Dear Anklebiters,
After working with other people's sound systems for a number of years, I decided last spring to invest in some equipment of my own. It's all decent gear, and with it and my existing contacts, I have been able to slowly build up enough clients to keep busy almost every weekend. But now it's tax time, and I'm wondering what I need to do on the business end of things to stay kosher and keep in good favor with our friends at the IRS. Jillian Porter
West Memphis, AR
Brian Cassell: Well, I need to start off by saying that we can't give any specific legal or tax advice, as we are not accountants or lawyers. That said, congratulations on your step into entrepreneurship. It sounds like you are off to a good start.
My brother and I are partners in our business, and for a number of years, we essentially ran it as a hobby. We would typically charge just enough to cover our costs of transportation and any rentals we needed to do each show. This meant that any investment in equipment was done from our personal finances. A few years ago, we finally made the step to incorporate and also opened a bank account for the business. Along with this comes some extra responsibilities, but it also brings certain advantages. Having a separate legal entity is really one of the best things you can do for your business.
To create an actual legal business, I would suggest securing the services of both a reputable certified public accountant, as well as an attorney who specializes in business law. An accountant doesn't have to do all your day-to-day bookkeeping, but is very helpful when tax time rolls around, and can give you guidance on which records to keep and how. Mine recommended that I purchase some business accounting software. I bought what he recommended and he can now open my records easily on his computer. This saves him time, and therefore saves me money.
Your attorney can help you create your business and then give you guidance on writing contracts and rental agreements, not to mention things like business liability. If you aren't familiar with all the different types of business entities, you may want to consult with both your CPA and attorney to help you decide what direction you want to take your business.
So, Paul, what can you add to this?
Paul H. Overson: We all love the IRS, so we want to have clean books and our businesses treated ethically. There are advantages to Sole Proprietorships, also to LLCs. I have known a few businesses that just kept records in a shoebox and a list on a clipboard. The point is, keep good records, have fun in your business and, above all, remain ethical and honest. Remember why you got into this business and do things for the right reason. We are first and foremost purveyors of great sound and first-class operations (right?). Brian, what do you think?
Brian Cassell: Paul, you mentioned a couple of forms of business entities. We should mention that there are a few others, including corporations, general partnerships and limited partnerships. These options may vary depending on what state you are in, and there are even some advantages to creating your company in certain states. As I said before, get some advice from a professional to help you chose what will be best suited to your situation. And yes, you want to keep the paperwork part of your business as simple as possible. When you aren't out doing a show, the less time you spend in the office, the more you can spend with family and friends.
Paul H. Overson: Well said, Brian– let's get our act together and go do shows. Preplanning in every aspect of our business makes us more professional so that our end product (great sound!) is what it should be.
