The Business of VO – Infrastructure

LLC. DBA. INC. Too…many…letters! And what are the differences between them?!?

Anne and Gabby get down to the nitty gritty and go over the different foundations your voiceover business should have based on your needs. They also share how they survived a few IRS experiences and how you can prepare yourself too! Keep a search engine handy for this one – because where you live, matters!


“If you’re serious about voiceover and you’re serious about this as a business, you really need to take a look at the best way to create your infrastructure because at the end of the year, it’s going to make such a huge difference.” – Anne Ganguzza



Takeaways

Quick Concepts from Today’s Episode:

  1. Make sure you know local and state business laws when considering your infrastructure – DBA, LLC, SCorp, etc

  2. Make sure to get a separate bank account just for your business – it will make your life a whole lot easier!

  3. Consider hiring an accountant to handle categorizing your income and expenses, and preparing your end of year statement/taxes

  4. Keep detailed business records as they occur so that you are not scrambling to play catch up at tax time

  5. Use a financial software to help you keep track of your business! (and back your data up frequently!)

Tweet This

Share ideas with your own network ++

Do you count your studio as office space? Make sure it qualifies for a deduction! #VOBOSS

At the end of the year, your business infrastructure matters! #VOBOSS

When starting your business, make sure to consult your state government website first for options! #VOBOSS


Referenced in this Episode

Direct links to things we brought up ++

  1. Consult the Business section of your local state government on business options, i.e. California –  http://www.ca.gov/DoingBusiness

