Music Business Entities, Part 2 - The S-Corp

Tax season is in full swing, and, if you take your business seriously, you already have your entity in place and the right expert to assist you with your state and federal filings for 2016.  If you want your clientele, colleagues, and stakeholders to take you seriously, organizing an LLC or chartering a corporation is a "must". A mis-organized business is a disorganized business. And the consequences can be, well, taxing.

The oldest and most established sort of business entity we see on Music Row is the corporation. A corporation has its own legal existence, separate and apart from its shareholders. It can sue and be sued, incur debts, own and sell property, and enter into contracts.

But merely coughing up $100 to the Tennessee Secretary of State and having a charter in hand does not mean you have a legitimate corporation. Bylaws, minutes, and records must be kept. Meetings of directors and officers must occur - even if that means that you conduct the meeting by yourself and for yourself. Otherwise, if your business is sued, a legal doctrine known as "piercing the corporate veil" could bite hard. And you could be just as much "on the hook" as you would be if you continued as a sole proprietor.

Some tax advisors lean toward the LLC as their entity of choice for startup businesses. This is because of its simplicity. LLCs have liability protection, and tax liability merely passes through to the individual member or members. However, I am advising my clients to consider the tax advantages of S-Corp status.  This particularly applies to the monster known as the "Self Employment Tax", which combines the Social Security and Medicare payroll taxes into one gigantic picking of your pocket each spring. With some clever accounting, the Self Employment Tax can be minimized.

Corporations can be a bit more complicated, to be sure. A "C" corporation is subject to double taxation (No - it's not a good thing at all). The corporation pays a tax on income when earned, and shareholders pay a tax on their dividends. An "S" corporation, however, does not pay income taxes. Profits and losses pass directly to shareholders. 

Employing yourself and taking some pay as dividends rather than as direct compensation can save you big money come tax time. Call us for more information on our strategies.

Views: 39


You need to be a member of Nashville Universe® to add comments!

Join Nashville Universe®

Comment by Mark Black on April 12, 2020 at 4:26am

Thanks a lot for this information! I want to open my own business in the sphere of music and your advice can really make my work easier. Now I'm thinking about the company formation of my business in Singapore and I want to start working with this online service. Maybe someone worked with them? What are you thinking about it?



  • Add Videos
  • View All


  • Add Photos
  • View All

Latest Activity

Profile IconRayHolder, moversandmakers, Jan Kermann and 1 more joined Nashville Universe®
5 hours ago
moversandmakers updated their profile
8 hours ago
moversandmakers posted a status
8 hours ago
Jan Kermann updated their profile
8 hours ago

© 2021   Created by Michael Kay.   Powered by

Badges  |  Report an Issue  |  Terms of Service