I’m retired, and in the past few years I’ve taken up painting. This hobby has begun bringing in more money than I expected. I was wondering at what point I should start thinking about separating my art money from my personal finances, and look at officially starting a little business.
I’d do it now. A hobby that makes money is called a business.
Hearing this is scary to some people, but starting a small business doesn’t have to be complicated. You can go to your bank, and using your Social Security number, open a sole proprietor checking account. Title the account with your full name, then DBA — doing business as — and the name of your business.
All your art income goes into that account, and any expenses paid where your painting is concerned comes out of that account. After the income goes in, and the expenses come out, what’s left is profit. That’s what you’ll end up paying taxes on. Also, you’ll be required to do quarterly estimates and send them to the IRS if you make more than $640 in a quarter. Always remember to always hold back 25 percent for taxes, too, in a separate savings account just for this purpose.
This is really cool, Pat. I think you’re on the verge of being very successful!