Band going legit - Questions

May Feign

My band is going legit in the next couple of months. I have a few questions.I'm not that financially minded so bear with me
As all of us are on the dole,how would we go about paying ourselves,do we need some sort of payroll system or would we declare the income as additional income at the end of the financial year and do our own returns.

Apologies if this isnt the right board and mods may move it if they wish

Thanks in advance
Rory

Edit : of course any advice or tips are welcome and appreciated

maccored

I'd assume you'd have to set yourself up as a business and organise a structure. If you are all bosses, then you;d start a company with directors. If you arent all equal then a boss and staff. Either way the business would have to pay employers tax, employees tax etc etc. If there were 4 in the band and you all wanted to make 30 grand each then you'd need to make sure you could turn over 120 grand PLUS all taxes a year.

Savman

Speak to an accountant!

bubonicus

Good place to start

http://www.revenue.ie/en/tax/it/reliefs/artists-exemption.html

keyboardcook

Listen to Savman. You are not going legit- more you are starting your own business.

So focus on that concept and follow it through.

Obi-Jim

I'd also say take Savmans advice. This is about starting a business.

This is an easy bit of work for an accountant, and will give you peace of mind that you are doing it the best way, and ALL your finances in and out are correct.

Savman

Savman wrote: »

Speak to an accountant!

More importantly....


SPEAK TO A SOLICITOR!!!!!!!!!!

keyboardcook

Sorry Papa Smut. No need for a solicitor. If you say that then it is clear you have no experience, no offence intended as I know you mean well.

They charge about three times as much for company formation as accountants, and really are not needed till you have legal issues.

Issues of legality regarding the Revenue Cpmminssioners will be dealt with by a chartered accountant, as that is in fact part of their remit.

A good accountant should give you a free consultation, as that is his/her sales pitch to you. Do not be in any way intimated by them. Remember. You Pay them.

Put a rough proposal together before meet anyone. This is not a long winded official document about what you dreamt of as a kid and where you see your angle at world domination. It should be short and concise, to include-

-Overheads (wages, transport, storage, hire purchase repayments, insurance, rent, utility bills). Basically, anything that you HAVE to spend to get functioning. Let you accountant deal with which of these will be considered fixed or variable. Most likely they will all be fixed (except for Hire Purchase, website, advertising). The Fixed and Variable part here does not relate to the fact that one cost fluctuates and the other doesn't.

-Consumables- Office Satationary, guitar strings, plug boards (should be considered but open to argument), pens, pencils, paper clips, light bulbs, lead (should be considered but also open to argument). Basically anything that is 'used up' in the running of your business

-Stock in hand (pa, guitar, candles and spotlights, grand pianos and keyboards etc)

- Your diary- ie- Cash Incoming

That is it in a nutshell.

Forget the solicitor. Trust me. Have a lot of t-shirts.

kc

May Feign

Cheers for all the replys guys.Accountant it is then

KevLeppard

Accountant here, altho I packed it in a few years ago.

Alright then, from the top here it goes.

First thing you gotta decide is the business structure, a Partnership or a Limited Company. With a Ltd Company, the band members will become the Company Directors. You will also be protected by limited liability (this means that if the business fails, your personal possessions CANT be sold to pay off the debts of the business). In the case of a Partnership, you dont have limited liability.

In this case, you guys should go down the Partnership route. Here is why.

(a) You guys probably have all the gear (amps, PA etc), and therefore wont have to shell out a lot of money that puts you in a lot of debt. You dont need the protection of limited liability.

(b) Double Taxation. In the case of a Limited Company, there is a double tax hit. First, the Company is taxed on its profits for the year. Second, for you to extract the money from the Company and actually get your hands on it, you
personally will have pay PAYE.

With a Partnership, the profits for the year are taxed once. FULL STOP.

As well as that, with a Limited Company, the band would have to submit CRO Returns (Company Regristrations Office) every year. This will also attract a filing fee and the fee charged to you by your Accountant that does this for you. If someone leave the band, you would have to file a Return for a change of Director. In a start up Limited Company you would also have to shell out for Company Formation costs. In a brief nutshell, too much unnecessary expense for what you are doing. Go for the Partnership. The rest of this post will assume the Partnership route.

Your Accountant will have to register the business/band for Tax (VAT and Income Tax).

You may not even have to register for VAT. I finished Accountancy a few years ago so I am not too sure on what the VAT threshold is at this point in time.

If you are registered for VAT, hopefully you all have your receipts for your gear (start up costs in this case if you want to put it another way). Get copies/replicas if you dont. Just make sure the receipt has a VAT number on it. You can claim back the VAT on your gear bought/being used in the band. This is done through your bimonthly VAT 3 form. It starts to add up if you think about costs of the PA and amps. If you are under the VAT threshold, you can apply to waive your exemption and claim back VAT on consumables (cables and gear). If gear is bought second hand, you cant claim back VAT (as the person that sold you gear didnt charge you VAT).

On the flipside, any gig money received, you will have to account for VAT at the standard rate. In other words, if you get €500 for a gig, the €500 includes VAT at the standard rate which must be paid to The Revenue.

If you are under the VAT threshold, think about it carefully before you decide to waive your exemption.

I take it you guys also have a van. Vans run on diesel. You can claim back VAT on diesel. If you are still carrying the gear around in cars, altho there is VAT on petrol you CANT claim this back.

