You may think it strange to differentiate music business accounting functions from other types of accounting. However, those accounting for music industry professionals have a unique job because their clients have unique positions.
Music Business Accounting Versus General Accounting
Music business accounting has the same broad goals as general-purpose accounting. The idea is to help the client with tax planning, record keeping, tax prep, bookkeeping, bill paying, contract review, and budgeting. However, creative professionals have particular financial concerns unique to their profession, such as music royalty accounting and managing a touring production.
The Role of Royalties in Accounting for Music Industry
Royalties are the money a company pays an individual who has a creative asset. Music royalties can come in the form of intellectual property or copyrights. With so many music platforms available, music royalty accounting software can make it easier to keep track of your royalties. You still need general accounting software for all other purposes.
Accountants that specialize in accounting for music industry professionals can help artists calculate royalties due to them. On the flip side, they can help smaller labels determine the number of royalties that go to their songwriters.
There are several different types of royalties
Accountants specializing in music business accounting need to understand these differences to help their clients make wise financial decisions. One example is mechanical royalties. If you’re the owner of a master recording of a song, a royalty is generated whenever that song is streamed on a service like Amazon Music.
Performance royalties kick in if your song is streamed on Spotify or a different streaming platform. Performance royalties are divided into two categories if your music is performed in public, in restaurants, on the radio, or in malls, and they are publishing rights and songwriter royalties.
Other examples include print music royalties, synchronization royalties, and producer royalties. An accountant who does music business accounting needs to be familiar with the pay structure of different types of royalties to ensure that the client is getting the money they deserve and that the client is accurately paying their taxes.
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The Benefits of Tax Planning for Musicians
There are a lot of musicians who are not taking advantage of the expenses they are incurring. Musicians should track every facet of their entertainment career. If you are in a bracket where you pay 25 percent taxes, each expensed item you claim is the equivalent of purchasing that item at a 25 percent discount.
A good accountant is not going to help clients try to circumnavigate tax rules. Instead, they will show their client how to take advantage of current tax laws to deduct every dollar they can legally.
Tax Deductions for Musicians
Musicians can deduct a wide variety of expenses, like instruments, computers, websites, cell phones, travel, dry-cleaning, makeup, association dues, costumes, and more. The list is virtually endless.
Entertainment industry accountants can help you create profit and loss statements, cash flow analysis, and balance sheets. They can show you key metrics based on benchmarking and help you evaluate and monitor your revenue and cash flow.
Accountants specializing in the entertainment industry can help you pick a place to live that will minimize the amount you pay in-state tax. They may advise you on a better entity structure for your entertainment business and routinely review and monitor your investments
Business Consultants Who Specialize in the Music Industry
When your business is music, you need an accountant who has in-depth knowledge of the music industry. You want to work with people who have been actively involved in the music business for years and have experience with a variety of music industry clients.
Fusion CPA has years of experience working with music industry professionals. We can help you with traditional accounting, financial statements, tax compliance, inventory management, and much more. Our client base in the music industry is as diversified as the services we offer. Learn more by clicking the button below to schedule an appointment.
This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.