Legal Tips For Kids Entertainers
Did you ever hear your parents say ‘It’s all fun and games until someone gets hurt!’ Children’s entertaining is sort of like that. We often don’t plan ahead. Here are some essential things EVERY kids entertainer needs to consider …
WHO IS THIS GUY?
As I sit down to start writing this piece, it strikes me that most of you have no idea of who I am. Which then begs the question, “Why should I pay any attention to him?” I know that’s what I’d be asking. So, I thought I should probably start by telling you a little about myself.
In my early 20’s I started off as a street performer in Chicago while I was essentially homeless. During that time I also started performing in restaurants when the weather turned cold. I got to be pretty good at both and earned around $1000 a week which was pretty good in the early 90’s.
Then I went back to school and earned my undergrad degree. After graduation I discovered that I didn’t like working at a regular job, so I went back to magic.
I started back performing restaurant magic. I ended up performing at all of the Spinnaker’s restaurants in Virginia, Maryland, and North Carolina.
Around the same time I put together a stage act and was picked up by the Charles Clancy tour which was a phone room tour of the Northeast.
In the mid 90’s I met Tim Conover, who would become my mentor and role model. Tim introduced me to corporate magic. Trade shows were an awful lot like street magic performed indoors, so that was a natural fit for me. Tim also helped me refine my act and I was amazed to learn that folks would actually pay me $1000 or more to perform at their events. It is at this point that I started traveling an awful lot.
In 1998 I helped create the Beach Street program by introducing Clear Channel Entertainment (Cellar Door Ent. at that time) to the idea of novelty entertainers performing on the street. I also helped set up the magic on the 24th street stage events. I got to open for folks like Jeff McBride, Joe Devlin, Peter Gossamer, and many others. Eventually I put together my own illusion show and performed not only in Virginia Beach, but around the country.
Some time during this period I also started performing for some larger theme parks. I was a street performer for Busch Gardens in Williamsburg, Virginia. I was also one of the contracted “streetmosphere” acts for Disney. I got pretty tired of the theme parks pretty quickly and went back to the corporate market.
Toward the end of the first stage of my career I stated performing for some international resort chains. They like the fact that I could perform a 45 minute act silently which didn’t require them to translate the show into Spanish, English, and French. During the early 2000’s I was flying about 100,000 and really starting to get burned out. So I started saving money like crazy and really simplifying my lifestyle.
In 2007, at the age of 37 I was able to semi retire. I had zero debt. I moved to a less expensive place to live. I had paid cash for my home, and I still had a bunch of money in the bank. I just kind of figured I’d do a few shows here and there, but I was done traveling and busting my hump.
Yea, after about 2 years of that I was going stir crazy. I knew I wanted to do something different, so I decided to go to law school.
To my surprise I did pretty well. I graduated 2nd in my class and placed pretty highly in a national moot court competition. When I graduated, I took the Tennessee bar exam. I passed. Then I started practicing law. After a brief stent of working for someone else, I quickly realized that I was just not meant to work for somebody else. Then I met a much more senior lawyer who is looking to wind down his practice so he can retire. He wanted me to take over when he decides to retire.
So I’ve been very fortunate and blessed way more than I deserve. In the past I haven’t really gone to a bunch of magic conventions or the like. I never cared for competing in magic competitions. I just always pretty much kept to myself. I never really thought much about lecturing or writing material because I wasn’t really sure that I had much to add.
Now after over 20 years of full time performing, I realize that the way I went about building a career was somewhat different. After some other folks started seeking me out to ask questions, I began to realize that I probably do have something to add.
So that is what this is all about. I’d like to write on several different subjects. Obviously I’ll write about topics that involve legal subjects that entertainers have to deal with. I’d also be happy to discuss other areas like marketing and building a business where you can earn real money if there is enough interest.
If you have any questions or are interested in any particular subject, let me know. Please keep in mind that I work around 50 hours a week with the law practice, then my wife keeps me booked with the entertainment business most weekends. I know it’s a lot of hours, but I love what I do and really could not be much happier! So it might take me a minute to get back to you. I will eventually get back to you, and hopefully I’ll have something to add that you will consider to be of value.
I remember when I was first starting to build a real entertainment business, I had a ton of legal questions. I couldn’t afford to talk to a lawyer, so I just winged it.