  2. Small Business Primer

  3. Freshbooks

  4. Quickbooks online


Full Episode Transcript

VO: Today’s voiceover talent is more than just a pretty voice. Today’s voiceover talent has to be a boss. A VO B.O.S.S. Set yourself up with business owner strategies and success with your host, Anne Ganguzza. Along with some of the strongest voices in our industry. Rock your business. Like a boss! A VO B.O.S.S. Anne: Hey everybody. Welcome to the VO B.O.S.S. podcast. I’m Anne Ganguzza your host along with my lovely co-host, Gabby Nistico. Gabby: Hey everybody! Anne: And today’s episode we’re going to talk about business infrastructure. Which I think is super important as we begin our businesses or we’re running our businesses, so that we can actually have a foundation and a base. So, Gabby. Tell me a little bit about your business foundation. Your base. How…What is it that works in your infrastructure? Gabby: So, right now, I’m an LLC and I have been for a number of years. Now, like a lot of people in voiceover I started as a sole proprietor. But I ran into a lot of limitations with that, pretty quickly. So, for my model, yeah, it made the most sense to switch over to an LLC, get my corporate paperwork, get my EIN which is an employee identification number and you know, it works pretty well and I’m pretty pleased with it. What about yours, Anne? Anne: Well, I actually, believe it or not, have been, I am a sole proprietor DBA for just about, I want to say seven years already. And, what I think is really interesting is, i know this is a huge question for a lot of talent. You know, “Do I incorporate? Do I become an LLC? I don’t understand.” You know, it’s usually I think what scares people away and I think that one thing that you and I had discussed prior to this was that it really depends on your state and the limitations of each for the state, so for example, for me to become an LLC, it was a considerable amount of money. And my accountant, when I spoke to my accountant about it, recommended that I, you know, didn’t really need to have an LLC because of the investment and so I could actually get away in the state of California with a DBA, doing business as, and that would give me all of the coverage that I needed. And the most important thing that it allowed me to do and I think that you and I would both agree, is that it allows you to keep your business finances separate from your personal finances, which is pretty darn important when you’re talking about end of the year taxes and that sort of thing. Gabby: Yeah, most defintiely I mean, there’s a lot of factors to take into consideration with this. You’re state absolutely is probably the biggest factor. Every single state has different categories and different fees related to incorporating versus LLC, because those are actually two different things, even though an LLC is a corporation, it’s a limited liability corporation. Anne: Versus an S Corp. Gabby: Right. Which, most voice actors qualify for because we do have a limited liability position. We don’t have customers coming and going. We don’t have a storefront. We don’t have inventory. So, we can typically do that. But yeah, they do vary pretty greatly. In some states, it’s very high. It can cost thousands of dollars to incorporate or to have an LLC and some states it’s just a few hundred dollars. And then you also have to look at the annual costs involved, because the annuals make a really, really big difference. Some states don’t have an annual fee, so one of the best things to do is first, if you’re kind of researching this process, go to your secretary of state’s website. And on your secretary of state’s website, you should be able to access the fee structure for these processes and in many cases you can actually file your applications yourself. Anne: That’s what I did. Gabby: Yeah and nothing pisses me off more than some of these companies that are out there that try to take advantage of that and like, they have like these corporate kits, you know what I’m talking about, Anne: Oh, I get them in the mail all the time. Gabby: Yeah. And they cost so much money for something that you can TOTALLY do yourself. Anne: Do it yourself. Absolutely. Gabby: It is so not a big deal. It’s literally, go to a website, fill out a form and you’re done. Send in a check. Anne: And all I did was go to my state, you know, my state government website and was able to do it all online, actually. And my… actually, I knew you were talking about annual renewal fees, well for example, for the state of California for a DBA I believe mine renews every five years. And so it only costs me a few hundred dollars. Whereas if I were to incorporate or LLC, it was going to cost me $3,000.00 or something of that nature and then a renewal fee every year. So, for me, the DBA works. Now, what, I guess Gabby, let’s talk a little bit about what are the main reasons to incorporate your business or form an LLC or a DBA? Gabby: Or not to do it. Yeah, so, let’s start with sole proprietorship. Let’s start there because it’s, you know, where most people are. If you are in voiceover currently and you don’t have a corporate license, but you are in fact, doing business, you’re sending your clients invoices, you’re making some money. You are a sole proprietor. Whether you know it or not. That’s the category that you fall under. So, with sole proprietorship, there’s a couple things that happen. The first is, you get taxed at a much higher rate. Which is why it’s not all that appealing long term. However, sole proprietorship does allow for things like business use of home and it allows for certain deductibles in your tax categories that can be very beneficial. But what I’ve always found is this. If you’re still part-time in voiceover and you have a day job with a W2, then you’re actually better off staying a sole proprietor for as long as possible. Anne: I agree with you there. I agree with you there. I believe that when I was doing part-time VO, it wasn’t until I, you know, I had