Wednesday, December 3, 2014

The Costs Of Starting A Small Craft Business

All right, it looks like I have all my stuff set up to be compliant with local and national laws so I can finally tally up what I had to spend to get going.

For those of you who don't know, I registered Sailor Crafty, LLC in the state of Utah. *small fanfare*

Yes, I am an official business, and here's why I chose to go this route. I'm an artist, see, a nerd artist. We nerd artists have a lot of fandoms we participate in, and we like to make stuff that celebrates our love of these fandoms. A lot of what we do dabbles in what we call "copyright infringement". There are varying levels of infringement, but basically if you are using anybody else's characters in any way, there is potential for legal action and no one wants to lose their home over something so small as "I made a plushie of so-and-so and sold it for $5." There are thousands of makers out there selling their wares openly online and most of them won't be prosecuted, but the fact is that they are all gambling and hoping the creators don't take too much notice (other than to give them a shout-out, of course!)

I'm guilty of said activities as I like to sew, draw, 3D print, etc. other people's characters and sell them. I have a little Etsy shop, a YouTube channel, this blog, and a Facebook page with my stuff displayed throughout. My wise husband admonished me to put the liability on a business entity rather than my personal assets should I be targeted by say, Square Enix, Sanrio or Nintendo. It's also a much better way of tracking expenses and revenue so I can figure out how well I'm actually doing. Plus there's that little thing called "taxes". So here is a breakdown of all the steps and costs of the things it took to get me all legal to sell in the state of Utah.

Reserve business name with the state: $22

State business registration fee (recurring annually): $48

Open a business checking/savings account: $20
I think some of that went into the actual account, can't remember, but part or all of this is some one-time maintenance fee. I went with my local UCCU branch since they had the best overall plan for my tiny business.

Register with the city of Orem (recurring annually): $30
I had no idea I was supposed to do this until a couple weeks after I registered with the state. It is important because you have to charge taxes both at the city and state level for customers that live in Utah. So my combined tax rate is 6.85%.

Get a home inspection ONLY IF you are to have customers in your house (1 time fee): $60
Most of my stuff happens online, but I have had a couple people who I did some sewing for and they came in to watch Leon while I did their projects. So in the interest of being as safe as possible, I went ahead and paid this fee.

Oops, my fire extinguisher is not up to date this year! Get it inspected. They said it would cost $6.50. Surprise! It actually costs: $40 (Service/Hazmat?Travel Charge!! I should have just bought a small new extinguisher!!!)

Freaking out and installing some handrails on your stairs because the city's inspection list says you need them: about $50
The inspector didn't really seem to care about that specific part! He was really shocked that I would even have people past the front living room, but I explained to him that no, I have people actually come down to my sewing lair in the basement so they can help me plan out their project sometimes.

So my overall total at the end here is:

$270.

$78 will be charged annually to keep my business registered and legal.

Guess how much money I have in my business bank account 2 months after I started my business? $270. It took me two months to break even, and some of this counts as "investor capital". This means I sold some items I already had when the business started which would have counted as costs. So basically I'm in the hole right now when you really think about it. Your experience may vary, especially if you are not bringing customers into your home. That would have saved me about $150 right there, but I get that you don't want to be sued if someone falls down your stairs or you had a house fire and nothing to put it out with. So keep these things in mind and make sure to save up for these types of fees before you start up your business!