market is totally contradictory. They tell me slow down and stop making more of a certain type of work because it might flood the market. The next thing I know they are asking me to make more because their clients just can’t get enough. I’m getting whiplash.

Business Relationship v. Personal Relationship – I would like to have clearer boundaries about the relationship with my gallery. I look to my gallery for advice about business and career, but not personal advice about how I live my life. I don’t want the relationship to be like a parent and a child. I view myself as an equal partner in the relationship and don’t want to be treated like an adolescent.

Honesty about Money – Artists talk and they share information constantly. We all know that galleries should split production with their artists. It drives me crazy when I constantly have to remind my gallery that they have to pay me half of my production. I think they think that I might just forget or that I’m not paying attention. Or that $500 - $5,000 doesn’t mean that much to me.

Transparency about Sales & Collectors – Overall I wish that my gallery would openly communicate with me about sales strategies, which works are going to which collector and how many works will be sold to a given collector. If I make a work for an art fair, I expect that that work will go to that art fair and not be sold ahead of time and never even get seen.

I know this seems like an unlikely scenario, but it does happen and it has happened to a few of my artist clients lately so I want to address what an artist should do in these circumstances.

I address some of these points in an earlier blog about “Why an Artist should maintain their own Archive”. Basically way before things start to feel financially unstable with your gallery…Way before things start to feel uncomfortable relationship-wise with your gallery, get a copy of your images. Galleries put a lot of money into photographing and documenting your work so make sure you take advantage of that and get a copy.

Another thing you can do as a normal part of having an organized studio and as part of your due diligence of running your own business is to keep track of what is owed to you by the gallery. This is extremely important, and I can’t stress it enough. I’m not saying this because I think the gallery is going to cheat you. I’m saying this because a gallery has a lot on its plate, lots of artists and vendors so it will make mistakes. So it’s best if you keep your own records. At all times you should know how much a gallery owes you. So these are 2 main things that you can do before the shit ever hits the fan.

Okay so now the shit hits the fan. And you start to sense that something isn’t right. Maybe there starts to be a lack of communication. Maybe you start to hear rumors from other artists or collectors. What do you do now?

Best thing to do is to become the squeaky wheel. I’m not saying be annoying. I’m just saying stay in constant communication with the owner of the gallery (not the director or other staff but the owner, they are the only ones at this point that can distribute money). Don’t get offended when communication is stalled. Just keep a cool head and a calm but consistent line of communication. I think email is effective in the sense that you have everything in writing but there must be phone calls peppered in there as well.

What do you say? If you’ve kept your records, then I suggest presenting your own numbers. For example: Dear gallery owner, I’m so sorry to hear that the gallery has decided to close. I’ve valued our working relationship tremendously. And I hope we can continue to have a relationship after the dust settles. In the meantime, I want to make sure that my records are accurate. I currently show that you owe me $10,000 as of February 15, 2014. This was the last correspondence that I received from the gallery that a work had been sold. Please let me know if any further sales have taken place between now and then. I understand that financially you have many obligations, but I would like to continue to a good working relationship with you so I would like to propose a payment plan of $2,500 each month due at the first of the month. Please let me know if this is equitable. Very best regards, Artist.

If you haven’t kept records, then I would proceed in the same way but just request an updated Statement of Account. If you haven’t kept your own archive then I would also add in this email that you would like to receive a copy of your archive, both photography and copies of articles, etc. And the final thing and perhaps the most important thing to request is the safe return of your inventory.

Here is a simple checklist of items that need to be acquired from your gallery in the event of a gallery closure:

1. Statement of Account – includes works sold, amount sold for, to whom (name, city and state) and if the works are paid or unpaid

2. Total Funds Due to Artist – suggest a payment plan that works for you, be ready to negotiate

3. Archive - photographs and copies of magazine articles, copy of bio and bibliography

Wow, it’s been awhile since I’ve blogged. I’ve been teaching at the Sotheby’s Institute in LA at the Drucker’s School of Business at Claremont University. The course is basically a master’s course in art gallery 101. But a lot of the students aren’t interested in running or working in galleries. Coincidentally several of my friends who used to work in art galleries have left to try to pursue other options within the art world. Each of these people still wants to be a part of the art world but not necessarily within a gallery structure. So I compiled a list of all the art related jobs and businesses that I’ve come into contact with over the last 15 years to give the students and my colleagues some ideas of what to do next.

  Appraiser

Art advisor / consultant

Art conservator

Art fabricator

Art fair organizer

Art lawyer

Artist manager

Artist-run gallery

Art storage / shipper

Auction houses

Business consulting for artist

Collections manager

Curator

Database manager

Dealer

Estate manager

For-profit gallery

Freelance archivist

Freelance registrar

Freelance salesperson

Museums

Non-profit gallery

PR agent

Rental gallery space

Secondary market gallery

Writer / critic / blogger

The most important part of your business plan is the Executive Summary. This is your one-page summary of everything that you’re going to cover in the Business Plan. I like to think of it as the Who, What, When, Where, How and How Much Summary.

After you’ve completed the questions from the last blog post you now have some foundation to start the Executive Summary. Some business advisers recommend that this be the last thing you write. I agree that it will take many levels of refinement, but I’m one of those people who thinks it’s good to jump in and start hashing out the big picture and get to the details once you’ve established your goals and objectives.

Here is what an Executive Summary includes:

The Mission Statement – Who are you as an artist? How has your practice evolved? Where do you want to go? What are your goals?

  Artist / Studio Information – Where are you located? What is the size of your studio? Who comprises your studio?

  Growth of the Practice – Where did you start your practice? Where are you now? Have you expanded the studio? Have you increased your sales? Have you procured exhibitions? Have you been included in biennials, group exhibitions and art fairs? Have you been awarded grants, prizes or residencies?

  Your Artwork – What is your artistic practice? Where does your philosophy come from? What is your educational background? What is your history? Why are you an artist? How do you describe your artwork to a gallery, collector, curator, or writer?

  Financial Information – What is your average gross profit? What is your average gross revenue? How do you plan to cut expenses? How do you plan to expand your market? How many people do you plan on hiring? How do you financially maintain your studio operations?

  Summarize future plans – Where do you want to take your practice? What are your immediate goals? What are your long-term goals?