albeit on the topic of something that’s a little boring…absolutely worth reading…but a little tedious.)
To me, the greatest challenge of being a successful VO artist is the nuts and bolts of running my own business.
Now,
I know I can’t let my guard down when it comes to constantly
challenging myself in performance issues, getting coaching, seeking
critiques, etc. But I’ve been doing this for a long time, and I know I
have talent, consistency, marketability, and confidence.
However,
if I’m not a good businessman, and accountant, and promoter, it won’t
matter that I can read a book better than Scott Brick…I’ll never be
noticed.
One of the tangents of being my own best business is
whether to choose to officially incorporate in the eyes of the IRS,
state and federal agencies.
An engaging thread on this topic
recently popped up in the Yahoo forum, and I’m going to excerpt
highlights here without naming names.
The original question was whether a full-time voice-actor should pursue being an S-Corp or LLC.
The first person to reply was fairly clear in his suggestion:
LLC is a bit easier, a bit less paperwork – but, personally, I don’t think
it offers enough flexibility. S Corp, offers more ways to handle taxes
better, gives you better control over your SSN/FICA & Medicare
contributions – that can add up to thousands per year. More paperwork,
doesn’t really take much more to set it up and probably costs about the
same.
‘Next person chimed in with the same opinion, and a lot of good details:
S Corp, in my opinion, is the best way to go. The only issue that may be a downfall of the S Corp that I can think of is when
you take your books to the accountant every year, LLC may be cheaper than an S
Corp in regard to the fees you pay to have your accountant file for you. Also, S
Corps are a bit more involved tax wise because LLC is simply pass through of
income to you personally, whereas, in an S corp, the S Corp pays you salary,
hourly, bonus, or distributions, FICA, SS and retirement.
That same person had a strong admonition for the person with the question, though:
The number one tip on this, be a killer bookkeeper (bean counter) or hire one.
And tip number two, get a really good accountant. That way, pretty much
everything will work in your favor and you’ll be educated much faster as to HOW
to go about your bookkeeping throughout the year that will come back to you in
the form of savings.
The next person to contribute, though, didn’t think there was a decision to make between S-Corp or LLC.
In my situation, there does not appear to be a tax benefits either. Like
most of us, I am the only employee in my business, so I operate as a sole
proprieter…or a DBA ("Doing Buisness As"). The main purposes of incorperating are liability and tax purposes. We are
in an (almost) entirely liability free business. (Is someone going to sue
you because you mispronounced something? Is someone going to sue you because
you were late for a session?) If you share your VO business with another
endeavor that does have liability, like being a VO Coach, publishing or
studio for hire, then you may have a need.
(COURVO’S
NOTE: THE QUESTION OF A VO ARTIST BEING SUED IN THIS POST PROMPTED A
SECOND THREAD ABOUT WHETHER VOICE-OVERS NEED TO WORRY ABOUT BEING
SUED. A THREAD I AM NOT GOING TO PURSUE IN THIS ENTRY.)
That point-of-view prompted an assent by the first responder, who went on to say:
However, while the liability issue is one facet of the corporation –
properly set up and executed and administrated, a Sub S Corp can be a HUGE
help in the tax area – and for many small businesses (whether VO or selling
hot dogs on the streets of NYC) with the help of a good tax accountant
and/or tax attorney – the Sub S Corp can be worth many thousands of
additional spendable dollars in the stockholder/owner’s pocket each
year. If the sole proprietor model works for someone and they don’t mind leaving
money on the table that might be available to put in their pockets – then so
be it. But, the laws provide us with the tools to take advantage of the same
tax tools as the mega corporations. We are free to use them if we so
choose.
Another person following the thread then offered this:
The other very tangible benefit of a corporate entity versus an independent
contractor / sole proprietor with a DBA would be the limited liability
protection that an S corp or LLC offers. This means that the "owners" or
"shareholders" of the corporation are personally protected from liability
(except of course for fraud) while having the tax benefits of being taxed at
your personal rate thus avoiding the double taxation that comes with a C
corp.
Followed by someone else who had yet another angle:
When I looked into LLC v/s S-Corps a couple years ago, it seemed to me the
main difference was that LLCs are geared more toward a company whose
employees would be billing hourly wages for services rendered, whereas an
S-Corp is geared more toward creating/selling shares in the company
(privately, not public stock) and paying out
salaries. Also more likely for
building a shippable product and generating venture capital.
