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How to Make Money With Your Music

December 3, 2017
Learn how to start collecting streaming royalties, performance royalties, mechanical royalties, digital performance royalties, and sync fees.
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You’ve finally finished your first EP and now you want to release it into the world. So the first step is… uh, what is the first step? A lot of artists hit this road block. You have some music that you’re really proud of, that sounds professional, but how are you meant to start making money off of it? This guide is going to teach you how to register your artist alias as a legitimate business and start taking advantage of various income sources.

Let me start this off by saying that I'm not a lawyer and that if you don't feel comfortable registering your business yourself, you can pay a lawyer a one time fee to do it for you. However, the process is quite straightforward and I've registered three businesses myself: my audio engineering business (Black Ghost Audio), my artist brand business (Virtus Entertainment), and my music publishing business (Grip The Blade Music).

Register Your Business

You're about to be making a substantial amount of income from music. The first thing you should do is set up an entity to conduct business through. By registering a business with the government, you'll receive a business number that will allow you to open up a bank account for your business, you’ll be able to apply for loans, get potential supplier discounts, and be able to hire employees.

Whether or not you need to register as a business depends on your particular situations, it varies somewhat from state to state, and it’s something you should talk to a lawyer about.

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There are slight differences in the way that each province or state requires you to register your business. If you live in the US, starting up a business is really easy. You can use a website like ZenBusiness to take care of the entire process for you. This is the company I used to register Black Ghost Audio as a business. If you create your business using the affiliate link in the description down below, you’ll get a free $25 Amazon Gift Card, and Black Ghost Audio will earn a bit of money as well. Alternatively, you can register your business directly with the government by filing the required forms yourself.

There are different types of businesses that exist. Some of the most common include a sole proprietorship, partnership, corporation, and limited liability company. The type of business that’s best for you, for the most part, depends on the situation you’re in. Let’s take a quick look at some of these different business types.

Sole Proprietorship: Registering as a sole proprietorship means that you're the one and only owner of your business. In this situation, your personal assets are tied into your business. I'd recommend this if you're producing music alone and just starting out.

Partnership: Registering as a partnership means that you're one of multiple owners of a business. In this situation, your personal assets are tied into your business. I'd recommend this if you're producing music with one or more people and you're just starting out.

Corporation: Registering as a corporation completely separates your personal assets from your business. If someone were to sue you, they could sue your business into the ground, but your personal finances would be off limits. The downside of owning an incorporated business is that you have to pay tax on whatever the business earns, and then pay tax again on whatever you pay yourself. Unless you’re running a company making substantial revenue, with multiple employees, it doesn’t really make sense to register your business as a corporation.

Limited Liability Company (LLC): A limited liability company, or LLC, provides you with the asset protection of a corporation, and the tax classification of a sole proprietorship or partnership. You get to take advantage of "pass-through" taxation in which the LLC doesn't pay corporate taxes. Instead, you pay personal income tax on the profits of the business and file a personal tax return. The reason you may choose to go with a sole proprietorship or partnership, instead of an LLC, is that registering as an LLC is typically more expensive.

Open a Bank Account

When you register your business, you’ll receive a business tax ID that will allow you to open a business bank account. A business bank account will help you keep your business funds separate from your personal funds. When you need to file your taxes, having your funds separated will make the process much easier.

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Make sure to keep receipts for everything you spend money on related to music throughout the year. You’ll be able to write-off these expenses which will reduce the amount of money you need to pay in taxes when tax season rolls around. You can take care of this yourself by using an online service like Quickbooks, or by hiring an accountant.

Now that you have a bank account, you’re ready to set up your income sources.

Set Up Your Income Sources

When you release a song, there are various different types of royalties that you're entitled to; this includes streaming royalties, performance royalties, mechanical royalties, digital performance royalties, and sync fees.

1. Streaming Royalties

Earned when your music is streamed online.

Example: When people stream your music via services like Spotify, Apple Music, Amazon Music, and iHeart Radio.

How to Collect in the USA and Canada: Register with Distrokid or TuneCore. If you release multiple singles throughout the year, it will be cheaper for you to upload your songs to streaming services using Distrokid. However, it's still worth taking a look at a benefit comparison because each service provides different perks.

2. Performance Royalties

Earned when your music is performed publicly.

Examples: When your song is played (recorded or live) via the radio, television, or internet. This also includes having it being played at concerts and music festivals.

How to Collect in the USA: Register with ASCAP or BMI.

How to Collect in Canada: Register with SOCAN.

3. Mechanical Royalties

Earned when a physical copy of one of your songs is made.

Example: When your song is sold on a CD, vinyl, cassette, etc.

How to Collect in the USA: Register with The Harry Fox Agency.

How to Collect in Canada: Register with CMRRA.

4. Digital Performance Royalties

Earned when your music is played on non-interactive transmissions.

Example: When your song is played on satellite radio, internet radio or cable TV music channels.

How to Collect in the USA and Canada: Register with SoundExchange.

5. Sync Fees

Earned when someone pays you (the holder of the copyright) to synchronize your music with visual media. (Note: When you create a song in Canada, you own the copyright by default)

Example: When a television show, film, commercial, video game, etc., pays to use your song in their project.

How to Collect in Canada: Register with CONNECT. You don’t need to go through CONNECT, but they can help you find people willing to license your music.

How This Traditionally Works: Typically a project (like a movie) will hire someone known as a music supervisor to find music for their film. This music supervisor contacts various music publishing companies in order to find music that will work for their project. If your publishing company pitches them your music, and they decide they’re going to use it, you get a portion of the sync fee! A good chunk of this fee will go to your publisher for setting up the deal for you. You can set up sync deals independently, so it’s not required to have a publisher.

Setting up these five revenue streams will ensure that you're collecting all the royalties that you're entitled to. Each time you release a new song, make sure you register it with the companies mentioned above. There are plenty of ways to make money as a music producer, but with very little effort, you can ensure that you're capitalizing on what you're owed.

I want to invite you to join me in the Black Ghost Audio group on Facebook; it's full of producers currently working in the music industry who are more than happy to help you improve your productions. Leave a comment below if you have any questions regarding this article. Your feedback is always appreciated, and we'll take it into account when we publish future articles.

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If you're interested in learning more about music production, sign up for a free online music production lesson with a Black Ghost Audio instructor today. They're happy to answer any questions you may have about recording, production, mixing, mastering, and music business.
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