The Art of Accounting within the Art Gallery Niche

LM Cohen & Company has been providing expert Accounting, Tax & Business Advisory services to businesses, organizations, and individuals since 2010. One such service that sets them apart is their work within the art gallery niche. We sat down with partner, Michael Young, CPA and marketing associate, Ali Basrai to speak with them about this fascinating area of expertise.

CPAI: How exactly did your firm get started in art business?

MY: Almost three years ago, LM Cohen merged in Hecht &

Company which had the niche in the art gallery and artist space. Hecht got started in the industry by obtaining an art gallery client who in turn started to expand his business. As the art industry blossomed, this client led the way to the expansion, and as that was evolving, there were many word-of-mouth referrals from clients, banks, and other associates. LM Cohen has seen a tremendous growth in the Art industry because of its expertise and reputation. So that’s essentially the CliffsNotes version of how we started in the art space.

CPAI: So you represent artists as well?

MY: We do – most galleries have a roster of sponsored artists. It is through the galleries that we get introduced to the artists. Our expertise and knowledge of the industry gives us an edge on how to advise these great artists who need our assistance in financial and tax matters.

CPAI: What was your strategy when it came to staffing and client services?

MY: Our strategy is to utilize the same client service team on all of our gallery and artist engagements so that they are skilled in the industry and they could share their knowledge of best practices within the industry. Our clients really appreciate that.

CPAI: How do you market your niche?

MY: To my knowledge, LM Cohen, have never marketed this niche via traditional marketing. The growth has been purely organic. Marketing this niche is something our firm is looking forward to doing, considering the amount of growth that has happened, just imagine if we started a formal marketing campaign.

AB: Currently, a lot of the marketing we have been doing is digital. We send email promotions through social media to our clients. That is something that is our goal – to continue using methods such as digital marketing and then getting users to learn more about this industry and our services with art galleries via email promotions, social media, and ads.

AB: We’ve found many of our current clients have been through word of mouth from existing clients, networking events, bank and lending institutions, and connections that partners have in the art gallery industry.

MY: The art industry is very close knit as most galleries know each other and they all utilize the same accountants, lawyers and bankers. That’s one of the reasons why we were able to grow as much as we have without much direct marketing.

CPAI: Do you service clients exclusively in New York City, or from other locations, such as the West Coast or even internationally?

MY: While most galleries have a presence in New York, many galleries have locations on the west coast, as well as other states in the U.S. Our larger art gallery clients have international presence throughout Europe, including London and Paris as well as locations in Asia.

MY: When people think of an art gallery, they usually think of people who just buying and selling art -nothing complex. But in reality, you are dealing with matters of an international company or corporation – no different than those of Fortune 500 companies. There are many international accounting and tax issues, i.e. transfer pricing and Global Intangible Low-Taxed Income (GILTI), so it’s truly like dealing with a Fortune 500-type of company collapsed into a sole proprietorship.

I love practicing in the art industry because there’s always something new and different to deal with. We frequently encounter unique accounting and tax issues, such as when a gallery expands into a new country, you have to be aware of that country’s regulations including the tax treaty and how you should structure the new subsidiary operating in the country. One of the main considerations for us joining CPAmerica was the accessibility to international firms through Crowe that can assist us with some of these issues that I just described.

CPAI: How were your clients in the art galleries effected by the COVID-19 pandemic? 

AB: This past year due to the pandemic, there were changes in the art gallery niche. The initial lockdowns did challenge many of our clients in the art gallery business as opposed to a normal tax year.

MY: Something that became prevalent among the galleries were virtual viewing rooms. Prior to the pandemic, not every gallery had an online viewing presence. COVID really forced everybody to spend time and money to create and enhance their virtual gallery.

To learn more about LM Cohen & Company and the art gallery niche, please visit https://lmcas.com/industries/#art-galleries

View the full article in CPAmerica’s September Advantage Newsletter