That
same person also posted some helpful Wikipedia links, which I offer
here as well. Remember, Wikipedia is an immensely helpful on-line
knowledge base, but as a journalist myself, I often corroborate the
entries I find there with independent sources:
http://en.wikipedia
http://en.wikipedia
http://en.wikipedia
Back to the thread of S-Corp v. LLC: The next person wisely pointed out an important factor in this decision:
It depends on what state you are in. I’m in California, so I chose to do a C
corp that’s still a personal service corporation. In theory, a mixture of C
and S, but technically a C Corp. In CA, you have to pay a minimum yearly
franchise tax of $800 whether you use C, S, or an LLC. However, I would not
have come to this decision without first
consulting with my CPA and an
entertainment attorney.
There’s a lot of truth to this, in fact, an earlier contributor to this thread had this to say about my own state of NV:
Incorporating in NV offers a number of advantages and can save you bucks in
the tax department if you’re making a sizeable income. It can be all set up
with an address, a resident agent, etc. in NV and if you operate properly,
it will be worth quite a bit to your pocket and retirement account. Oh yeah
– and you don’t have to live there.
Hey! I didn’t know that!
Then, another respected voice-over artist offered this to the thread:
My accountant tells me the biggest advantage to going S Corp can also be
its biggest downfall. With an S Corp you can pay yourself disbursements
or dividends without taking out payroll taxes, HOWEVER, the IRS is on to
this
and is cracking down on this practice especially with individuals.
The penalties for getting caught? You don’t wanna know.
(ALMOST DONE!)
Finally, a person with oodles of experience in this business offers this:
I’ve been just about every type of corporation you can name over the years,
sometimes with partners, as when we owned an audio book publishing company in
the 1990s, and it gave so many headaches and cost so much money having to hire
people to do the various duties accountants and lawyers and the state you reside
in demands of you, the business owner. My accountants made thousands all the
time!
I relinquished my last corporation, dissolving it legally with my
attorney in the state of Texas, an expensive undertaking too! Finally, after
several months of work, the state of Texas dissolved everything. Never again, my
friends. I’m staying "just me." I am a DBA and so happy.
Take my advice
and do NOT let your accountant talk you into incorporating just because you are
doing voiceovers. If you are doing OTHER things and getting paid for those,
maybe…but if you only are a voice, you book thru agents who handle your money
(mostly), and you do some jobs on your own, you’re fine being a dba. (Again: Doing Business As…)
That
post prompted the following response, and I swear, this is the last
part of this Blog…but it’s a long one, ’cause it makes so much sense.
I agree with xxxx concerning "accounting hocuspocus."
A person who does
nothing but VO, probably doesn’t have much in the way of expenses and
deductions. Home studio, including computer and software: amortized or
immediately written down. Phone, ISDN, Internet connection. Postage, office
supplies. Advertising, e.g., PPC, trade mag ads, online banners. Maybe a little
travel. Medical insurance, if you don’t have a spouse with insurance through an
enployer. All deductible via Schedule C. With QuickBooks and TurboTax, it’s
pretty painless (though time consuming sometimes) to keep books and file taxes.
Maybe have an accountant review your returns before filing.
The key in my
opinion, if you have discipline (and knowing a number of us "creative types,"
discipline is not always our strong suit), is to take the revenue that an
incorporated talent doesn’t show as taxable income–because he/she takes
deductions or uses employee payment methods through a corporation of some
sort–and invest it in tax-deferred retirement accounts in order to pay oneself
later.
Sure, part of reducing taxable income through investment in
retirement accounts is part of a good accountant’s arsenal when setting up
corporations, but why pay out the thousands it costs to do all that extra paper
pushing and justify it as another deduction that further reduces taxable income
(it’s still money spent and gone), when you could just take that money and
invest it as part of the up to 15% of your income that can go into tax-deferred
IRAs and an additional few thousand in tax-free in a Roth IRA? Plus, as Bruce
Miles mentioned, you’ll get to draw a higher SS benefit, too, because you paid
more into the system–a system that started with 16 workers supporting one
worker in retirement and that is now at just barely 3 workers supporting a
single retired worker. How to fix that? Another topic altogether.
Yikes!
And instead of having to hire and pay accountants, and provide all
the care and feeding of info to them, a talent could be using that time to,
well, earn more money!
There you have it!
I tried to be true to the contributions each person made to the thread.
One
more thing: several of those writing on this subject suggested seeking
the (should be) free advice from a tax accountant, accountant, CPA, or
Tax attorney before doing ANYTHING. Wise advice, I’m sure. In fact,
you might want to talk to more than one.
Thanks for reading this far!
courVO
