Separation

Separation
By Jeff Stone

Introduction:
It’s that time again… The tax man cometh. I’ve been doing magic for a long time now. However, last year was the first year that I actually tried to separate my personal finances from my business finances. What a pain, and you need to do it too!

Checking Account:
Let me start by saying that I am no expert on taxes and finances, etc. However, my accountant Bill Brough (Bruff) is. I hired him in the middle of 2007. It was then that I realized I had no idea what I was doing. All of the details of what Bill helped me with would be too much to go into here, but let’s say this: SEPARATE CHECKING ACCOUNTS!

Get a separate account for your magic. Remember, this column makes the assumption that you are interested in magic as a business, not a hobby. Start simple. When you get paid for your next gig or you get income from your next product sale, take that money to a bank and open an account. Deposit the full amount into that account.

Different banks require different amounts to open an account. For example, US Bank requires $100 to open an account. However, once the account is open, there is no minimum balance, so you can withdraw the $100 the next day.

Discipline:
Okay. So now you have an account. What next? Discipline. That’s what! Do not buy anything magical unless you write a check against your magic account. DO NOT, I repeat DO NOT spend money from your personal account to buy magic stuff. If you don’t have enough money in your magic account to buy what you need for magic, then DO NOT BUY IT.

This was the hardest part for me to get down. Whenever I shipped a product, or ordered a product or bought supplies for a gig, it was hard for me to remember to use my business account. Also, half the time when I got a check from a client, I would just cash it rather than put it in my business account. Bill, my accountant, is still recovering from the several coronaries that I’ve caused him with my shoe-box filing system.

Why?
So what’s the point of separating things? Well first of all, it lets you keep your finances organized, and you can quickly tell how much your business costs to run and how much you make from it. You may be spending more money on magic than you are making. That’s fine if this is a hobby, but not so fine if it’s a business. Secondly, it makes taxes much easier.

Taxes:
Again, remember, I’m no expert, so please seek the advice of a tax preparer or accountant on these issues. Having said that, there are many advantages to having a business of magic. For example, all of the books, DVDs, subscriptions to magic magazines, etc are tax deductions.

Bookkeeping:
Bill is both my bookkeeper and accountant, and he understands small business very well. My recommendation would be to find an accountant, bookkeeper and tax preparer. In most cases, they are all one person.

Hiring:
Although Bill is located here in Salt Lake City, he accepts clients in other states as well. It may be exactly what you need. Of course if you’re only getting a couple of gigs per year, then this may not be the thing for you. However, consider hiring out this portion of your business. It’s well worth the money. A good accountant can also help you with ideas to make your business grow. I’ve gotten plenty of fresh business ideas from Bill.

Growing:
Finally, consider the growth of your business. If you’re doing gigs already, then chances are you don’t really need too many new props or anything. You probably have everything you need to go do a gig tomorrow. Of course, there may be a few exceptions, but it’s generally a true statement.

With that in mind, discipline yourself to not buy any more DVDs or books with your magic income until you’ve dedicated a percentage of the income to grow your business. What can you do to grow your business? Check out previous issues of this column along with future issues. There are plenty of marketing ideas to go around.

Last year was the first year that I separated my personal from business. There were quite a few bumps in the road. My plan for this year is to make my company (Stone Cold Magic, LLC) completely self-sustaining. If I need a new deck of cards, and I have no money in my Stone Cold Magic account, I guess I’ll be doing coin tricks because I won’t be buying any cards with my personal money. You shouldn’t either. Until Next Month…

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