no separation of business and personal accounts and so, I had more money invested in my voiceover career than I was making. And so, for that reason it was okay for me to just, you know, at the end of the year, 1099. So, that worked for me until I started going full time and then making money and then when I did that, I spoke with my accountant to find out what the recommendation was for the state of California. And, you know, how that would be best for my situation. Gabby: Right. Because the thing about being a sole proprietor too, and again, especially if you have another form of income, is that as long as you have what thre IRS would consider to be a failing business, meaning that you’re spending more to run it than you’re making, then, um, you can get tax breaks that would go towards the money that you earn W2 and you can actually get a decent amount of money back on your taxes. Anne: Right. Exactly. And I think that they expect you to have, like if it’s a starting business, I know that my accountant was saying something about, I think you can, for 5 years you can claim a loss. Gabby: Yes. 5 years. Anne: Yeah, 5 years you can claim a loss while you’re investing in training and equipment and you know, travel costs, whatever it is. And then after that, and I think that she recommended that you don’t, well, I work from home, but it was one of those things where you know, it raises red flags if you claim certain things and the home was going to be one of those things, if I were going to start, you know, itemizing things from my home. But I can absolutely categorize expenses in training and equipment that sort of thing. Gabby: So, I want to address that real quick, because I’ve heard this a lot from various tax professionals and accountants, and the whole thing of business use of home. This is really kind of sticky one. So… Anne: It is. It’s complex. Gabby: I’m fortunate enough, I have a very close friend who works at the IRS. He’s an auditor and so he actually did a class for my Meetup group a while back and he gave us some really, really great tips and one of those tips and one of the things that he like drilled into our brains when it comes to expensable items is the phrase: “Ordinary and Necessary.” The things that you expense have to be ordinary and necessary for running your business. And with business use of home, he said, look, accountants are afraid of it because yes, it can very easily be a red flag area, and he goes, the problem is a lot of people use and abuse the business use of home category. He goes, so, first of all, it has to be a dedicated space. He goes, it has to be a space in your home that is used exclusively for business purposes. He goes, if it’s not, if it’s like a spare bedroom that’s doubling as your office, it doesn’t count. And he goes that’s where it’s problematic for people. Now… Anne: Interesting. Gabby: …most voice actors, myself included, have a very dedicated space. So, my home, much to my husband’s dismay, doesn’t have a garage. The garage is my office, or what would be the garage. Anne: I have a dedicated space in my spare bedroom. It is a spare bedroom, but it’s my office. Gabby: Yeah, but I’ve seen your house, yeah you have a dedicated space. Absolutely. It’s all it’s used for. Anne: It’s dedicated, absolutely, it’s the only thing that happens in there. Gabby: Right. So, my garage is instead of being a 450 square foot 2 car garage is a 450 square foot office space with my booth in it, we have desks, we have all of our gear and our equipment and I have employees and yeah, so that space, I can absolutely claim on my taxes. You can claim your space, absolutely. But like I said, accountants get worried becuase they know people try to cheat this a little bit so if you’re doing it right, and you’re space is dedicated, than by all means, take that percentage of business use of home. But remember it’s a percentage. It’s not the whole. Anne: I want to… excellent advice, and one thing I do want to say is, you know, it’s so important that, you know, if you’re serious about voiceover and you’re serious about this as a business, that you really do take a look at the best way to create your infastructure because at the end of the year, it’s going to make such a huge difference and I can’t even tell you. When I was working part-time, versus working full time and having my accounts separate, it was so hard ot keep track of expenses, because they were coming out of my personal bank account and then, you know, it was just so hard at the end of the year for tax time to really categorize or itemize any of that. And once I was able to, you know, split that off into a DBA and get a separate business account, it was so much easier to just keep track of things and I will tell you that you know, after, close to 10 years full time, you know, with my business, and I did for 5 years claim a loss, because I was investing a lot of money in my business and not making as much in the beginning and I will say that keeping your records you know, organized and straight, and I will tell you like, hands down, hiring an accountant was the best thing I ever did for my business because, you know, it’s just one of those jobs that, you know, I think we talked about this in a previous podcast, is you know, if you don’t love it, you know, outsource it. I’m going to outsource it to the person who can really do a great job for me, and I just happen to be very fortunate to have a great accountant. I was, I did get audited last year. And it was a by mail audit and everything worked out perfectly. All they wanted was some additional records from my travel. And I was able to provide that to them after about 100 pages of, you know, everything else that they required. And everything worked out. So, it’s not horrible and i’m going to say that the reason why it worked out was because I was so organized and because I had a good accountant and I was able to justify everything that I had reported on my taxes, which was really great. I wasn’t really