Strictly speaking, anyone can create a few paintings, hang them on a wall, and call it an art gallery. But of course, not all art galleries are created equal, and there is a world of difference between personal art displays and more serious, public venues.
Demonstrating that your art gallery belongs in that latter category is imperative if you want to draw attendees or procure any kind of funding. The question is how. There are a number of strategies for art galleries to bolster their credibility, but none more important than choosing the correct legal structure.
Specifically, art galleries can benefit from being registered as Limited Liability Companies, or LLCs. This is a relatively straightforward and inexpensive legal process that can pay huge dividends in terms of conveying professionalism and earning trust.
What is an LLC?
LLCs are nothing new. They’ve been around since the 1970s when they originated to help real estate investors mitigate their legal liability. Today, LLCs are widely used across virtually every industry and niche. They certainly provide a viable way for art galleries to establish their professional bona fides.
What does an LLC entail from a business standpoint? The main thing to know is that LLCs are considered to be their own stand-alone legal entities. In other words, the business and the business owner are distinct in the eyes of the law. This is different than it is with, say, a Sole Proprietorship, which does not acknowledge any distinction between business and owner.
By establishing your art gallery as a distinct legal entity, you can take advantage of a wide range of benefits, including enhanced professional credibility. Let’s take a closer look at some of the benefits of registering your art gallery as an LLC.
The Advantages of Registering Your Art Gallery as an LLC
- You demonstrate that your gallery is legitimate. Again, there is a sense in which anyone can call their art display a “gallery,” but registering as an LLC proves that you’re actually running a serious business, not a hobby or side hustle. This can go a long way toward winning over investors or other benefactors.
- You make tax time a breeze. When your business is set up as an LLC, you don’t have to file a separate tax return. Just declare profits and losses on your personal tax return and pay at your normal tax rate. For most gallery owners, this is a favorable arrangement.
- You enjoy personal wealth protection. Occasionally, the art world can be litigious. When you register your gallery as its own LLC, it affords you some personal wealth protections, allowing you to keep your personal nest egg off the table to potential lawsuits.
- You enjoy flexibility and ease. Compared with most other business structures, LLCs are very easy to manage, and also simple and straightforward to set up. You can avoid most of the regulatory burdens that come with incorporation, allowing yourself more time to cultivate and steward your collection.
These are just a few of the reasons why it makes sense to choose the LLC format for your art gallery.
Tips for Registering Your Gallery as an LLC
The actual process for LLC formation can vary a little bit from state to state, and it’s always wise to check local guidelines. With that said, registering a gallery as an LLC is usually not too complicated. Here are a few tips to get started.
Have a Registered Agent
Every LLC is required by law to have a Registered Agent, who is in charge of receiving any letters or other documents from the government. (Think tax docs, subpoenas, etc.) Some states may allow you to serve as your own Agent, but it’s much more common to hire a third-party service. For an example of this, check out legal Zoom reviews for LLC services.
Get Your Paperwork Ready
As you can probably imagine, creating a new legal entity means filling out some paperwork. There are a couple of specific documents you’ll need before you can get your LLC up and running. These include:
- Articles of Organization. This is the document you’ll file with your state, officially formulating your LLC.
- Operating Agreement. This is more of an internal document, used to outline how you’ll split duties with any partners you bring on board. This document can save you from potential disputes down the road.
Prepare for a Small Filing Fee
Be aware that, when you file Articles of Organization with the state, you’ll need to pay a small filing fee. The amount varies from state to state, and can be anywhere from $20 to $300.
Claim an Employer Identification Number
Your EIN is a special number that’s given out by the IRS. If you’re a US resident, you can get an EIN for free. You don’t necessarily need your EIN right away, but you do have to have one before you can file taxes or administer payroll to your gallery’s employees.
Keep Your Bank Accounts Separate
One of the main legal advantages of registering an LLC is that it gives you a chance to keep your personal assets and liabilities distinct from your business ones, and vice versa. This is key to the legal protections that the LLC format offers. To take advantage of these protections, ensure you set up a business bank account, distinct from your personal ones.
Establish Your Gallery as a Credible Business
Establishing your gallery as a credible business is an important way to get the funding, attendance, and prestige that it’s due. An important strategy is to register the gallery as an LLC, and to take advantage of the professional stature that this business format conveys.
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Author’s Bio
Amanda E. Clark is a contributing writer to LLC University. She has appeared as a subject matter expert on panels about content and social media marketing.
