When is a good time to do the tax side of business?

[Lucas]

This March is when I expect my buisness (my band) to start earning positive income (big positive income), and I wonder when a good time is to incorporate or file other buisness related forms so that I can write expenses off on taxes and such. I really don't know much about taxes in this sense, since I have always been able to do a 1040EZ. The reason I ask is because I spent some of my personal cash for it, like printing records and webhosting, and I wonder will that be able to be deducted since right now its still a personal endeavor.

Any advice in this sense is good.

[dgorila1]

First thing to do is find a good tax/business advisor. Just because you are not "formally" incorporated, you should still be able to deduct anything business related. The simplest business form is sole proprietorship, which requires alot less setup costs than incorporating. LLC would be the next level. A good business advisor can tell you which form of setup will be be best in your situation.
Where are you located? I may be able to refer the woman who does my taxes. She also sets up businesses - does all the legwork and setup for whatever business type would be best, does all the required local, state, and federal paperwork, gets the tax ID #, etc. I used her for this in a previous business I had. She is very good. Highly ethical and honest, and is an enrolled agent with the IRS. Basically this means she has passed stringent testing and certification by the IRS where all her paperwork, bookkeeping, etc is considered "audit proof" by them. I highly recommend her. Let me know if you are interested and where you are located. Thanks.

[Lucas]

I am located in Kent, Ohio. Like I said, any advice at all is appreciated. If I could write some of this off on taxes, it would be awesome. Especially stuff like the printing and such. I dunno exactly how it would work, as I am not really a sole proprietor, I have 3 other bandmates, but I do the majority of the work outside of making music (web, booking, marketing)

Originally Posted by dgorila1

First thing to do is find a good tax/business advisor. Just because you are not "formally" incorporated, you should still be able to deduct anything business related. The simplest business form is sole proprietorship, which requires alot less setup costs than incorporating. LLC would be the next level. A good business advisor can tell you which form of setup will be be best in your situation.
Where are you located? I may be able to refer the woman who does my taxes. She also sets up businesses - does all the legwork and setup for whatever business type would be best, does all the required local, state, and federal paperwork, gets the tax ID #, etc. I used her for this in a previous business I had. She is very good. Highly ethical and honest, and is an enrolled agent with the IRS. Basically this means she has passed stringent testing and certification by the IRS where all her paperwork, bookkeeping, etc is considered "audit proof" by them. I highly recommend her. Let me know if you are interested and where you are located. Thanks.

[dgorila1]

Definately get professional guidence! You want to protect yourself personally and financially, as well as get the biggest possible credit/deductions for all that you have/will put into the business. And you need to think of it as just that....a business. Ideally you want a contract or document of some sort that all the members would sign that specifies what each person contributes to the business, their interest (stake) in the business. This way when the band eventually breaks up or someone leaves, or you hit it big, you have legal documents stating exactly what each member is entitled to. If you are getting ready to go "big time" as you say, you want to get this done ASAP. Good legal, tax, and financial advice is critical in ensuring your business and financial success as well as protecting yourself. You well know that no band last forever, and you don't want to be like many of the once successful members of a band that are now broke because of bad legal and financial decisions. Good luck. By the way, what type of music does your band play and what the name? As you probably already know, putting your tracks on the web for free download is a good way to spread your music fast and hopefully get "discovered" and taken to the next level.

[ahimel]

Agreeing with dgorila1 -- incorporate NOW. Right now you are in a general partnership. That's the default business structure if there's more than one person and nothing else is specified. It's also the riskiest business structure known to mankind.

If one of the other band members does something stupid -- or does nothing at all -- and gets sued, the lawsuit can come after your bank account, your instruments, and your house. That's the joy of an unlimited (general) partnership.

I'd probably start with an LLC. It'll take about 30 minutes at the Secretary of State's office -- in Colorado you can do it over the web, from the comfort of your home. Set it up, and set up a seperate bank account for the company (band). Money from gigs goes there, and is then paid out to the band members according to your agreements.

Save some of that money up, and use it to pay a lawyer. Get them to write up articles of incorporation that cover all that stuff dgorila1 mentioned -- who gets paid, when, what happens if someone leaves, or you hit it big, how much money stays with the company, who pays for new guitar strings ... all that stuff.

Then if the drummer explodes, you won't lose all of your money on top of losing a friend and having to find a new band memebr.

[Lucas]

Originally Posted by ahimel

Agreeing with dgorila1 -- incorporate NOW. Right now you are in a general partnership. That's the default business structure if there's more than one person and nothing else is specified. It's also the riskiest business structure known to mankind.

If one of the other band members does something stupid -- or does nothing at all -- and gets sued, the lawsuit can come after your bank account, your instruments, and your house. That's the joy of an unlimited (general) partnership.

I'd probably start with an LLC. It'll take about 30 minutes at the Secretary of State's office -- in Colorado you can do it over the web, from the comfort of your home. Set it up, and set up a seperate bank account for the company (band). Money from gigs goes there, and is then paid out to the band members according to your agreements.

Save some of that money up, and use it to pay a lawyer. Get them to write up articles of incorporation that cover all that stuff dgorila1 mentioned -- who gets paid, when, what happens if someone leaves, or you hit it big, how much money stays with the company, who pays for new guitar strings ... all that stuff.

Then if the drummer explodes, you won't lose all of your money on top of losing a friend and having to find a new band memebr.

Ok, I will look into that now. If I incorporate now, can I fill in the details as it goes, as in, who is part of it, the articles and the like?

I am seriously starting from 0, and want to get this rolling as smoothly as possible, as well as quickly.

[ahimel]

The first and most basic step is incredibly basic -- you say, "This is the name of the corporation, this is where it's located, these are the people doing the incorporating." It's just a form you fill out at the secretary of state's office. I can't tell you all the details of the Ohio form, but if you get your secretary of state's website (try Google) you should be able to do it there, or find a number to call someone who'd be happy to help.

Then you request a tax ID number at https://sa1.www4.irs.gov/sa_vign/newFormSS4.do.

That gives you enough to get a bank account in the name of the band instead of any individual member's name. Then if you get a new person, someone quits, etc, you don't have to deal with moving money or changing names.

Every time the band gets paid, save some fraction -- I'd recommend anywhere from 10% to 50% -- in the bank account instead of splitting it out among band members. This not only can be used to pay for stuff that should rightly belong to the band (sound equipment, recording studio rental) but will help you save up for a lawyer.

You want articles of incorporation ASAP. The creation of an LLC will help quite a bit in protecting you, but they're still relatively easy to pierce. The articles are what make or break your ability to say, "Hey, dude, you have to sue the band, not me."

Just my advice. Be aware that I'm not a lawyer or an accountant.

Amanda