I thought I’d start this series by writing a few articles that would answer those questions that I had way back then.
DISCLAIMER: I am licensed to practice law in the State of Tennessee and nowhere else. So I cannot give you legal advice if you live somewhere else. What I can do is just offer some general legal information for educational purposes only. Obviously, if you live outside the United States, you should completely ignore everything I have to say as I can assure you that I know nothing about the laws of your country. Please do not construe the information contained in these articles to be legal advice.
SUBJECT #1 Business Organization
When I started earning decent money I didn’t know what the difference between being a sole proprietor, a corporation, an S corp., or an LLC or even why I should care.
There really are only two reasons why you should care 1) taxes and 2) liability. The type of entity you choose to be should help you minimize the amount of taxes you have to pay and should help protect your assets from legal exposure in case you get sued for something.
So lets start with the 3 biggies: 1) Sole Proprietor; 2) Corporations; and 3) LLC’s
Let’s talk taxes…
You are going to have to pay them. You should expect to pay around 20% of your income in taxes to the Federal Government. If you live in a state that collects state income tax, you are going to have to pay those too.
If you are a sole proprietor, you are going to be expected by the IRS to begin paying quarterly taxes. If you don’t pay quarterly and you end up owing more than $5000 at the end of the year, you are going to pay penalties.
On top of the quarterly taxes, you are also going to have to pay a “self employment tax” which equates to about 30% of the profits you earn.
Generally from what I have seen, if you are a sole proprietor, you are going to be giving a little over 30% of your income to Uncle Sam.
Common Tax Mistakes for a Sole Proprietor
Just about every sole proprietor, including yours truly, looks to find ways to deduct as many business expenses as possible in order to lessen their gross income so they can lessen the amount of taxes they have to pay. Many folks go out of their way to find ways to make their business loose money at the end of the year, hoping they won’t have to pay a penny to the government. I completely sympathize with this sentiment. It’s a mistake.
First off, sole proprietors are much more likely to be audited by the IRS than any other group of people. Just the fact that you are a sole proprietor means you are much more likely to have the IRS paying particular attention to all those supposed deductions you are claiming. It really isn’t a question of whether you will be audited; rather the question is when you get audited how bad will it hurt. If you screw up, you will pay a heavy price.
Second, you are going to need credit. If you keep claiming that your business is loosing money, creditors are going to be much less likely to want to lend you money. At some point in your life you are going to want to borrow money. You are going to want to buy a house. You are going to want to buy a car. You are going to need to get a credit card with a decent limit so that you can finance some of the things you are going to need both personally and professionally. You can’t borrow money if you look like a pauper on paper.
As a sole proprietor you should be looking to earn enough money so that you generate a healthy profit AND are prepared to pay the taxes when they come due. It’s the being prepared to pay the taxes that usually causes folks the problems. Don’t worry. I’ve got a plan that is absolutely fool proof and will guarantee you’ll have more than enough money left over to pay the piper when tax time comes. I’ll get into my Accounting System later on. It’s simple, and it works.
As you can guess, one of the big drawbacks to being a sole proprietor is that you can be sued personally for things that happen with your business. If your flash paper catches the building on fire where you are performing, you could loose your house. Everybody is pretty much familiar with the amount of legal exposure sole proprietor face.
There is no real way you can protect your personal assets from being at risk from a lawsuit that comes about because of your business activities. The only thing you can, and absolutely should do, is make sure that you have and adequate amount of liability insurance to cover you if something goes wrong.
When I say adequate insurance, I’m not talking about the $300 per year group policies you can get by being a member of different entertainer groups. You really need to talk to an insurance professional that understands commercial coverage.
One of the added benefits of having good insurance is that most major carrier policies will include a “duty to defend” which essentially means that if you get sued, the insurance company will pay a lawyer to defend you.
I plan on writing more about liability insurance policies a little later. For right now, suffice it to say, you get what you pay for. If you are a sole proprietor you really cannot afford to have good insurance. You also have to know exactly what you are buying when it comes to insurance to make sure that the policy fits your needs.
That’s it for now…Next week we will take a look at the various Corporate forms and how they can benefit you as well as the disadvantages you have to accept.