If a person is actively pursuing a career as a musical artist, and not just playing/writing as a hobby, that person is engaged in a trade or business (i.e., the music business). Hence, an artist can use the Internal Revenue Laws of the United States to his or her advantage. This article will discuss the main deductions that an artist can utilize for the purposes of paying taxes.
So long as an artist incurs expenses that are "ordinary and necessary" in pursuit of that artist's career, the expense should be deductible. However, any expense deducted from a tax return must be backed up by documentation. Therefore, it is imperative that an artist keep complete records of any and all expenses paid in pursuit of the artist's career. Usually, the record will be a receipt. Note that the IRS does not consider a cancelled check, by itself, adequate to verify a deduction; a receipt is more official and credible. An account book/file is also recommended to keep track of expenses. The main deductions to be aware of are as follows:
A. Travel. This would include air, bus, taxi or train fares, and any related transportation.
B. Meals and Lodging. These are deductible if related "primarily" to business.
[part 2 next time]
Ben McLane Esq
benmclane.com
Thursday, September 29, 2011
Wednesday, September 21, 2011
Music Business/Law Tips - "Songwriter Agreement" (Part 2)
Statements. Once the song is recorded or printed, the writer is entitled to receive royalty statements at least once every six months. Further, the writer should be allowed to audit the publisher's books to see if royalty calculations were done correctly.
Writer's Credit. The publisher must see to it that the writer receives proper credit on all uses of the song.
Arbitration. In order to avoid large legal fees, it is advisable to include a provision to allow an arbitrator to settle any disputes between the writer and publisher.
Future Uses/Rights. Any use/right not mentioned specifically in the contract should be retained by the writer because it could be a valuable bargaining chip in the future.
Performing Rights Affiliation. The writer must affiliate with either BMI, ASCAP or SESAC and the contract should read that all writer performance royalties must be paid directly to the writer by the performing rights organization; and, if the publisher should be paid these monies in error, the monies must be immediately sent to the writer.
Because of the length of a publishing relationship and rights transferred, the writer should obtain an experienced person to assist with a contract negotiation, preferably an entertainment attorney.
Ben McLane Esq
benmclane.com
Writer's Credit. The publisher must see to it that the writer receives proper credit on all uses of the song.
Arbitration. In order to avoid large legal fees, it is advisable to include a provision to allow an arbitrator to settle any disputes between the writer and publisher.
Future Uses/Rights. Any use/right not mentioned specifically in the contract should be retained by the writer because it could be a valuable bargaining chip in the future.
Performing Rights Affiliation. The writer must affiliate with either BMI, ASCAP or SESAC and the contract should read that all writer performance royalties must be paid directly to the writer by the performing rights organization; and, if the publisher should be paid these monies in error, the monies must be immediately sent to the writer.
Because of the length of a publishing relationship and rights transferred, the writer should obtain an experienced person to assist with a contract negotiation, preferably an entertainment attorney.
Ben McLane Esq
benmclane.com
Monday, September 12, 2011
Music Business/Law Tips - "Songwriter Agreement" (Part 1)
Important decisions a songwriter faces concern which publisher to sign with and what type of contract to sign. Publishing deals are of two basic kinds: the single song contract (generally for one song) and the exclusive songwriter's contract (for all songs written during a period of time). Although these two deals are quite different, they have one thing in common that the writer must be aware of: copyright ownership is transferred to the publisher. Therefore, it will be a long-term deal. This being the case, the writer needs to be certain that he/she is entering into a fair contract. Some basic points that a songwriter's contract include are the following:
Reversion Clause. There should be a provision that if the publisher does not secure a commercial release within a specified time (i.e., one year), the songwriter can terminate the deal.
Work For Hire. If it is a single song deal, make sure that "employment for hire" and "exclusive writer agreement" phrases are not included. Also, there should be no options for future songs.
Changes To Song. The publisher should only be able to change the title, lyrics or music with the songwriter's consent.
Royalty. The songwriter should receive at least fifty percent (50%) of all income earned from the song(s).
Deductions. The costs of demos should be paid 100% by the publisher.
[part 2 next time]
Ben McLane Esq
benmclane.com
Reversion Clause. There should be a provision that if the publisher does not secure a commercial release within a specified time (i.e., one year), the songwriter can terminate the deal.
Work For Hire. If it is a single song deal, make sure that "employment for hire" and "exclusive writer agreement" phrases are not included. Also, there should be no options for future songs.
Changes To Song. The publisher should only be able to change the title, lyrics or music with the songwriter's consent.
Royalty. The songwriter should receive at least fifty percent (50%) of all income earned from the song(s).
Deductions. The costs of demos should be paid 100% by the publisher.
[part 2 next time]
Ben McLane Esq
benmclane.com
Monday, September 5, 2011
Music Business/Law Tips - "Royalties (computing)" [Part 2]
Since new, unknown acts do not have a guaranteed audience, the label is hesitant to grant a high rate because there a is good chance that the artist will never even sell enough records to recoup all of the costs that go into releasing a record (i.e., recording, promotion, pressing, etc). In comparison, a well-known artist is almost assured of making a profit and hence would receive a higher rate.
The artist must be knowledgeable about what the royalty is based on. The base is usually the suggested retail list price, but oftentimes the wholesale price of the record acts as the base upon which the royalty is computed. Since the wholesale price is roughly one-half of the suggested retail list price, the artist should receive approximately twice the royalty that would be allowed under the retail base price system.
The artist should try to negotiate escalations for royalties. In essence, this means that the artist is rewarded in the future with a higher rate if the artist reaches certain sales levels. For example, it the artist has a 10% royalty, the rate would be bumped up a percentage point if 250,000 units were sold. Increases can continue for even further sales levels. Escalations can also be tied to when the label picks up an option for another year/record.
Royalties for sales outside of the United States are usually reduced. The reduced rates depend upon whether sales are in major foreign markets or not. For example, Canadian sales usually receive 85% of the U.S. rate; sales in the United Kingdom, Germany, France, Japan and Australia receive 75% of the U.S. rate; the remainder of the world receives approximately 50% of the U.S. rate. The justification for the lower foreign rate is that the label is probably licensing the product to an independent foreign distributor that must also be compensated.
Other things which affect the rate but which were not discussed here consist of, but are not limited to, packaging deductions, free goods, and whether a record is a budget release or not.
Ben McLane Esq
benmclane.com
The artist must be knowledgeable about what the royalty is based on. The base is usually the suggested retail list price, but oftentimes the wholesale price of the record acts as the base upon which the royalty is computed. Since the wholesale price is roughly one-half of the suggested retail list price, the artist should receive approximately twice the royalty that would be allowed under the retail base price system.
The artist should try to negotiate escalations for royalties. In essence, this means that the artist is rewarded in the future with a higher rate if the artist reaches certain sales levels. For example, it the artist has a 10% royalty, the rate would be bumped up a percentage point if 250,000 units were sold. Increases can continue for even further sales levels. Escalations can also be tied to when the label picks up an option for another year/record.
Royalties for sales outside of the United States are usually reduced. The reduced rates depend upon whether sales are in major foreign markets or not. For example, Canadian sales usually receive 85% of the U.S. rate; sales in the United Kingdom, Germany, France, Japan and Australia receive 75% of the U.S. rate; the remainder of the world receives approximately 50% of the U.S. rate. The justification for the lower foreign rate is that the label is probably licensing the product to an independent foreign distributor that must also be compensated.
Other things which affect the rate but which were not discussed here consist of, but are not limited to, packaging deductions, free goods, and whether a record is a budget release or not.
Ben McLane Esq
benmclane.com
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