Benefits of starting your own label?

E

entitee

New member
I'm wrapping up the final portions of my album. It started as a fun project to use as a calling card for my production for hire. Now I think that it can be much more as a product that people outside of music production can enjoy. I think it can be a good launching vehicle to get not only my name out there but the names of those featured on the album. I also feature locally established artists that have already built some kind of a fanbase and have exposure through doing shows. Basically, I think I have a quality product that will sell. However, I'm on a very tight budget but I do have good credit. I've looked into all the steps necessary to get a dba license and a seller's permit. What I don't know and have been getting mixed info on is what I can do once I get my label officially started. I plan to release this album on it initially and then possibly sign a few artists featured on my album and release theirs.

What I need to know is about things like tax write-offs, tax breaks, sales tax, etc. I want to know what qualifies for write-offs. I want to know how to go about keeping track of sales if they are 'out of the trunk' type. How often do I have to report sales for tax purposes? How do I report sales? Basically the business financial side. I want to get everything done legit if I'm going to be running a business. If I get my label started, can I get tax breaks on everything I purchased this year prior to starting the label that was used for the production of my album including my mic and other equipment.

I'm about ready to get the mastering done and send the album off to be pressed up. Should I wait until I get the label business done?
 
You can start selling today.

You can start today if you want to. There is a schedule C that comes with your 1040 Individual tax form. This is it:

http://www.irs.gov/pub/irs-pdf/f1040sc.pdf


Study it and learn how to report your sales and expenses. Remember, keep good records and all your receipts. This form flows thru your 1040. It's always good to have more expenses. Once you have a name for your company and tax payer ID# and everything and you're making big hand over fist money you can make everything official and file a seperate corporate return. Hope this helps.




Nicnack
 
ok ok... thanks
So basically, I can sell my albums without having declared myself as a business and file taxes for losses/gain?
That's good to know.

Now for the other questions...
 
if you are going to sale your record out the truck of your car, you don't have to worry about tax write offs. your forming a cash base hobby business. only thing you would have to get is a DBA for the name of your business so that no one can start using your company name for the next ten years. you DBA is good for opening your bank account in your company name. that way you can write checks to people. looks more professional. don't get an tax number until you have enough money in your bank account. let's say $10,000.00 dollars, this is when the bank will countact the I.R.S. to let them know you have a large amount of money in your account. save all receipt from food, travel, gas, write down your mileage on your car to and from events dealing with your company. going to the store and mall doesn't count. get a reciept book with the carbon copy page. so you can keep track of all cash payments that you pay out to promoters, artist, promotions companies, web masters and ect. and the form you need when you sart reporting your money is an 1099 form for self employed workers. but at this stage your still in the it's a hobby faze. and if your money starts to roll in faster than you expected get an accountant or a bookkeeper quick and bring them all the reciepts you save.
 
ok, i see. self employment is how it's considered.
what about sales through local stores on consignment? i'm assuming that i would just need to keep a receipt for those sales with them.

what about sales tax? I live in California where there is about 8% sales tax on items like CDs. I've heard that I can purchase items exempt from sales tax as long as I sell them again later with sales tax and report those sales. Is this something I should even be worrying about? Should I just pay tax on items right now to avoid getting into trouble when I report whatever amount of sales I do personally?
 
i would incorporate your business, forming something like an LLC in Cali will only cost you ~ $100 including filing fees, it's ~$300 here in Texas

basically you can get the all the info about taxes and business licenses etc. online

Here are some good links that you can get specific info from:

IRS info here:
http://www.irs.gov/businesses/small/article/0,,id=99336,00.html

More Info from the Small Business Administration:
http://www.sba.gov/starting_business/startup/guide.html

Info needed for your record label in California:
http://www.ss.ca.gov/business/filings.htm <--- biz types
http://www.taxes.ca.gov/Small_Business/index.html <--- tax info
http://www.ss.ca.gov/business/bpd_forms.htm <---biz forms
http://www.csac.counties.org/counties_close_up/county_web/index.html <--- find your local county for dba & permit info

