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The
Business of a Band
By Michael McCready
Attorney at Law
Not enough bands realize that their band is a
business. Some band members may be familiar with business practices, but
my experience has been that most are not. Therefore, this column will
address what to do when you start a business.
The very first thing a band should do is get a
business license from the county they live in. A business license is also
called a "fictitious name certificate" or a "doing business as" (d/b/a)
license. What this certificate does is tells the world that X,Y & Z are
doing business using the name "The Band" and where their business address
is located. The procedure for obtaining a d/b/a license is through the
County Clerk. They will require an application and a small fee. Generally,
another legal requirement is that you publish your application in a
newspaper for 3 weeks. Most newspapers do this in their legal classified
sections. The newspaper will publish your d/b/a license and it will read
something like this: "LEGAL NOTICE: X,Y & Z are doing business as "The
Band" with principle place of business at 123 N. East St. Chicago." The
newspaper will take care of the rest and you will soon receive your
business license. The main reason you need this license is to open a
checking account in the band's name.
The next thing you should do is get a tax ID number
for the band. I realize that very few bands pay taxes on what they earn. I
am not sanctioning not paying, but this is the procedure for doing it the
legal (and correct) way. You need to file form SS-4 which can be obtained
by calling 1-800-829-3676. Fill out the form and mail it to the IRS
regional office for your area.
Once you have a tax number, you should keep track
of all the income the band earns. More importantly, you should keep track
of all the band's expenses. This includes everything from promotion costs
(flyers, 8x10's, etc.) to equipment (guitars, amps, PA's, etc.) to tour
expenses (gas, meals, etc.). All of these are tax deductions. Taxes can be
complicated so you may want to see an accountant. Don't worry, even the
accountant's charge is deductible, as is a lawyer's incidentally. The IRS
also puts out a great, though lengthy, tax guide. When requesting your
SS-4 form, also request Publication 334, "Tax Guide for Small Businesses."
Anything you ever wanted to know, or not know, is contained in this guide.
Another tax issue bands should be familiar with is
sales tax. I have yet to encounter a band who was aware that they were
supposed to pay Illinois sales tax when they sold tapes, CD's and tee
shirts. Sales tax is what you pay when you buy something tangible, whether
it is a pack of gum or a new car. Procedures vary from state to state so
you should contact your Department of Revenue or Taxation for more
information on sales tax.
I also recommend bands consider taking out
insurance. You can buy insurance for anything. For example, sports teams
often take insurance out on their star's physical ability. Consider
insuring your equipment. If it gets stolen or damaged, the proper
insurance policy may go a long way toward getting the band playing again.
Also make sure whoever drives the band has auto insurance. Once again,
insurance is deductible as a business expense.
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