The common pitfalls of working with musiciansby
Egos and big personalities are not the only things in store if you work with musicians. Stephen Pell from the 2019 Accounting Excellence award-winning firm Pell Artists trumpets the highs and lows of working in this specialism.
I’ve been reflecting on a readers’ recent Any Answers post asking the AccountingWEB community about the common pitfalls of working with musicians.
The reader did not have any experience working with musicians and was considering whether they should be taking them on as a client or referring them to someone that specialises in working with musicians.
Looking for a point in the right direction, AccountingWEB member Taxing Kevin said: “I am eager to diversify our client base, but my worst nightmare would be missing something detrimental and the potential negative PR that may come with it.”
In 2015 I started an accounting business that specialised in music. In fact, we only work in music and service a very exclusive client list which includes high profile musicians. This laser focus has meant that we have we’ve been able to innovate way past the traditional service model into something that brings tremendous value to our music industry clients.
I’m fortunate enough to work with some of the most talented artists and entrepreneurs on the planet from household names to emerging superstars. It’s fun. Really fun. But it’s chaotic, frantic, fast-paced and an emotional roller coaster.
It also poses a whole new set of challenges to an accountant outside what I would all the ‘norms’ of general practice. You can soon be out of your depth in the music industry, so here are some of the areas that should be considered when deciding whether to take on a musician.
It’s true, musicians and artists overall are entirely disinterested in business administration. And even if their intentions are good it’s highly unlikely, you’ll receive the business records as you’d expect to receive them.
You’ll need to create a service, systems and processes which removes ALL the leg work otherwise you’ll be banging your head against a brick wall right up until 31 January.
Even if earnings are low, artists and musicians tend to transcend global boundaries from day one. Touring is a huge part of a musician’s business and record labels tend to help cash flow unprofitable word-wide tours.
Artists and musicians will perform all over the world very early on. You will need a good grasp of withholding taxes, immigration rules and how to apply foreign tax credits across different types of income. You will also need a strong network of international advisers to assist with resolving local tax issues.
Special rules DO apply
Musicians and artists are not exempt from accounting and tax laws. In fact, most tax authorities across the world have such a dim view of musicians and artists and their ability to file taxes in an accurate and timely manner that they legislate specifically for them. For example, there is a special clause in most Double Taxation Agreements for Artistes and Entertainers to ensures tax is withheld on all income relating to a performance in a country.
On the plus side, there are also special tax rules aimed at helping artists with lumpy and unpredictable income streams. An expert adviser will be able to help musicians pay the right amount of tax by applying these special rules.
Egos and big personalities
There are some HUGE personalities in music, it comes with the territory. If you decide to work with musicians, you need to be ready for anything and have a strong backbone. The music business is competitive and cut-throat – it takes a certain type of accountant to work in the music business.
Artists and musicians are a lovely bunch but are often fragile and mental health issues are commonplace. As their trusted adviser you will also become a part-time counsellor. Artist managers and booking agents tend to be lively characters too.
I’ve worked within the music industry for over a decade and I’m learning new things every day. If you’re working with musicians for the first time, then I suggest having a specialist music industry accountant work alongside you to help mentor you through some of the more complex areas.
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Stephen is the founder of Pell Artists, a leading business management, tax and accounting business which advises ambitious creative talent and household names. He is also a strategic advisor to several disruptive tech companies operating in the music space.