Get a band phone if you dont already have one. You can claim back the VAT on your phone bill, so long as the phone is used for the business and not personal use. You are probably better off getting a bill phone, as the VAT number of the phone network is on the bill. Phone Top Up credit slips dont have this. To claim back the VAT on any expense, the invoice/receipt MUST have a VAT number on it.

With Income Tax, the cost of your gear will also qualify for Capital Allowances. Very briefly, Capital Allowances are used to reduce your tax bill. For gear to eligible for Capital Allowances, it must be
(a) new
(b) owed (either already paid in full or bought on Hire Purchase but NOT leased)
(c) in use at the end of the year (the financial year).

If you buy gear on Hire Purchase, you claim back the full VAT portion at the start. If gear is leased, you can claim back the VAT on the monthly repayments.

Obviously you are in cash business, as opposed to credit. You do a gig and get paid cash. You will have to keep a Cash Receipts book.

You will also need to keep a cash payments book and a cheques journal.

Open a band bank account. Lodge your gig money to this account and pay for band expenses from this account only. If you guys opt for a cheque book on this account, make sure that each cheque needs 2 signatures.

One member of the band should take responsibility for keeping the books and records, even its just the basic receipts and payments. Either manual or on a spreadsheet. If you feel a little unsure on VAT 3 returns, ask your Accountant to look after it for you. Accountants do tend to charge a small fortune for bookkeeping work. Its fairly straight forward and will save you a small fortune in the long run.

One last thing, dont just jump to the first Accountant that you meet. INTERVIEW your Accountant and see who can do you the best deal. Accountant fees are not cheap, they charge by the hour (you can claim back the VAT on your Accountants bill too). Dont just base it on cost. Ask him/her if he has other clients in the same business as yourself.

Hope this helps

Savman

Or in other words, don't do it :pac:

Obi-Jim

That's a great post KevLeppard.

I think this is a great thing for any band that's been around for a bit and has steady income/expenses, to do.

It's really not all that much work, just a bit of paperwork at the start. The hard part is the change of attitude to make sure you get and keep all the vat receipts, and keep your books up to date rather than letting it catch up on you. It really can save you a lot of money.



On a side note KevLeppard, if you claim the VAT back on all the amps, guitars, PA, etc ..... if you ever close up the company, don't you have to pay that VAT back to the revenue? (because the company doesn't exist, so the assests wouldn't be used to provide a service any longer, therefore will belong to the individuals again so VAT must be paid, by the end user)
Is this correct? It's just something I've run into in the past.

KevLeppard

Obi-Jim wrote: »

That's a great post KevLeppard.

I think this is a great thing for any band that's been around for a bit and has steady income/expenses, to do.

It's really not all that much work, just a bit of paperwork at the start. The hard part is the change of attitude to make sure you get and keep all the vat receipts, and keep your books up to date rather than letting it catch up on you. It really can save you a lot of money.



On a side note KevLeppard, if you claim the VAT back on all the amps, guitars, PA, etc ..... if you ever close up the company, don't you have to pay that VAT back to the revenue? (because the company doesn't exist, so the assests wouldn't be used to provide a service any longer, therefore will belong to the individuals again so VAT must be paid, by the end user)
Is this correct? It's just something I've run into in the past.

Depends on the circumstances. Would have to know the facts of the case before giving a genuine answer. When it comes to VAT, there are certain instances where VAT would have to be repaid to The Revenue.

Just one "health warning", if a transaction is carried out purely for dodging tax, The Revenue will be in on top of you.

KevLeppard

One last thing I didnt mention earlier (and before I head to bed), it would probably be best if the individual band members register as a Sole Traders (instead of Partnership) and be assessed on an individual basis with The Revenue. I know I mentioned Partnership earlier but a Partnership is basically 2 or more Sole Traders anyway.

Reason being, if a Parter leaves the Partnership, the Partnership is instantly dissolved. However, there is nothing to stop the remaining Partners forming a new Partnership and continuing on as before.

It just makes life a lot easier if one of the band members decides to leave the band. Just saves you the hassle and cost of Partnership cessation and formation (again), as it would only add to your Accountant's bill with the time taken to prepare the work and correspondence. Just get the new member to follow the same registration process as you guys.

Obi-Jim

cheers.

No, wasn't anything like trying to swerve Mr. Tax.
It was setting up a company knowing that it probably would only last 3-5 years, so was it worth claiming all the VAT back, only to repay it again down the line.

Thanks again

May Feign

kev,thats a brilliant reply,thanks a mil

southlouth type

May Feign wrote: »

My band is going legit in the next couple of months. I have a few questions.I'm not that financially minded so bear with me
As all of us are on the dole,how would we go about paying ourselves,do we need some sort of payroll system or would we declare the income as additional income at the end of the financial year and do our own returns.

Apologies if this isnt the right board and mods may move it if they wish

Thanks in advance
Rory

Edit : of course any advice or tips are welcome and appreciated

Was playing with a band a few years ago in the same situation .The best option for you would be to go on a start your own business course . This means you can retain your welfare payment while being self employed , %100 for the first year , %75 the next year etc . My advice to you is to pay some sort of prsi just in case things dont go well , this means you can recieve some sort of welfare payment in the future ...