What are the benefits of starting your own music business? To Save Money! Yep, that’s right. Even if you don’t MAKE money, you can SAVE money by starting a music business. You don’t have to open a brick and mortar store front to get the benefits of a business. Anyone who is involved with music in any way can have the benefits of a music business. Musicians, bands, singers, song writers – whatever your interest, you should start a business.
♦ Taxes – you’ll most likely pay less
♦ Credibility – people may see you as more legitimate
♦ Legal – you may have a certain amount of personal protection from lawsuits
Check out some of the things I deduct from my taxes. Then think of the things YOU could deduct with your own music business. But first, a disclaimer. I’m not an accountant. You should check with one.
My main business is making and selling performance music for singers (really good karaoke music). I license my recordings to movies and TV shows. I rent out my recording studio. Based on that, here is what I deduct from my income, before paying taxes.
I deduct the cost of every
♦ TV service
♦ Radio or internet music service
♦ Music entertainment of any kind
How can I do this? My customers want to sing to the most popular songs. I have to figure out what is popular and what will sell over the long term. I have to be out there researching it – at concerts, on the radio and TV.
I’ve licensed my music to TV shows like American Idol, X Factor, America’s Got Talent, Family Guy, Oprah and Movies like Despicable Me 2 and This Is 40. I have to know what they’re using by watching TV and movies.
Some of my best sellers are from Broadway musicals. So, of course, I go to Broadway shows and write it off my taxes.
A fun vehicle like an RV can be a huge expense or a nice tax write off. I wrapped my RV with advertising and drove it to trade shows and events. Even when I drove it on family trips, it was a traveling billboard.
Just about any expense involved with making
my recordings is deductible.
♦ Songs I download
(for research or for reference)
♦ Sheet music
♦ Musicians I pay
♦ Smaller pieces of equipment or software
Assets are higher cost items like recording equipment and musical instruments. They are deductible, but usually over time, rather than right away. That’s called “depreciation”.
♦ Recording studio equipment
♦ Musical instruments
♦ Expensive software
And Lots More
There are too many possible deductions to list, but here are a few more
♦ Business lunches and dinners
♦ Travel expenses
♦ Marketing expenses – like website and internet costs
♦ Bank charges
When you have a real business, with a name and logo, and you have a title – like “president”, people will look at you differently. You will appear more legitimate. Have you ever been talking to someone and they ask you for your business card? Don’t you wish you had one? Even if it’s an electronic business card, passed through the air between cell phones, you’ll get more respect if you have something to give them.
Another disclaimer. I’m not an attorney. But after 30 years in business, I have lots of legal experience. Some people may tell you, if you are incorporated, your personal assets are protected if your business is sued. Well, unless you are a big corporation, with executives and a board of directors, you probably aren’t totally safe. Most likely, your business includes you and no one else. Because of this, attorneys these days generally name the owner of a small business, personally, along with the business. So don’t assume you can do anything you want and get away with it, hiding behind the “corporate shield”. Attorneys will break right through it.
In my experience, here’s one of the legal benefits of starting your own music business, no matter how small. I have business liability insurance, with something called “errors and omissions” coverage. If I unintentionally make a mistake and I get sued for it, my insurance may cover the cost or defend me. Several years ago, a music publisher sued me. I was faithful at getting licenses for the music I sold and I always paid my royalties. But I happened to give some of my music to a company who made a kids karaoke player. They were including my music in their product as samples. I didn’t make anything on it. For me it was just advertising. When this company had their product made in China, they were supposed to get licenses for the music samples from the music publishers. Unfortunately they failed to do this. One of the music publishers sued them and I got pulled into the lawsuit as well. Long story short, my insurance company went to bat for me. It took about a year to work through it and the insurance company spent about half a million dollars on my behalf, but it finally got settled and I stayed in business. If I had been working without the benefit of a business and business liability insurance, I wouldn’t have lasted long in that legal battle.
In my next article, I’ll tell you the details about how to set up your business.