Remember when you do incorporate you have many fees (some annual) associated with that including the actual incorporation costs, possible lawyer costs, possible account costs, an attorney to handle your yearly corporation minutes and filings, etc. There are ways around some of that if you know what you are doing but I just want to point out there is more to it than ducking taxes and writing off your Creed CDs and your new Parker Fly.

I know some bands incorporate when they are earning some sort of large amount of reportable income in one year (i.e. money over the table from a publisher or record company, an advance for a record, game show winnings, etc) so the costs of incorporating are small compared to the money saved by setting up your professional tax dodge. If you are just earning payouts from the door from shows and selling CDs from your website, it may not make as much sense. Money paid to you by people that ask for your social security number is usually reportable 'over the table' income. If you are making a lot of your money under the radar, incorporation may actually create unwanted attention to your band from the IRS.

Good luck!

I've toyed with a variant on the theme intern_8033 suggests.

In our case, our band records and releases material through our own label. While it never occurred to me to incorporate the band, it always seemed like it might make sense to set up the label as a sole proprietorship (in the name of one of the band members). This would allow many of the costs of operating the band (recording, promoting, going on the road, etc.) to be incurred by the label.

In this scenario you'd be able to take advantage of tax deductions without all of the headaches of incorporation that Mayfair described. Of course you would need a fairly high level of trust, stability and cooperation within the band to make something like this work.

I've never really followed up on the idea since it seems to run counter to our dream of eventually finding someone else to release our work.

About ten years ago, I was in a band that incorporated. When I quit the band, they had to "buy me out." It so happened that the band was saving up for a new PA system and my share of the band savings was about $800. It's the only time I've ever gotten paid $800 to quit a band. I should do that more often.

Chris Garges
Charlotte, NC

Intern_8033 wrote:Has anyone tried doing this to save on taxes?
Seems like a good idea to me. I realize that you have to start making profit after five years, but even if that doesn't work out, you get a few good years of tax savings out of it.
What are the sorts of things you can deduct? How about these:

-equipment purchases
-practice space rent
-meals you eat with your band during practice, before and after shows
-transportation to practice and shows
-costs associated with making records

?

Andrew

There's no need to incorporate. The only reason you may need to incorporate is if there is potential liability associated with what your doing, its a way to protect your personal assets (house, car, tangeable perstangibleerty), in this case if you did incorporate your equipment would be an asset of the corporation and at risk in the event of a law suit. Getting incorporated costs about $500, and depending on the complexity of the records the preparation of the corporate tax return can be expensive, a simple corporate tax return can easily cost $1500 just to prepare. Thats in addition to your personal tax return. Partnerships or LLC's are a better way to go, but still require alot of record keeping. That's one of the biggest pains in this process, your paper work will increase exponentially as the business becomes more successful. Unless your making alot of money, filing as an individual should be OK.

As an individual you can currently deduct equipment purchases, rental space, and meals (to a degree). You can also deduct printing costs for fliers and CD's, any computer equipment used for your business, a portion of your rent and utilites for your home if you have a dedicated practice room. Basically anything associated with the business aspect of your music. But you have to be in the business of making money with this equipment, otherwise all this stuff is just personal expenses and is not deductable.

Transportation would only be for real travel, out of town for a gig or to pick up equipment. Going to practice or a gig is basically like driving to work, it dosen't count. Even if the mileage is deductable you only get 29 cents a mile.

meals again, probably only when traveling, or for legimitate business entertainment.

The risk with deducting all this stuff is it can flag you with the IRS if your deductions are outside their normal statistics. Thats when dedutions like your meals or anything else come into play, during an audit.

I've started and sold two businesses, both were Sub-S Corps, I also taught some intro business classes at a couple local schools. So I know a few things, but most accountants will give you free advise if you have them do your taxes.

Good Luck

my band has been incorporated for about ten years

i think the benefit, besides writing shit off, is that you are documenting your cash flow in the event that the i.r.s. decides to audit you

if you don't keep track of it somehow or another, you'll be in trouble if that happens

and being forced to file a return every year has forced us to keep track of our dough

as i recall, ezra is right about costs, but you can probably do half the bookkeeping work on your own, with quickbooks or something like that

then you're not handing the accountant a box full of receipts and saying 'do my taxes, please'

i think tax preparation costs us about $500 a year now...and we could do it ourselves. we just all hate it so much, it's worth it to have someone else finish it off.

while there are costs associated with incorporating there are also benifits. a corporation that you create acts as a buffer between you and the rest of the business world wether it is a liability issue or protecting the copywright of your work. so if the band goes bankrupt or someone is hurt during a show only the corp. can be sued not the individual. creative people are always getting screwed buy big business because we don't want to deal with the paper in order to protect ourselves from bad deals, check steve's anatomy of a record deal. the work for hire contracts that are part and parcel of the recording industry are the worst and the "media" giants are taking that thinking into every nook were a creative person works. they want to own all rights to all media in every medium for now and the future... i have seen contracts that even extend those rights to the undiscovered universe.