Info you'll need on copyrighting you music:
http://www.loc.gov/copyright/

Info needed for Publishing:
http://www.ascap.com/about/howjoin.html https://www.bmi.com/affiliation/Index2.asp?

this should get you started...lots of good reading :D
 
one more link

click here:

enter "Motion Picture and Sound Recording" in the business type field

continue, then find your county and city where the business will be and it will tell you all the permits you need

:sing:
 
ok, now i have everything i need to know on how to officially start a business. Let me know if I understand this correctly:

I do not have to worry about doing any of the official business stuff yet. All I need to do is announce that I am a business and open a bank account for the business. This is just a not for profit activity until I've been doing it for 3 years with profit.

I will need to report losses/gain for deductions on Schedule A of the 1040 tax form which pertains to misc. expenses.

If I got that right could you explain a bit more on what to report on the 1040? Also, does anyone have info on the sales tax issue I mentioned in my previous post?
 
entitee said:
ok, now i have everything i need to know on how to officially start a business. Let me know if I understand this correctly:

I do not have to worry about doing any of the official business stuff yet. All I need to do is announce that I am a business and open a bank account for the business. This is just a not for profit activity until I've been doing it for 3 years with profit.

I will need to report losses/gain for deductions on Schedule A of the 1040 tax form which pertains to misc. expenses.

If I got that right could you explain a bit more on what to report on the 1040? Also, does anyone have info on the sales tax issue I mentioned in my previous post?
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if your not gonna do anything major right now, then you won't need anything really, a simple dba will be suffice and whatever else you may be required to file

don't apply for an tax id (ein) right now either if your not gonna be actively engaged in business , because then the irs will be watching for quarterly tax filings
 
so basically secure my label name and then run with the money (if i make any).
and forget about everything else?

even though i won't be getting a tax id or anything like that i won't even have to include my business dealings on my personal income taxes?

i think i have enough info for now. i'll seek out someone who's an accountant if i need more.
 
even though i won't be getting a tax id or anything like that i won't even have to include my business dealings on my personal income taxes?
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i don't mean that you should not pay taxes, i was saying that if your not gonna incorporate your buisness and you don't expect to make much income then you can just run it as a sole proprietorship and report any income on your regular tax returns

the irs website has all the tax reporting info on it

but when in doubt, consult a pro like u said :D
 
Basically

entitee said:
so basically secure my label name and then run with the money (if i make any).
and forget about everything else?

even though i won't be getting a tax id or anything like that i won't even have to include my business dealings on my personal income taxes?

i think i have enough info for now. i'll seek out someone who's an accountant if i need more.
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I know a lot about accounting. You don't even need a label name to sell CD's independently. Your name and SS# is your company. Schedule C is the way to go. It reports how much you made, spent and what your inventory/ units did during that year. Authors of books do it all the time. Schedule C flows to a line on your 1040. If it is a loss it will be a tax break. If you move a lot of units a loss does not look bad. A lot of labels don't make money off of record sales, but if you have a following labels will look at you as being marketable to do other things. Everything else is really irrelavent unless you're making videos and about to cut a deal. Just make sure you create a budget and keep good records to prove every number that is reported.



Nicnack
 
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thanks nicknack, thats what i needed to hear.
the only reason i'll get a label name is to create brand recognition if i do future releases.
 
Exactly

entitee said:
thanks nicknack, thats what i needed to hear.
the only reason i'll get a label name is to create brand recognition if i do future releases.
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Exactly. It's basically just a vanity label unless you're cutting a deal or you want people to recognize you built it when they see your video when you make it.


Nicnack
 
Sale Tax

Look into a blanket certificate basicly it's a paper you can give any business when sales tax will be passed on to the end consumer such as taxes on recording or mastering
Check out Officemax or Office Depot for the form they should give it to you for free
 
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