Starting a business in a tough economy is hard, but a great captain does not set sail on a rocky sea without a carefully plotted course. Start plotting your course by setting up a goal chart, listing a timeline of when you want to obtain the goals. Leave a page or two after each goal to list the strategies you used to obtain the goals. Once you obtain a goal, check it off the list, but be sure to keep the strategy list so you will know what worked.

The chart will enable you to visualize your goals as well as see those goals that have not yet been obtained. The ones that haven’t been obtained can then be re-looked at to see what your strategy was, the parts that worked and those that didn’t and then reset your strategy to ensure you achieve those goals as well. 

If you haven’t already done so, you need to come up with a business name, something that pertains to who you are and what you represent, or something special in your heart. This is known as “branding.” It’s what will catch people’s eye. The honest truth is that your image and your name sell you as much if not more than your music will, at least initially. 

If your prospective audience can’t get past your image and your name doesn’t strike a chord, they will never get to your music because a CD does not start playing until it’s in a player. I was lucky enough to be branded by the media. One was, “The Rae of Hope TM” (obviously because of my second name) and the other is “Racy Jaci.” Lest anyone take that one out of context, it was because I am seen as quick-witted with a wicked sense of humor. So now, when people who are even slightly familiar with me hear any of those phrases, I instantly pop into their head.

Next, create a logo. If you are not creative in the field of design, try to get a friend who is an artist to create a logo for you for the price of a dinner. Otherwise, you will have to hire a graphic artist, and that can be expensive. You can go to your local college and check out the art department. Talk to the head of the department to find out who he recommends. 

A very important step on the business side is to file for a seller’s permit (and in some communities, if you are setting up a business in your home, you will need to file a home business license in order to avoid some stiff fines and penalties. Check with your local chamber of commerce to find out what applies to you. For a seller’s permit, you will need to go to your local government office and ask what the requirements are. Ït’s usually a $10-$30 fee to file it and there is a lot less paperwork you need to figure out.

Some cities may require you to file a “Fictitious Business License” in your local newspaper and run the ad for six weeks. Your local government office may be able to provide a list of newspapers, and give you an idea of how much the newspapers charge for this service. They will also be able to tell you if there is anything additional you need to do or provide.

Once you start making a lot of money, you might want to consider becoming incorporated. If you want to go through all the hassle of trying to get the forms, fill them out correctly, and research all the legal jargon yourself, you will save money for attorney fees. My advice is, suck it up and pay the legal fees. Find someone who specializes in this field to incorporate you. This will help insure that there are few or no mistakes. You don’t want to put your company at risk.

If you decide to become incorporated and use a lawyer, the fees can range from $90.00-$500.00 per hour, so choose wisely. The total cost for us to incorporate was $900, but that was three years ago.

Get recommendations from others who have done this, or go to your local Chamber of Commerce and ask for recommendations. Before you go to a lawyer, you will need to research the business name you have chosen to see if it has already been taken.

To do this, find your local library and ask them if they have databases that allow you to search business names that are already in use. They should be able to guide you through the research process. It takes about 10 minutes, and there are five databases that I know of that search the U.S. and Canada for fictitious business names, Dunn and Bradstreet being one of these searchable databases.

Another option to become incorporate is to file on the internet.  I recently did this with my latest company.  Check out this websites to help you:

http://www.incorporatetime.com/Fee.htm

Being incorporated has its advantages and disadvantages. That’s why you may only want to become incorporated once you are making a substantial income, or if you have legal reasons to do so.

Being incorporated insures that the name of your company is yours, and no one else has the legal right to use it in your state. However, incorporating will also cost you additional tax money. But there are tax shelter advantages to becoming incorporated as well. You will need to consult a good accountant who can best advise you of what would be beneficial for you as well as the ramifications of your final decision.

If you are going to incorporate, your lawyer should be able to advise you as to which kind of corporation would be best for you if you decide to go this route. Make sure you ask him/her about an “S” corporation or an L.L.C. If he/she thinks an “S” corporation or an L.L.C. would be beneficial for you, you will have to go to an accountant who specializes in entertainment taxes. If you are wondering what the difference between a corporation, an “S” corp or an L.L.C. are, you can research that on the web. Unless you are a huge company, I would not suggest going the incorporated route, I think an “S” corp or an L.L.C. are the best option for a small company. Here are the differences between an “S” corp and an L.L.C.

This is a general explanation. To get a more detailed explanation please check the Internet, your local Library, the IRS or the BBB. 

An “S” corporation grants a special tax label, which must be applied for and granted by the IRS (an EIN number is part of the process). This allows the income of an “S” corp. to be taxed differently.

