You probably know what I’m doing. If not, then this link will take you to the rest of these lessons and explain what it is I’m trying to do with this series.
The short version is that I’m sharing all the lessons I wish people had shared with me – specifically for performing musicians. You can find all sorts of resources to learn to play, many of them free, but nobody really tells you what it takes to be a professional musician.
My goal is to change that. This next rule isn’t one that most of you will ever need to follow. However, if you do need to follow it then it means you’re doing well. Even if you’re not doing that well – then it may be a good idea to follow this rule anyhow. More importantly, it absolutely is a good idea to read this rule and there’s almost certainly something you can take away from this.
Rule #12: Hire an accountant!
By now, you should have realized that a band is, in fact, a business. Not only is it a business, it’s one that has certain rules. The tax department is very interested in your business. It’s just how things work.
So, you should register yourself as a business. This means you’ll get things like a Tax ID Number, you can write off business expenses, and you can gain certain legal protections.
Ask your lawyer. You have a lawyer, right? Good…
I recommend you have them look at the various options for incorporation and then you file articles of incorporation with your State’s appropriate board. This is usually $100 to $800 and you can pick from a variety of corporations. Some of them are limited liability, which absolves you (the individual) from a number of legal responsibilities. Namely, if the company (your band) goes bankrupt then debtors can’t take your house.
Your lawyer will advise you and help you with this paperwork. I’ve mentioned this previously and it’s a very important step for you to consider. Also, you probably will have some naming rules. You probably can’t call your corporation The Best Fucking Rock Band to Ever Fucking Rock Band. They have rules against that sort of stuff!
Why am I telling you this shit?
Well, you can then do stuff more easily and your accountant will thank you. You can start doing things like writing stuff off. You can lawfully assert that your guitar purchases are business expenses. You can write off strings, picks, mics, cords, travel expenses, some vehicle expenses – unless it’s used only for business use and then you can write all that shit off.
Don’t go stupid. No, you can’t write off a party as being a business meeting – though you can probably get away with writing some of it off as advertising, assuming you have (real) potential clients there. However, you’re definitely going to want a lawyer and an accountant for that. If you’re being reasonable, you don’t need an accountant.
I think the worst case I’ve seen was a moderately successful musician who came up through the ranks and made good. He pretty much didn’t pay any taxes for like a decade – including from his time in the trenches with us.
Then, he got a letter…
He was nailed with something like $120,000 tax bill – after fees and penalties. He was threatened with imprisonment.
So, you have to pay your taxes.
The good news is they make accountants. Not only that, the accountant assumes some legal penalty when they sign off on your taxes. They are asserting that they’re experts and that, if the information you gave them is true, they assume some responsibility for the results. That’s what a Certified Public Accountant does.
It’s easier to insure. It’s easier for large venues to do their bookkeeping. It’s easier all around if you’re a lawfully registered business. Some venues will insist on such. They want to deal with the legal entity – not you the individual person.
An accountant is a part of this step. You can do a lot of the bookkeeping yourself. It’s really not hard – so long as you keep up with it and take the time to understand the forms you’re filling out.
So, file to become a business and then keep your receipts and take full advantage of the protections offered by having formed a corporation. No, it doesn’t grant you special tax rights or anything – that’s a myth. It doesn’t do much more than create a second entity that is lawfully recognized as such. It separates you from the business and forms the business as a legal entity with some rights and protections.
Those are going to vary per jurisdiction and type of incorporation chosen. Again, this is why you hired a lawyer. They are experts at this sort of thing – make use of them. Then get an accountant.
Do I have an accountant? Yes, yes I do. I’m pretty sure she hates me and she sometimes yells at me because I don’t do a very good job at keeping track of things. I also don’t do a very good job of showing up on time with the appropriate paperwork. Many accountants will actually help you help them – and will streamline the process to get them information on a regular/timely basis.
Even if you hate taxes as a moral principle, nobody cares. Uncle Sam gives zero shits about your beliefs. He wants his cut. You’re absolutely going to be held accountable if they decide to dig. All the venues you play at are keeping records. They want to be able to write off the expenses of hiring you. This is modernity with fancy computers. You’re unlikely to get away with tax evasion for very long. It’s cheaper and easier to just pay them.
Ask your liar about some of the penalties. Ask them about the benefits of the various corporation types and the process for filing the articles for such. Ask them about the protections offered by using a CPA. Equally important, make sure your liar and your accountant know each other AND have permission to speak to each other on your behalf. Them being able to exchange information can be a big help. (You may be asked to sign some papers to enable them to do so.)
No, really, you probably don’t need an accountant. But, it’s a step you may want to take as you grow. It’s absolutely something to put on your list of things to do. The topics discussed in this are just as valid if you do the work yourself. Most importantly, consult a lawyer.
It tickles me pink to see you folks enjoying these. I enjoy writing them. I’m also loving the scheduling feature, as it enables me to do them in my spare time and not try to write them in some sort of schedule. This has also enabled me to be more prolific.
As always, I appreciate any feedback and absolutely welcome ideas and any aid you feel you can offer. I’m honored that you even read these. Until next time…
Shut up and play us a song!