"This is your year!"
The new year's hype is infectious, but overall the excitement fades after a few weeks or months into the new year. Truth be told, those who prepare before the year is up make it past the New Year's hype. But for those that started after the new year, it's not too late. Take a look at the next tip:
Music + Business = Music Business
The other side of the music business is the actual business.
One side of the music business is music. Right now, you're creating music all the time, so you already got the music side down. The other side of the music business is the actual business. A person's regular occupation, profession, or trade. If you want music to be your profession, you have to get your business in order.
Shout out to By Stephen Pell of the Full Service Business Management, Accounting & Tax Advice for the global music industry company, Pell Artist.
Here are a few priorities for you to set up for your business if you haven't done so already.
Determine Your Business Structure (Getting an LLC or starting out with a sole proprietorship)
Get your EIN or Tax Id Number An Employer Identification Number (EIN), also known as a Federal Tax Identification Number, is a 9-digit number that the IRS assigns and is used to identify a business entity.
Setup a New Business Bank Account. This is so you don't have any commingling happening when the money comes in. Keep your personal account and your business account money separate.
Register with Your Performing Rights Society to collect your songwriter royalties (For the US, it's ASCAP, BMI & SOCAN as the majors) And to ensure you're collecting all of your royalties, make sure you're signed up for Songtrust.
Setup your Cloud Accounting System It is a requirement when in business to keep an up-to-date record of your financial activities from day one. A bank account will do a lot of the bookkeeping for you. But this is not adequate enough for ambitious artists who know the significance of understanding the numbers.) You could use Microsoft Excel to accurately record your business transactions. Or you can use an accounting or bookkeeping system like QuickBooks Online.
Setup your Receipt Management System A major problem for many artists is not retaining receipts. If you don't keep hold of them, you risk being unable to account for certain expenses, which means paying more taxes than you need to. Even small expenses can add up, so keep a close record of every penny you and your team spend. Again, if you're linked to an accounting system like Quickbooks, they make it pretty easy to just upload a picture of the receipt, so it's on record.
Get your Insurance Sorted Figure out the necessary insurances you may need to perform in your business. There are all different types, but a few you should look into as an artist is business insurance, equipment insurance, liability insurance if you're putting it on. Show and travel insurance for when you're on tour. There are many more, but we'll cover that in a different episode.
Get your Agreements and Contracts in Order Disputes happen. People disagree and change their minds about their decisions all the time. Sometimes, what someone says verbally is not being honored; it may leave you in a challenging situation where you lose time, resources, or money. Because someone else changed their mind and you didn't have an agreement, you're the one stuck holding the bag. Agreements and contracts keep everyone within the duties and responsibilities agreed upon for the term of you working together. If there is a dispute, the agreement can determine what needs to happen next. If it doesn't, or a party doesn't want to honor their commitment, then you'll have to bring the courts in and have the lawyers and a judge settle it out.
Start Setting Aside Money to Pay Your Tax Bill…Right Now!
Take the smart approach and put tax money aside in a separate bank account from day one. If you do this, you will never find yourself scrambling to find money to meet a tax payment to the IRS. An oversimplified method is to save 25-30% of all income you receive and put it in a separate account so you'll easily be able to pay your tax bill. While doing that, you should get with an accountant for guidance and better understand how much you can expect to pay approaching tax time.