In a corporation, money is double taxed.  It’s taxed when it comes in the door and then again when it’s paid as income. An “S” corporation avoids double taxation, meaning that the money is only taxed one time and it allows certain deductions to be passed through the “S” corporation and onto the individual tax returns of the owners. 

An L.L.C. (limited liability corporation) provides protection from personal liability. Additionally, an LLC provides certain tax benefits, pretty much the same as an “S” corp.  However, with an L.L.C., you can have as many “members” (owners) as you want.

It is very important to use attorneys and accountants who specialize in entertainment and tax law. You don’t want to pay an attorney or an accountant to go through school to learn the laws pertaining to your field before they even touch your files unless you can afford it. (But even if you can afford to pay for their schooling, do you really want to?)

A disadvantage of being incorporated is that you WILL need an accountant (unless you are a whiz at tax laws – and a bit of advice, a good accountant can get money back from the government for you even if you haven’t paid a single dime in taxes that year. How? Well, I am not an accountant, but I recently saw that happen with a friend and I thought their accountant was shifty. So for their protection, I went to a friend of mine who is a CPA who does corporate taxes and he said it is a fact. I am going to my friend’s accountant next year! ). 

Why will you need an accountant? Because there are different forms you must fill out on a quarterly basis. If you do become incorporated, you can no longer have your business finances and your personal finances in one account. You will need a separate business checking and savings account.

Additionally, you can no longer take deductions for your business against your personal taxes. Those deductions will now be put only against any business income the company has. Any money that comes in for your business is the businesses, not yours. Anything withdrawn other than salary (which is preset) must be documented and of course must be legitimate. The good part is that the company can own everything and then you are at a real tax advantage. For the details of how to do that, you Will need a great tax attorney or accountant who can wade you through those waters.

If insuring that your name is not used by anyone else is your main motivation, incorporating may not be the best thing for you. The same result can be achieved by trade marking your name, which currently costs $350.00 if you file it yourself. (The least expensive lawyer I found when researching this part for the book, was $500.00 to file the trademark application for someone.) Back to what you must do once you set up a business. Expenses for the company paid for out of your pocket must be put in an itemized expense report, and backed by receipts (save those receipts, even for small $1.00 items!), in order for you to get reimbursed.

If you are not incorporated, it would still be advisable to open a separate business checking and savings account. It’s more professional. Try to find a credit union that accepts business accounts. They are much much cheaper. A business account from a regular chain bank will cost you so much per month, usually $10.00-20.00, plus so much per check and so much more per check after you’ve written x-amount of checks.

There are many credit unions that charge one flat fee and that’s it. The least expensive I have seen is $4.00 per month with no per-check fees or hidden costs. Additionally, credit unions typically have higher interest rates for both checking and savings accounts, not to mention that credit unions generally use their money to help the community, so you would be a philanthropist to boot! At any rate, get the most from your money while it sits in the bank.

As far as accounting goes, you need to document everything so your accountant can write it off your corporate taxes at the end of the year, or quarterly if you must file that way. Save those receipts! Take care to chart the mileage on your car. Document the day, time, and mileage start/end, where you went, and why. This is often an overlooked deduction that can be quite substantial.

Log every give away, and how much each give away cost you (wholesale, not retail), postage, meals that have to do with business, office supplies, travel expenses, clothes (deductible only if you only use them for business), fees for weight loss is now a legal deduction, phone calls, etc. It is best to get a separate phone line for your business. It will be clear-cut for accounting purposes, but also the IRS will like it better.

Tell the phone company you want an extra regular line, or they will charge you up the wazoo for a business line. It’s better to over-document than to under-document. Your accountant can not write off what is not documented. A good accountant who is familiar with entertainment taxes will be able to easily ascertain which of your expenses are deductible and which are not. At the end of the year, they will tell you, if you ask, what you should continue to document. The rest you will have to learn in business courses, by word of mouth, and through experience.

When setting up your business you will need a little bit of cash to get started. Here are a few of the items you will need in order to set up your home office.

Printer
Computer
Desk
Chair
Paper
Pens
Stapler
Calculator (optional as most computers have one inside their operating system.)
Staples
White out
Scissors
Telephone
Internet Access
Applicable Software and Word Processing Programs
Fax or faxing software
Accounting Software
Envelopes

Additional Resources

SCORE is a team of successful business owners, both past and present, who volunteer their time to help others succeed in business. Their services are free, you only need to make an appointment. http://www.score.org/

Tags: business, economy

This entry was posted on Saturday, October 17th, 2009 at 11:14 am and is filed under Money-Saving Articles. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.