Registering my Studio as a business

Kate said: Jul 7, 2012
Kate O’Brien
Suzuki Association Member
Violin
1 posts

I’m hoping there are some teachers out there who can help and will share experiences and resources. Online searches and chats with colleagues haven’t turned up an answer. Can anyone tell me about private music teachers (who, as several threads here have pointed out, are self-employed business people) registering their businesses in the US? Are any benefits or disadvantages to operating under anything other than your own legal name? I’m mostly interested in creating a situation wherein I can benefit most regarding finding affordable health insurance, decreasing my taxes and just doing things in a smart way.

As a side note, it might be helpful for some of us out there to know that as of Jan 31, 2010, self-employed Canadians can pay into Employment Insurance (EI) and be eligible for benefits like maternity leave and sick pay. Does that exist in the USA? That’s part of what spurred my searching. Thank you all for your comments….!

Alissa said: Jul 7, 2012
Alissa Rieb
Suzuki Association Member
Violin, Suzuki in the Schools, Viola
61 posts

I recently went through establishing myself as a business in New Mexico. I
do not believe there is something like what you described in Canada here in
the USA. Every state is so different on how they treat self employed
people. I asked my friends and got recommendations for a local accountant
specializing in small businesses. This will be your best bet and usually
they’ll give you your first consultation free. There are also self
employment insurance providers. Again, try to get local references or meet
with at least three insurance providers to compare rates. Most studios I
know factor leave and insurance into their hourly rates. Hope that helps!

Alissa Rieb
ABQstrings

On Jul 7, 2012, at 5:30 PM, SAA Discussion
wrote:

New Comment on Registering my Studio as a business from Kate
Registering my Studio as a
business

Kate said:

I

Lori Bolt said: Jul 9, 2012
Lori Bolt
Suzuki Association Member
Piano
San Clemente, CA
226 posts

Doesn’t SAA offer some kind of insurance program? I’m not sure if it’s health insurance.

Lori Bolt

Community Youth Orchestra said: Jul 13, 2012
Community Youth OrchestraViolin, Viola
70 posts

Running your private studio as a registered business takes paperwork and some research into how to deal with all of it. I would check with the legal specifics for your city/state/province/etc., but some of the main benefits are:

  1. Limiting Liability—While it probably isn’t going to happen, you could have a case where a student and/or parent has an accident (slip/fall/etc.) while at your studio, and if they are horrendously unreasonable will put the blame on you for having an unsafe environment in your workplace and attempt to extract money from you. Whether that is the case or not, you can prevent them from hitting your personal finances by operating as a registered business.

  2. Insurance—general and professional liability insurance, available for small business owners, can protect you from a lot of irritating and/or costly events as you have to interact with people day in and day out. You can also get kinds of insurance that protect the employees (that’s you) in case of injury or long-term inability to work. Many working musicians can’t reasonably afford even personal health insurance and their livelihood is at stake when they have accidents that prevent them from playing/teaching.

  3. Taxes—it’s much easier to keep track and account for income and expenses for “work that you do” in your personal taxes if you just pay yourself from the business. If you have an accompanist you pay from time to time, then it comes from your business, and not you personally so you can keep your work and personal spending separate. Of course, this means you have to keep up with and file for your business as well, and that’s another whole level of accounting work.

I highly recommend speaking to an accountant!

Julie Stroud said: Jul 13, 2012
Julie StroudViolin, Viola
11 posts

In addition to the other great comments, I would add that it would be wise to check with your Secretary of State’s and county auditor’s offices. Each state, county and city has its own rules and laws for business licensing and while private music teachers running studios from their homes normally don’t have to meet special requirements, there might be city or county ordinances that could easily be overlooked by accident.

For what it’s worth, I do everything myself. I’m cheap (lol) and it’s too much work to get all the records in order for an accountant to do the taxes for me, so I do them myself. I have a liability insurance rider on my homeowner’s insurance policy for my home studio that includes a specific written waiver to operate said studio. I’m not a lawyer, but as far as I know, the only way you can get out of personal liability in the United States is to become a corporation (that is its primary legal purpose).

In the US, we’re still fighting about health insurance. We have passed the first hurdle in the process, and most states are in the process of setting up insurance exchanges and pools so that small business employers and individuals who can’t get private insurance will have a place to obtain it. Right now though, individual insurance is considerably more expensive than group insurance, so the only way to keep the cost down is to buy the least expensive or least coverage policy one can find. Or go without, which a lot of teachers probably choose to do because they can’t afford it.

In the US, registering your studio under a different name doesn’t have any tax benefit or any other benefit as far as I can tell. I’ve been registered as a different name for four years. It more or less is a way for the teacher to keep business and personal life separated. If your studio name is different from your given name, you’ll need to register your business properly (see paragraph 1) before you can open legal business accounts with your studio’s name on them (bank accounts, brokerage, etc.)

Hope this helps…

Julie

Julie Stroud
Violinnovation.com

Community Youth Orchestra said: Jul 14, 2012
Community Youth OrchestraViolin, Viola
70 posts

…the only way you can get out of personal liability in the United States is to become a corporation (that is its primary legal purpose).

That’s right. In most cases, a teacher would establish their business as a sole proprietorship, like being an independent contractor. In this case, you and your business are treated essentially as one and the same in terms of liability.

As a corporation or LLC (limited liability company) though, you and your business are separate legal entities. Depending on your state, that might involve more taxes and the accompanying paperwork headaches! :P

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