Setting Up a Corporation/LLC to write-off gear

[RockGuitarDude1]

I always feel like a fool for not taking advantage of these types of things.

 

I've been recording bands for 8 years or so and I think it would be a good idea to legitimize myself. I have a day job so I just do this recording stuff on the side. As a result, the recording I do is very sporadic. I may record 3 bands in a month and then none for the next 3-6 months.

 

I don't need to rent a space as I can do this on property I own. The business has no expenses other than my time & equipment.

 

Is there a legitimate way to be able to write-off the purchase of recording gear & then just tack the income from this recording business to my personal income tax? I'm not sure if an S-Corporation or LLC would be the way to go for this?

 

Any input would be greatly appreciated.

[BlueStrat]

Talk to an accountant. But honestly, I don't see how it's any different than operating a band. I claim the income and take the writeoffs on a schedule C that I file ( self employment tax form), even though it's not my primary job. I've never needed to be incorporated to take deductions. But I have a good accountant do all my taxes.

[Ronan Murphy]

I am not an tax pro, just some dude on the internet, so don't take any advice from me, but .... There might be some benefits to becoming an LLC, but I am not sure you are going to need to do that to write off gear. In the US sole proprietors can do this.

[daddymack]

 

I am not an tax pro, just some dude on the internet, so don't take any advice from me, but .... There might be some benefits to becoming an LLC, but I am not sure you are going to need to do that to write off gear. In the US sole proprietors can do this.

 

 

You would need to show the IRS a dedicated area on your property used exclusively for recording, and likely have to have receipts for everything, and file quarterly taxes...definitely, as otheres here said, see an accountant...the IRS is really tough on 'home-based' businesses right now (I used to have one, and I hear it is harder now!).

[gilgimech]

If you become a LLC you can write of nearly everything except clothes and your practice space. But if you record there you can write it off. It's the same as a DJ who does weddings. I advise you to get a business bank account if you do that. that way you have records of all the purchases you make. You could write off everything from the gas you use to get to the show, to the the drinks you by at the bar during your shows. You just have to show that the expenditure was during actual "working hours".

[soundwave106]

 

You would need to show the IRS a dedicated area on your property used exclusively for recording, and likely have to have receipts for everything, and file quarterly taxes...definitely, as otheres here said, see an accountant...the IRS is really tough on 'home-based' businesses right now (I used to have one, and I hear it is harder now!).

 

 

To fully write off gear, you really need to be a business that is *intending* to be profitable, at least some time in the future -- and you have to show the right intent. A lot of musicians are "hobby-only" and will never be profitable, so the IRS is pretty picky about the music business from what I hear.

 

The good news for hobbyists is that you can even write off gear from hobbies... though it's a "misc. itemized deduction" (which some won't be able to take advantage of) that cannot exceed the amount you make. (But hobby income isn't subject to self-employment tax! See this Motley Fool article for some info.)

 

Even in this "recording bands on the side" deal, I'm not sure whether one could truly push this as a business -- that's a tough call and I'd almost recommend talking to an accountant for that decision. But if you decide to push this as a for-profit business, you don't necessarily need to become an LLC. The main advantage of corporations is the limited liability, and I'm not sure that liability issues come into play for this situation here.

[RickGoetz]

Be careful with the hidden costs with an LLC... Some states (NY) make you publish two notices of formation which can be very pricey. I can't speak to which one is better for write off purposes but I remember being very unpleasantly surprised when I got the bill for placing those articles.

 

Good luck,

 

R