Once you’ve started directing effort and funds toward earning income as a musician, congratulations, you’re in the music business!
Many musicians put off organizing the business side of their career until they have to, only to realize how many opportunities they missed to save money along the way. So, no matter how overwhelmed you may feel about tax planning or the grant application process, meeting with a lawyer from our entertainment group as early as possible is a good idea for understanding the big picture and keeping more money in your bank account.
If you’re just starting out in the music business, here’s some of what we’ll discuss with you:
Incorporating your business is a step that warrants a conversation with a professional. Yes, it involves additional compliance and costs, and at the outset of your career the costs outweigh the benefits, but once you’re gigging more and earning more per appearance, it’s a smart move.
You’ll be able to run expenses through the corporation, like new instruments and gear, which you can write off so you pay less tax. Also, as an incorporated company, you’ll be personally protected against any claims made against you by club owners, record labels or anyone else.
Our team can take you through the ins and outs of incorporating and get you set up for a long run.
Generally speaking, when you’re starting out in the music business, you’ll spend more than you earn. This is called a “business loss,” and a big mistake a lot of musicians make is not taking full advantage of these losses, which you can claim against other income from your day job, or carry forward so you get the tax benefit when you are making money down the road.
The best way to do this is to track and report all of your expenses. We can help you determine what expenses you should be tracking.
Income Tax and GST/HST
You’re required to register for GST/HST when you hit $30,000 in gross sales (business income before expenses). As a musician, your gross income includes royalties and advances, so you can hit the threshold without being aware.
Once you are registered, you have to collect GST/HST on taxable revenue at the rate set out in the province where you are performing. But the money you spend in GST/HST on business expenses is subtracted from what you collect in GST/HST, so you wind up owing less per period. If you pay out more GST/HST than you collect, CRA will issue you a cheque for the difference.
We can set you up for GST/HST collection, and make sure you have what you need to remit on time (the penalties for late filing add up quickly!).
Cash Planning and Budgeting
Touring is expensive and fraught with unforeseen expenses like vehicle and gear repairs, weather-related problems, cancelled gigs and more. As well, recording costs can also get away from you if you’re not careful.
This is why planning a tour or an album should include a budget with a contingency amount. It’s a valuable exercise that will help you to stay financially focused.
We can give you template worksheets to reconcile money you earn/spend on the road, settlements, grant funding and more.
Chasing your dream of being the next <insert your favourite artist here> is a great thing. Hit all the right organizational notes, contact your DMCL advisor, and you’ll be in a much better financial position every step of the way.