Simplified accounting for a young gallery: the essential basics

01Choosing the right tax regime from the start

The choice of tax regime is the first accounting decision you will make, and it conditions everything that follows. In France, a contemporary art gallery generally conducts a commercial activity, which directs it toward the simplified real regime or the normal real regime, depending on projected turnover. The micro-enterprise regime, attractive for its simplicity, is rarely suited to a gallery that manages consignment works and needs to deduct actual expenses: rent, insurance, fair fees, transport, framing and communications.

The simplified real regime applies to businesses whose annual turnover does not exceed 840,000 euros for merchandise sales activities. It allows you to maintain streamlined accounts with a simplified balance sheet and income statement. This is the most common regime for galleries in their launch phase. Galerie Emmanuel Perrotin began in a Marais apartment in Paris before becoming one of the art market's global empires, and it naturally passed through the various stages of fiscal growth that you are about to experience.

The normal real regime, mandatory beyond the turnover threshold, requires complete accounting with heavier reporting obligations. You probably will not need to worry about this during your first years of activity, but it is useful to know that the transition exists and can be prepared for.

A crucial point: VAT on margin. Art galleries benefit from a specific tax regime that allows VAT to be calculated only on the margin realised upon sale, not on the total price. If you purchase a work for 3,000 euros from an artist and sell it for 6,000 euros, VAT applies only to the 3,000 euro margin. This regime, provided by Article 297 A of the French General Tax Code, is extremely advantageous and constitutes one of the economic pillars of gallery activity. Your accountant must master this mechanism, or you risk paying VAT on the full sale price, which would severely impact your profitability.

02Understanding the distinction between outright purchase and consignment

The most important accounting specificity of an art gallery lies in the distinction between works purchased outright and those held on consignment. This distinction, which may seem obvious to you on an artistic level, has major accounting consequences that many young gallery owners overlook.

When you purchase a work outright from an artist, you become its owner. The work enters your inventory, appears on your balance sheet assets, and you record it as a merchandise purchase. Upon resale, you record a sale and generate a margin. This is straightforward, classical, and functions like any commercial activity.

Consignment, far more frequent in the gallery world, is a different mechanism. The artist or another dealer entrusts a work to you for sale on their behalf, in exchange for a commission. You do not own the work: it must therefore not appear in your accounting inventory. Upon sale, you record only your commission as turnover, not the total price of the work. Galerie Kamel Mennour, like most programme galleries, operates primarily on a consignment model with its artists, with the standard commission typically sitting around fifty per cent of the sale price.

The temptation when starting out is to mix everything together: recording consignment sales as outright sales, artificially inflating turnover, and ending up with disproportionate tax obligations. A written consignment contract with each artist, specifying the conditions of deposit, the commission percentage and the conditions for returning works, is indispensable for sound accounting.

03Organising invoicing and supporting documents

Rigour in invoicing is what distinguishes a gallery that functions from one that navigates blindly. Each sale must produce a proper invoice, numbered chronologically and without interruption, containing all mandatory legal mentions: identity of seller and buyer, description of the work (artist, title, dimensions, year, medium, technique), price excluding tax, VAT rate and amount, price including tax. The mention of the VAT on margin regime must appear explicitly when this regime is applied.

For sales to private collectors, the invoice is often the only document attesting to the transaction. For sales to professionals (other galleries, decorators, businesses), the invoice must comply with the buyer's accounting requirements, which demands particular attention to mandatory mentions.

Expense supporting documents must be kept with equal rigour. Each supplier invoice, each expense note, each bank statement must be filed, dated and archived. The legal retention period is ten years for accounting documents in France. Galerie Nathalie Obadia, recognised for the rigour of its management, has built part of its longevity on impeccably maintained administration, which has allowed it to weather economic crises with a solidity that many less organised galleries have not possessed.

A practical tip: open a bank account dedicated exclusively to your gallery activity, separate from your personal account. This separation, mandatory for companies and strongly recommended for sole proprietorships, enormously simplifies bank reconciliation and saves you spending hours sorting personal and professional expenses at year end.