nervous about it. So, it’s one of those things that I think is so, SO, important that you really, you know, as a business, figure out which way you’re going, what direction you’re going, but no matter what you do, make sure that you have those accounts separate so that it’s easy for you to categorize and itemize things that the end of the year. Gabby: Well, it’s…yeah. I think that what happens more often than not is most of us, when we start our voiceover career are so blissfully unprepared to begin expense tracking and doing basic accounting. It is mind boggling, it’s new, it takes a new kind of discipline and dedication, and yeah, the honest to God truth is, I don’t know any voice actor that began with everything in absolute perfect working order. Instead, year one and possibly year two are like a scrambly cluster where you’re running around with all these receipts and trying to make sense of things and you know, it’s a mess. Anne: Absolutely. And at the end of the year you’re banging your head against… Gabby: Yeah. Anne: You know, going crazy, going, oh my gosh, you know, what do I do now? I just remember panicking. Gabby: Yeah! Anne: When I didn’t have it together, I was like, Oh, God, it’s the end of the year, now what do I do? You know? It’s like I’ve got to look up records here, find my receipts there, it was, and it’s almost, it’s terrifying a little bit when you’re not, you know, when you’re not an accountant and you’re not familiar and it’s not something that you love to do. It’s one of those things we just kind of like, let’s do the job, get paid for it and then go on to the next thing. Gabby: Yup. And it happens to everybody. And I think that part of that panic and that fear that sinks in is because early on, we have a really bad relationship with the IRS and we have a really bad view of them. Anne: That’s so true, that’s so true. And actually that’s why I shared my story, because I didn’t want everybody to think that, you know, it’s all evil and it’s all horrible. They simply asked me for additional records and I gave it to them. You know? And it really helped that I was prepared, it helped that, you know, I had every day, you know, I actually have, and trust me, it took me a long time to have an accountant. I mean, I was doing this on my own for many, many years until all of a sudden said, you know, why don’t I just, I found a great person who did our taxes at thr end of the year and I said, would you be willing you know, to on a monthly basis, do my books and thankfully she said yes. And it was the best move I ever made, just because she was able to along the way guide me and we could keep up with it rather than wait until the end of the year when all of sudden you’re like, oh no! I’ve gotta, you know, ok so, who were my clients, how much did I make and where’s that receipt and how much did I spend and it just, if you keep it up on a day to day basis, or a week to week basis, it makes it so much easier at the end of the year. Gabby: Yeah. And again, it’s a discipline. There are so many digital ways now to expense track having a dedicated bank account is huge, because you can literally just print your statements and not have to worry so much about paper receipts. You can use scanners, if you prefer paper receipts, that’s fine you just have to be very dedicated with their entry and the record keeping. I tell people it’s a once a month thing, in terms of maintenance in my own business. Now, here’s what’s interesting, so again, 15 years into this even with an LLC I do my own taxes. I don’t have an accountant yet, I’m actually probably hiring one for the first time this year. And it’s actually because my corporation is possibly having to move into a different tax bracket and as a result of that, it’s become over my head, but aside from that, I’ve done it myself. Every first of the month, I enter and reconcile receipts and reconcile expenses versus, you know, income and I use a combination of Freshbooks, which is my accounting software and I used TaxAct to do my filing, and so I do monthly and then quarterly reconciliation and I also pay my estimated taxes quarterly as well. Anne: Absolutely. That’s a big help. Gabby: It is something that you can manage yourself if, again, you have the discipline for it. If it gives you too much of a headache and it’s too freaky, then yes, by all means bring an accountant in. Anne: I did mine myself as well for many years. You know, it’s just, the past, I want to say the past 3 years, when yeah, I was getting myself into another tax bracket, which is a good thing. You know, it’s a good thing and at that point it was over my head and I thought maybe I’m not taking advantage of everything that I possibly can, and so, it’s absolutely worth my money to have someone to really you know, do my books for me, so that’s that’s fantastic. So, I think that, you know, our listeners might want to know again, a little bit, the advantages of incorporating or having a DBA and I know that you said the one thing that we talked about it keeping your finances separate, but the other thing might be, you know, so that people can’t sue you. Let’s talk about that a little bit. Gabby: So, you’re… an LLC or a corporate license protects your personal interests from your business interests. Now, voice over doesn’t come with a ton of risk It’s not, you know, again, like we have storefronts and inventories and those things. But if someone were to take legal action against you, it separates your business and it’s assets and liabilities from your personal assets and liabilities. Which is where you’re able to protect things like your home and your car and your savings account and, you know, the things that really matter. Anne: Absolutely, absolutely. And you know, something that I never thought. Some people. there’s a couple of different schools of thought, that you need to have an LLC, you know, do you need to be protected because we don’t typically run into those instances. For me, it’s a very… it’s a possibility, because