A sole proprietorship is the easiest and cheapest business entity to own. To begin a music therapy sole proprietorship, just get out there and start providing services. So long as you are an MT-BC meeting any state licensure or permitting requirements, than you’re good to go; if you currently provide therapy sessions, music lessons, or anything else unaffiliated with another business, than you already are a sole proprietor! This is because there is no legal distinction between you as “one natural person” and the business entity. You are the sole (single, as opposed to partnerships) proprietor (“owner” or person with exclusive rights) of your business services. This means you are entitled to all profits, but also burdened with “unlimited responsible” for all debts and liabilities. All business income (or losses) is taxed as your own direct income (or losses), and along with your business expenses, is filed through a Schedule C on your personal tax return (Form 1040). So keep good records and receipts of all money coming in and going out to prepare yourself for income taxes. You would be wise to set money aside (I suggest at least 20%) as soon as you earn it, and be sure to pay the IRS in total by April 15th, or preferably in quarterly estimated filings by the 15th of April, June, September, and January. For more information, see the U.S. Small Business Administration (SBA) and the Internal Revenue Service (IRS) websites. Accountants may provide a free consultation to help you understand these responsibilities, and offer reasonable rates to help you file taxes.
What about a better name? You and the business are a single entity, but you may prefer not to market your personal name. While carefully crafting a business name, check to make sure it isn’t already registered in your state nor trademarked nationally. You may also want to peruse social media and find available URLs before committing to a name. Each state will be a little different, but the brief paperwork and minimal costs of filing a “DBA” (Doing Business As, also known as a fictitious name) are a snap.
For example, Jennifer Sokira was sole-pro for several years: “Before I began CTMTS (Connecticut Music Therapy Services) I was a sole proprietor. I had a regular full-time music therapy job at a school and I didn’t really spend a lot of time thinking about the “after school” clients as a business. I took on some extra clients because I needed extra money. When I was ready to take the next step and leave my full time job, I just opened an LLC to create a separation of filled up my clinical hours via word of mouth. I plugged along for a couple of years with my main focus on music therapy, my clients and being a clinician, but I didn’t spend a great deal of time focusing on my identity as a business owner. This changed as my business grew and my vision for my business expanded, however I’m glad that I focused on my clinical work during those first few years. I needed that time to grow into the role of a business owner. This allowed me to become a good mentor to my employees and to develop a trustworthy reputation as an effective therapist, which is a great asset in growing my company now” (Pizzi & Guy, 2015, p. 23).
Any questions or corrections? Comment below, or e-mail RileyMTBC@gmail.com. This is the second part in a serial about music therapy business legal tax structures. Follow on Twitter @rhythmNreason or check out our website tag “Business Legal Structures.”
BizFilings. (n.d.). When to File a DBA. Retrieved from http://www.bizfilings.com/learn/file-dba.aspx.
IRS. (n.d.). Estimated Taxes. Retrieved from https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Estimated-Taxes.
IRS. (n.d.). Form 1040, U.S. Individual Income Tax Return. Retrieved from https://www.irs.gov/uac/About-Form-1040.
IRS. (n.d.). Schedule C (Form 1040), Profit or Loss From Business. Retrieved from https://www.irs.gov/uac/Schedule-C-(Form-1040),-Profit-or-Loss-From-Business.
IRS. (n.d.). Sole Proprietorships. Retrieved from https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Sole-Proprietorships.
Pizzi, M. & Guy, J. (2015). Leading The Way: Music Therapy Businesses of the Future (e-book). Available through the AMTA bookstore at https://netforum.avectra.com/eweb/shopping/shopping.aspx?site=amta2&prd_key=65654da6-2fa6-49ff-8f59-fe5382ba6d69.
SBA. (n.d.). Sole Proprietorship. Retrieved from https://www.sba.gov/content/sole-proprietorship-0.