04Choosing and using suitable accounting software

The question of accounting software arises within the first months of activity. Solutions range from Excel spreadsheets, which are free but dangerous because they offer no protection against data entry errors, to online accounting software such as Pennylane, Indy or Tiime, through to installed software like Sage or Cegid. For a young gallery, a lightweight and affordable online solution is generally the best choice: it allows you to enter your sales and purchase invoices, track your cash flow in real time, generate VAT returns and easily transmit your data to your accountant.

The ideal is to choose software that interfaces with your professional bank account to automate entry reconciliation. You receive a 4,500 euro transfer from a collector: the software automatically matches it with the corresponding invoice and marks the sale as collected. You pay 800 euros for transporting a work: the software identifies the debit and categorises it as transport costs. This automation saves you considerable time and reduces the risk of errors.

However, software does not replace an accountant. For a gallery, the fiscal specificities (VAT on margin, regime for original artworks, droit de suite, exemption of certain intra-Community transactions) are sufficiently complex to justify professional intervention. The cost of an accountant for a small gallery typically ranges from 1,500 to 4,000 euros per year, an investment that more than pays for itself through the tax savings it generates and the errors it prevents.

05Tracking essential indicators each month

Accounting is not merely a legal compliance exercise: it is a dashboard that tells you whether your gallery is heading in the right direction. Three indicators deserve monthly monitoring, even if your activity is still modest.

The first is gross margin on sales. For each work sold, what is the difference between the sale price and the acquisition cost (or the commission paid to the artist in the case of consignment)? This margin, expressed as a percentage, tells you whether your pricing policy is sustainable. A gallery that sells a lot but with margins that are too thin exhausts itself without building anything lasting.

The second indicator is the ratio of fixed costs to turnover. Your fixed costs, including rent, insurance, salaries and subscriptions, represent the expenses you must honour whether you sell or not. If this ratio exceeds seventy per cent of your turnover, your business model is fragile and you must act: either increase sales or reduce fixed costs. Galerie Semiose operated for a long time in a modest Marais space before moving to a larger one once its turnover permitted, illustrating a prudent approach to growing fixed costs.

The third indicator is available cash. How much money do you have in your professional bank account at the end of each month? This information, elementary as it may appear, is vital for anticipating lean periods and planning major expenses (fairs, artwork transport, space renovation). A simple spreadsheet, updated weekly, is sufficient to track this indicator.

06Anticipating tax and social charge deadlines

The first years of activity are often disrupted by tax deadlines that the young gallery owner had not anticipated. VAT, the business property contribution (CFE), the value-added contribution (CVAE) for galleries exceeding a certain threshold, and social charges if you operate as a company: these deadlines fall on precise dates and tolerate no delay without penalties.

VAT is generally declared quarterly for galleries under the simplified real regime, with two semi-annual instalments and an annual adjustment. CFE payment falls in December. Social charges, if you are the manager of an SARL or president of an SAS, are calculated on your remuneration and can represent an unpleasant surprise for a gallery owner who has paid themselves a modest salary but discovers that charges represent approximately forty-five per cent of gross remuneration.

The solution is to systematically set aside a portion of each sale for tax and social charges. A rule of thumb often used by experienced gallery owners is to put aside approximately thirty per cent of each gross margin in a dedicated savings account, which will serve to honour tax deadlines as they arise. This discipline, difficult to maintain when cash flow is tight, will spare you the unpleasant surprises that have closed more than one young gallery.

07When and how to delegate accounting

The question of delegation inevitably arises. Should you do everything yourself or entrust your accounting to a professional from the outset? The answer depends on your comfort with numbers and the volume of your activity, but one thing is certain: even if you delegate, you must understand the basics of your accounting. A gallery owner who signs tax returns without understanding what they contain takes a personal legal risk.

The most common model for a young gallery involves entering invoices and expenses yourself in accounting software, and entrusting the review of accounts, tax returns and the annual balance sheet to an accountant. This division of tasks allows you to keep control of your daily management while benefiting from professional expertise on technical matters.

When choosing an accountant, favour a firm that knows the cultural sector or, better still, one that has galleries among its clients. The tax specificities of the art market are numerous enough that a generalist accountant may make costly errors. Ask for references, question other gallery owners about their accountant, and do not hesitate to change if the first one does not suit you.

Artedusa partner galleries benefit from an online sales space that generates traceable and documented transactions, simplifying the accounting tracking of sales made through the platform and facilitating bank reconciliation at month end.