going legit to pay taxes. can I just set up as a freelancer?

[scarygroover]

Hi people,

the studio i built on my property has really taken off and I am very busy. so busy that I put in my notice to my day job.

I am going to have to start paying taxes once I leave the day job and was wondering if there is a way to do it as a self-employed, freelance/contractor /engineer instead of a recording studio. The reason I ask this is because the city I live in won't let me open a studio on my property where I live (well they might but they charge 3100 dollars just to bring it to a hearing in which they might say no go and keep the 3100 ouch!)

So I am wondering if there's a way to be a legitimate tax payer but as a freelance engineer and not as a studio. any help would be greatly appreciated.

Thanks,
Michael

[Frost]

Call yourself an independent contractor.

Use your social as your tax ID

Have an acountant do your taxes, even if it is a cheap one from H&R or something similar.

Keep good receipts for your income.

Keep receipts for your expenses, which will be everything from your computer and CDR's to a few diners, postage, CD and DVD's as well as concert tickets. These will offset your income from the studio. YOu need to show a profit 3 out of 5 years but that can be a small profit. You can show a loss 2 years which will be a big loss if you write off equipment in the years which will benefit you the most. This way you can get some of your w2 taxes back in the 2 years you will show a loss.

If you are making a big profit and will never see a loss, please quit your day job and hire someone like me.


Frost

[Everybody's X]

save them receipts! I set up an LLC years ago
this year I screwed up and came out with 20k profit , so I have to pay $2800

lame

[T-rex]

Dude, I have no tax advice.

I just wanted to say congratulations on quitting the day job and recording music for a living. That's the best thing I've read all week.

[@?,*???&?]

This isn't as painful as you might think. You'll end up paying about 15%-19% in taxes when all is said and done. You won't pay Social Security, so don't expect that to accrue. Nearly everything in your life will become a write-off.

[thethingwiththestuff]

i've always wanted to know what it takes to go freelance legitimately...is there paperwork involved in stating you are an independent contractor? and to then be able to write off cds and stuff?

[Scodiddly]

At the simplest level, which is where I currently reside, you can become a sole proprietorship - so I went over to the county building, and paid $10 to submit a "doing business as" (DBA) form. That sets me up with a company name (or my own name, if I'd wanted that).

I have a separate checking account for the business, in case there's some legal trouble. That way I don't have to worry about getting my personal account frozen or something. I also have a professional accountant to do my taxes each year. Not the seasonal chair-moisteners at H&R Block, but a real pro. Costs me $400 or so, but it's well worth it.

I'm sort of on the borderline about doing an LLC and looking for more business - I'd have to get insurance and such, a bit of a step up from the very simple business I have right now.

[bert]

i got my business license for 2004 and will see how my taxes come out this year. I have a giant envelope of reciepts. The biggest bummer is paying someone so much to do your taxes. But for the peace of mind i'm not going to skimp.

[MT]

I have a separate checking account for the business, in case there's some legal trouble.

No offense, but I don't believe a DBA will protect your personal assets from being pulled into a legal issue. Unless you're incorporated, you're wide open.

Someone straighten me out if I'm wrong.

And secondly, having a "real" accountant do your taxes makes you much less likely to get any shit from the gov.

MT

[lifeintime]

I have a separate checking account for the business, in case there's some legal trouble.

No offense, but I don't believe a DBA will protect your personal assets from being pulled into a legal issue. Unless you're incorporated, you're wide open.

Someone straighten me out if I'm wrong.

And secondly, having a "real" accountant do your taxes makes you much less likely to get any shit from the gov.

MT

An LLC is the way to go. In a sole proprietorship, you are the company. In a LLC, the company is a seperate entity, and your personal ass(ets) is/are protected.

I second the vote for having a professional tax accountant do the work, even if it gets expensive.

[Scodiddly]

I have a separate checking account for the business, in case there's some legal trouble.

No offense, but I don't believe a DBA will protect your personal assets from being pulled into a legal issue. Unless you're incorporated,

Probably true if a real lawsuit hits. But in the event of a small dispute its supposed to help.

[Fieryjack]

An LLC is the way to go. In a sole proprietorship, you are the company. In a LLC, the company is a seperate entity, and your personal ass(ets) is/are protected.

You may want to consider an S-Corp, too, which many small businesses do. DBA DOES NOT protect your "home" assets from any liabilities that may arise.

You should also have a SEPARATE BANK ACCOUNT (corporate) from all your personal stuff. Get an American Express Blue and track your expenses that way, it's really easy.

[Everybody's X]

An LLC is the way to go. In a sole proprietorship, you are the company. In a LLC, the company is a seperate entity, and your personal ass(ets) is/are protected.

You may want to consider an S-Corp, too, which many small businesses do. DBA DOES NOT protect your "home" assets from any liabilities that may arise.

You should also have a SEPARATE BANK ACCOUNT (corporate) from all your personal stuff. Get an American Express Blue and track your expenses that way, it's really easy.

That's true but American Express charges merchants 6% and subsequently a lot of places wont take it. I ended up switching over to Visa because nobody wanted my AE card

[GregW]

Hi people,

the studio i built on my property has really taken off and I am very busy. so busy that I put in my notice to my day job.

Congrats!! Maybe someday I'll follow the same path...though the jury is still out as to whether I want to do so...

I'll add to the list of people recommending that you have someone do your taxes. They do it for a living, and it's easier to have such a person do it for you...much as it is easier for musicians to have YOU do their recordings! A tax accountant will also go to bat for you in case of an audit.

Talk to a lawyer about DBAs, liability and all that, I think the two biggest things about any biz, no matter what it is, are insurance and government stuff (taxes, zoning, etc.) Get help with both! I think a DBA is there mainly if you have a seperate bank acount, if you have employees...or if you are making any serious $$ on your own. I've known plenty of ICs, and I've never known any to have a DBA...nor employees, nor a biz bank account, nor any serious $$. I'm thinking of getting a DBA myself, but I'm wondering if I should bother.

As for the zoning, if you're making a decent living at it, you might want to rent or buy a space that is zoned for business. It might make a lot of things easier.

But take care of the IRS and your state's tax dept.!! (If you're in MA or NH, shoot me an email!) Those are probably the scariest entities you'll encounter.

And above all, have fun and congrats!!!!

-GRW