For musical artists just entering the entertainment business or long time veterans, having savvy legal counsel is a no brainer. Intellectual property damage, unpaid royalties, copyright violations and breach of contract cases are just a sampling of issues artists may face along the way.
But when the question of financial damages comes into play – lost profits, reputation or something else - that’s when having a certified public accountant (CPA) on the team can really pay off.
Whether a major label artist or an independent, consider these four reasons to work with a CPA.
LITIGATION
A hot topic for industry players is royalties and how they are split among artists, writers, labels, publishers, etc. Attorneys can assist with contractual rights, but accountants quantify those rights. CPAs with forensic accounting credentials use an analytical approach to develop findings for the calculation and forecasting of royalty revenues and costs associated. These experts understand and translate royalty statements to determine correctness. Many civil disputes arise from artists and their advisors not being able to do this.
IRS ISSUES
Many independent artists live for their craft and don’t consider tax ramifications for ignoring the bookkeeping side of the business. Don’t leave yourself exposed to the IRS for misreporting contract labor, management fees, merchandise sales, gigs paid in cash and compensation to band members. The IRS is a powerful agency that can garnish wages, levy bank accounts, and seize homes. It can put a lock on business doors or force owners to sell assets. CPAs are prepared for the taxman by being knowledgeable in minimizing liability and exposure to more serious charges.
FINANCIAL PLANNING
Sound financial planning can help preserve the financial security musicians are working so hard to achieve. Experienced accountants can spot opportunities to maximize tax savings such as income deferral opportunities to having the right entity structure (limited liability company, corporation or partnership) in place.
PEACE OF MIND
As a music artist gains notoriety and success, the complexity of the business grows. Are recording costs and meal expenses deductable? Is withholding taxes for sidemen necessary? Are crowd sourcing payments taxable? Answers to these questions, not to mention the complex tax code, are better left to the experts. Knowing their financial health is being taken care of by trusted advisors allows artists to focus on their craft.
The news is full of examples of artists who have battled financial crisis. Even the greatest, most successful musicians aren’t immune. Music is big business and artists should be proactive in protecting their interests from the start. Select independent, trusted sources with the knowledge to identify financial opportunities and provide risk protection. After all, they don’t call it show business for nothing.
Based in Houston, Texas and an active member of several organizations, David Acosta serves on the Board of Directors of the Texas State Society of Certified Public Accountants and the Board of Governors of the Texas Chapter of the National Academy of Recording Arts and Sciences (Grammy Awards©). www.CooperCPAGroup.com