This guest post is written by Jo-Ná A. Williams, Esq., a former vocalist and songwriter and a solo practitioner with her own firm in New York, J.A. Williams Law – The Artist Empowerment Firm.
We’ve all heard the horror stories regarding famous musicians in recent news: vocal cord damage, tax evasion, millions of dollars in revenue stolen by greedy CPAs. I’m sure you’re wondering: how could these successful artists wind up in such trouble? How could wildly influential musicians end up penniless, facing jail time, or losing thousands of dollars in revenue as a result of cancelled concerts and refunded ticket sales?
Truth be told, these scary and slippery situations are often the rule, not the exception. As an indie musician, if you don’t take proper care of the business side of your career, you could wind up in some serious hot water or even worse, sleeping on a cot behind bars!
So what can you do to ensure you don’t face the same fate? How can you create a solid business foundation and financial security in the unlikely event of an emergency? Here are 5 simple steps to protect your career and cover your derrière:
1. Register your business entity
While you may operate as a solo proprietor (contractor) now, this entity does not protect of your personal assets from legal liability. Also, since your business and personal taxes are merged you won’t reap the full benefits of writing off all your business expenses. No write-off = no refund! Although you can continue as a solo prop and write off some expenses, establishing a business entity (ex. like an LLC) would give you better tax benefits. Remedy this by visiting the Small Business Association’s website at www.sba.gov and taking a look at the various entities to determine which may suit your business. Then, have a consultation with a small business lawyer to determine which entity best suits your career goals. Remember: some protection is better than none.
2. Keep your business and personal finances separate
Never the two shall commingle! After you register your business entity, get a bank account and a credit card in the name of your new business and do your best to keep all expenses related to your career on that business card. Attention artists! This means your guitar, your rental car to the gig, meals on the road, studio time, etc. Keep these expenses away from your personal checking account and credit cards to avoid a tax liability nightmare in April.
3. Always have your performance agreement handy
When you perform at a venue most have standard contracts. However, this is not the case in every situation. Invest the money to have an attorney draft a proper agreement you can always have in your arsenal when the venue is empty-handed! If you can’t afford to have a lawyer read every contract you’re presented, take their contract and do a side-by-side comparison with your own. Note what looks different and see if you can negotiate important terms (like your revenue or your liability). Having your own agreement ensures that you are always protected every time you step on stage.
4. Put the right price on what you do
This is a delicate balance. If you know your business and professional image need work, then you are not in the position to charge premium prices… yet. However, don’t get discouraged because you SHOULD charge enough to pay yourself first for your gigs, studio sessions, etc. Get into the habit even if it’s only $25. Keep those payments and invest them in tip #5 (see below).
5. Create a “DISASTER Strikes” savings account
What happens if you injure your hand and you can’t play the drums for a few weeks? What happens if you have to cancel paying gigs or even worse, the entire leg of a tour because you have vocal damage? How will you cover your losses? Create a separate savings account solely designated for tragic “what if” situations. Contact online banks like ING Bank that offers savings accounts with high-interest rates, low hassle and the convenience of dividing your account into separate sub-sections. While you’re at it, keep an account for your tax payments and prevent Uncle Sam from beating down your door.
If your state allows, sign-up for a short-term individual disability insurance policy so you have income coverage in the event that you get injured and you’re unable to make a living from your art.
Your art is a business in addition to your passion and life’s blood. You have to nurture every part of your career to truly be successful. While building a solid business foundation takes time, it will be worth it when your expenses are paid, you’re doing what you love and you have the financial freedom to take your career beyond your wildest dreams. Ok what are you waiting for entrepreneur? Let’s do this!
Jo-Ná A. Williams, Esq. can be reached at email@example.com and on Twitter. For a FREE copy of her guide “Blueprint: The Insider’s Guide to Empowering Your Career as an Artist and Ditching your 9-5 for Good” Sign up here: http://eepurl.com/iOqe1.
(Legal stuff: this article is for information purposes only. It does NOT replace the advice administered by a licensed attorney in YOUR state based on your specific situation. I know you wouldn’t assume I was your lawyer cause your mama “didn’t raise no fool.” But mine didn’t either, hence the disclaimer!)