Music business brehs question

[GrindtooFilthy]

If an advance is actually a loan since artist need to pay that money back to the label why is it then treated as taxable income

this sounds like a finesse of unknown proportions i have to pay taxes on money that I need to pay back to someone else

Imagine your employer/contractor telling you to pay them back money on your own TAXABLE income


It must be crack at this point

 

[Treblemaka]

Because labels don't always recoup advances from the artists. It's not a loan in the classic sense as there is not usually an interest rate attached to it.
It is also considered income for the artist and can be written off or tax minimized if the advance is transferred to a business entity rather than a person.

Look at it more like paying someone 3 months of their annual salary in advance, then not paying them for the first 3 months of employment because they are returning that value to you in the form of services rendered.

 

[GrindtooFilthy]

Because labels don't always recoup advances from the artists. It's not a loan in the classic sense as there is not usually an interest rate attached to it.
It is also considered income for the artist and can be written or minimized if the advance is transferred to a business entity rather than a person.

My thing is that since it can be treated as taxable income labels shouldn’t have the power or even be able to “recoup”, imagine your job asking you to pay them back money that was considered tax deductible for you. Like huh

 

[Double Burger With Cheese]

I don’t know about the tax implications, but an advance is not a loan is the sense that most think. Most times you don’t have to pay the money back in cash like you got it. It is usually recouped based on royalties. So you get a million dollar advance, you won’t see royalties until you make a million in royalties. Then you can collect royalties. But if you never recoup, you don’t have to pay the million back with money. You just never see residual income from royalties. Someone can correct me if I’m wrong but I think this is how it works.

 

[GrindtooFilthy]

I don’t know about the tax implications, but an advance is not a loan is the sense that most think. Most times you don’t have to pay the money back in cash like you got it. It is usually recouped based on royalties. So you get a million dollar advance, you won’t see royalties until you make a million in royalties. Then you can collect royalties. But if you never recoup, you don’t have to pay the million back with money. You just never see residual income from royalties. Someone can correct me if I’m wrong but I think this is how it works.

Smh this industry was designed to make sure no one wins smhh

 

[CrimsonTider]

Because labels don't always recoup advances from the artists. It's not a loan in the classic sense as there is not usually an interest rate attached to it.
It is also considered income for the artist and can be written or minimized if the advance is transferred to a business entity rather than a person.

Look at it more like paying someone 3 months of their annual salary in advance, then not paying them for the first 3 months of employment because they are returning that value to you in the form of services rendered.

You don’t have to pay it back.

The labels give you money to make a product for them

they sell the product

once they make the money back that they invested in you, they share some of the profits with the artist

 

[GrindtooFilthy]

You don’t have to pay it back.

The labels give you money to make a product for them

they sell the product

once they make their money back they invested in you, they share some of the profits with the artist

Hmmm like a share holder/investor I guess that makes sense then but the money they make back or try make back is usually 25% or 5x the amount they gave the artist or more

 

[R.E.N. Spells Ren]

I thought the only time you have to pay it back is if you don’t deliver on the terms of the contract.