20 Questions for New Artists: Bank Accounts/Tax Returns/Accountants
For the next few weeks, we’re going to post sections from the article “20 Questions for New Artists” by Chris Castle and Amy Mitchell which has been posted various places. If you are interested in getting a free copy of the article, write to firstname.lastname@example.org before February 1. This doesn’t constitute legal advice, or any intent to form the attorney-client relationship. (If you miss an installment, try searching this blog for “20 Questions for New Artists”.)
Bank Accounts/Tax Returns/Accountants: A common mistake that bands make is to have all income paid to one band member, which usually results in unnecessarily complex adjustments at tax time.
Check with your bank branch to find out what the bank requires in order to open a bank account in the band’s name (usually at least a “doing business as” or “dba” filing with a government agency of some kind).
The band should find an accountant in your geographical area who is familiar with music issues and band accounting and take a meeting with that accountant (preferably a Certified Public Accountant). The band’s accountant should be able to advise you on questions such as the deductibility of expenses (recording sessions, haircuts, meals and travel, cell phones, etc.); liability issues (not surprisingly, liability issues substantially increase as soon as the band hits the road and starts driving); whether the band should lease or buy that new band van; and how to treat various income streams such as money received from investors, royalty income, merchandise, etc., as well as payment of sales tax, withholding and income tax.
Eventually, the accountant will be responsible for paying each band member their draw or salary, and making sure any roadies or other employees are properly paid under state and federal tax laws.
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Copyright 2009 Chris Castle and Amy Mitchell. All Rights Reserved.