First Things First
“I am not a certified tax or financial advisor. Please consult with someone in your area that is certified to get state specific and other relevant guidelines.”
If you are going to take your music career serious, it is highly recommended you set up a legal business within the state you live. You’ll want to go to your states department of revenue website and follow the steps to get started. There are 4 business types you can setup: sole proprietorship, corporation, partnership, and limited liability company or LLC. I’m not going to get too in depth on the other three, but will go into detail for an LLC; this is how we chose to structure our business. LLC’s are about $150 to setup and it is cool cause you can add members. If you start by yourself and let’s say want to add a music manager, you can do that with a LLC. It gives you nice flexibility as you grow. Some of the other benefits are:
You Get To Run Your Own Show
Limit Your Personal Liability (If Someone Sues You They Can Only Go After Your Company’s Assets Not Your Personal Assets)
Avoid Double Taxation and Pass-Through Deduction
Less Administrative Hassles and Paperwork
Flexibility in Sharing Profits
Once you setup your LLC or other business type, you should also register for your DUNS number. A DUNS number is basically your business credit score. It gives potential clients and other business a snapshot of your company to see if they want to work with you; to see how business savvy you are; to check the health of your company. You can do some more research on DUNS on google and youtube videos if you choose.
Now that you have your LLC setup and DUNS number, if you choose to do that right away, you want to take your paperwork into a local bank. Now if you aren’t really making much money, it isn’t necessary to setup a business bank account right away; but if you can, I highly recommend it. You can start one in most cases with only a $100 deposit. It is great idea to get into the habit of paying any expenses from your business account and also depositing any income earned. Be sure to use this account for music business transactions only so you can keep a tight tab of everything. If you start making a decent amount, remember to keep track of write offs to offset any taxes you may have to pay at the end of the year. You can write a lot of things off: gas mileage, meals related to your gig or business meetings, equipment expenses, and many other things. Getting in the habit of keeping receipts and closely monitoring your finances will make you a more well-rounded artist, and businessperson in general. If you have someone else handling your finances, you will now have a better idea of what to look out for.
The info provided here should get you on the right track to running a successful music business the legitimate way. I know music and business tend to clash, but if you can be savvy with both you will be years ahead of your competition. If you want more useful information like this that can help elevate your music career, I encourage you to grab a copy of my new 19 page EBook below!
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