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Explosive Beatz

Decide what type of Trader you will be, when you start your Music Business ?



As the music industry continues to grow, more and more people are starting to explore the idea of turning their passion for music into a profitable business. Whether you are a singer, songwriter, producer, or any other type of music entrepreneur, you may find yourself wondering whether to trade as a sole trader or a limited company.


Both options come with their own set of advantages and disadvantages, and in this post, we will explore the tax benefits of trading in the music business as a sole trader and as a limited company, the registration processes, and the importance of registering all intellectual property like trademarks, registering original music or video with PRS or PPL, and having written contracts with stakeholders of your music business venture. We will also discuss the importance of taking professional insurance when going into business to cover legal costs in case something goes wrong or mistakes are made.




Tax Benefits of Trading as a Sole Trader vs. Limited Company

One of the most significant differences between trading as a sole trader and a limited company is how your income is taxed. As a sole trader, you will be personally responsible for paying income tax and national insurance on all profits made from your music business. This is known as self-assessment tax, which you will need to complete annually.


On the other hand, if you trade as a limited company, the company will be responsible for paying corporation tax on its profits, and any income you take out of the business as a director or employee will be subject to income tax and national insurance.


While a limited company may appear to be the more tax-efficient option, it's important to consider the additional costs that come with trading as a limited company, such as accountancy fees, higher administrative costs, and compliance costs. Therefore, it's important to weigh the pros and cons and decide which option is best for you.




Registration Processes

The registration process for becoming a sole trader is relatively straightforward. All you need to do is register with HM Revenue and Customs (HMRC) and notify them that you are self-employed. You will then be given a Unique Taxpayer Reference (UTR) number, which you will need to use when completing your self-assessment tax returns. You can register as a sole trader online, by post or phone.


The process of registering a limited company is more complex, as you will need to register with Companies House and HMRC. You will need to choose a unique company name and provide details of the company's directors and shareholders. You will also need to provide a memorandum and articles of association, which are the company's governing documents.



Registration

As a music entrepreneur, it's essential to protect your intellectual property rights. This includes registering your trademarks, original music, and videos with relevant organizations.


Trademarks protect your brand, logo, and product names, and registering your trademarks with the Intellectual Property Office (IPO) can give you the exclusive right to use them in the UK. This can be especially useful if you plan to sell merchandise or license your brand.

Registering original music or videos with PRS or PPL can ensure that you receive the royalties you are entitled to when your music is played or streamed. PRS for Music licenses music to TV, radio, and online streaming platforms, while PPL collects royalties for the public performance of recorded music.




Written Contracts

When starting a music business venture, it's crucial to have written contracts with all stakeholders. This includes band members, producers, promoters, and any other parties you may be working with.


Verbal agreements can be ambiguous and difficult to enforce if disputes arise. Written contracts help to clarify the terms of the agreement, protect all parties involved, and provide evidence of the agreement if a dispute arises.


Professional Insurance

Finally, it's essential to consider professional insurance when going into business. This type of insurance can protect

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