I, you know, I have students come over to the home or I have students come over for workouts. And so, if somebody were to hurt themselves, you know, in my home, that could be a reality for me and it’s something that I need to consider for my business. Gabby: Same here. You know, for coaching, for classes, for any additional service that you might be providing. Even once in a blue moon, even though it’s very rare, I may have a client come here to record. So, yeah you have to be protected in those situations. Now, also what we see in a lot of instances is that it is faster, easier and more efficient in terms of getting paid when you are an LLC and you’re doing corp to corp transcations. Now, sole proprietors of course, yes, you know, companies would issue you a 1099, which they do with an LLC anyway, but the paperwork that I have to fill out, so, when a business is looking to add me to their vendor list, I have to fill out what’s known as a W9. But, the difference is, a sole proprietor is putting their social security number on that W9. I’m putting my business’ EIN. Anne: Actually, I’m just going to say in that state of California, as a DBA, I actually get an EIN number. Gabby: Ah! See again, that’s where it differs state to state sometimes. Anne: So yeah, super important that you guys find out, you know, how that, what are the differences in the state. So, that’s one of the reasons, yeah, I was issued an EIN number which I was surprised and that’s why, that’s why I am still a DBA after so many years of being full time because I have an EIN number and pretty much everything is covered for me and it’s only a 5 year renewal fee and so, you know it’s cost effective for me. I do have the concern though, that if people come over and hurt themselves, you know, in my space, in my studio space that I have, it’s possible I could get sued. Gabby: And well, even if you, DBA or otherwise, not have an EIN can defintiely delay payment processes. Anne: Oh, agree! Gabby: And it can make vendor relations kind of difficult because a corporation would rather work with another corporation. Anne: Exactly. Exactly. That’s an excellent point. Gabby: So… Anne: That was quite an intense podcast I would say. Gabby: I know. I know, and it’s so, I hope that people take away a couple things from it. Obviously one that, it doesn’t have to be scary. The IRS is not like this big bad monster that’s out to get you. They’re actually really easy to work with. I’ve had to talk to them and call them and do things with them many, many times and they’re really not as hideous as everyone wants to think. Anne: Exactly. I agree. Gabby: And that as you go through this voiceover journey and as you have different income brackets and different places milestones in your career, you’re going to have to do some research on these things. Do your homework. Secretary of state offices, state laws and regulations and then of course, eventually consulting with an accountant and possibly moving over to an accoutning system that’s offsite for you. Anne: So our takeaways again. Do your homework. Check out what the laws are in your state. Consider, you know, and I think we’re going to have an entire, we are going to have an entire podcast dedicated to accounting software, so we will be talking about that in the future. Probably very close to this podcast, so do you homework, find out what’s required. Absolutely, you know, step back and start to take a serious look at, you know, your categories, and your investments into this as a business as well as your, you know, what you’re getting income that’s coming in as well as expenses going out. I think that’s super important to really start trying to organize that, and like, Gabby you were saying on a monthly basis or for me, it’s like a week, or kind of a weekly to a monthly basis where i’m having an accountant. Consider and accountant if you you know, absolutely are at a loss, and I learn a lot from my accountant by the way. It’s not just like, oh here you take care of it and I don’t look at the books. I absolutely look at the books because I need her to help me, you know, find out where is my money going. You know? Am I spending too much money on equipment, am I spending too much money on whatever it could be on pay to play memberships, whatever it is, online softwares to help me do job. Whatever it is, you know, where am I make the most money? She can help me do that and she’s very willing to help me in the software, you know, find that out for myself too because I can’t…gosh I still do my invoicing. She doesn’t do my invoicing for me. So I still need to go in and be familiar with the software. So, there’s a lot of things that I’m learning. So make sure you guys do your homework. Don’t be afraid of the IRS they’re not big horrible, well, for the most part, I’ve not had horrible experiences with them. And, make sure you’re aware of your state laws. Gabby: Yep. Anne: Alright. Gabby. It’s been an amazing podcast. Thanks so much for your wisdom and your experience and I think it’s going to be very beneficial for our listeners. Gabby: Yours as well! Anne: Yes. Thank you! And I’m super excited for our next podcast where we talk about accounting software. Ok, well big thanks to our sponsor ipDTL. If you guys were impressed with our quality connection and recording which I am always impressed, you too can record like a boss! You can find out more at ipDTL.com. From all of us at the V.O. B.O.S.S. podcast, have a kick butt week! Gabby: And don’t forget to rock your business… Gabby and Anne: like a boss. A V.O. B.O.S.S! Gabby: Like us on Facebook @vobosspodcast and Twitter @vo_boss Anne: And you can subscribe on iTunes or Stitcher. Thanks so much guys! We’ll see you next week!

VO: Rock your business like a boss. A VO B.O.S.S. All rights reserved. Anne Ganguzza Voice Talent in association with Three Moon Media. Redistribution with permission. Coast to coast connectivity via ipDTL.


 

Gabby Nistico no longer appears on the VO BOSS podcast.