I am often asked “When is the right time to hire a business manager? I think this is an important question for those people working in the entertainment industry. It is usually asked around the same time as the question “When is the best time to setup my loan-out company?”
I think these two questions should go hand in hand as the answer to the second question will help answer the first question. The right time to set up a Loan-Out company is when the entertainer is earning in the range of $100,000 to $200,000 annually. Since there are costs with setting up the company, as well as costs associated with maintaining the company, it is in your interest to make sure you are earning enough money to pay the costs and be able to reap the tax benefits afforded by using the Loan-Out company.
Since setting up a loan-out company has accounting, insurance, tax and various other requirements this is usually the “right” time to bring in a business manager. The business manager will guide the artist through the process of setting up the right type of entity, get bank accounts setup, provide the required bookkeeping and tax preparation services, put the proper insurance in place, and make sure that the loan-out is providing all of the advantages that it was intended to provide.
I have seen too many Artists create Loan-Out companies without proper guidance and accounting assistance. If the proper maintenance and filing requirements are not done these newly formed companies will become disqualified to do business. This could keep the studios and other companies from paying your entity as well as create tax and penalty problems as you try to get your company back in good standing.
Having a professional like a business manager guide the artist through this process is always worth the costs of doing so.
If you have any specific questions about setting up a loan-out company or hiring a business manager please feel free to contact me. Look forward to hearing any comments or questions on this blog.