Protecting Your Assets
From DJWiki
Now that you’ve experienced the performing side of the Mobile DJ business, let’s take a look at the business side.
Pencil Prospects
Anyone who calls and says, “We’re all set, I just need to run it by my fiancee, can you hold the date?” is not ready to book. They may have told several of your competitors the same thing and continue to shop. If you hold the date, and someone else calls who’s ready to sign, what are you going to do? Rule one: Never “pencil” anyone in on your bookings calender. A booking is official only when you have a signed contract and received a deposit. Explain to every “pencil prospect” that no date is guaranteed until the deposit and agreement are received. This is business.
Here’s another reason everything should be in writing: You get a call at ten o’clock on Saturday morning for a party that night. The caller says his DJ just cancelled and he’s really in a bind. What do you do? If you are available and really want the gig, ask the client if you can meet them prior to the job to get a contract signed and collect a deposit. If time doesn’t allow this, offer to do the job on the condition that you receive cash (in this instance, don’t take a check) at the time you arrive. This way, if you get there and find you’ve been “had,” you limit your risk to the time it took you to load and travel to the location. It’s aggravating, but not nearly as bad as playing the whole evening only to find the client has left and you don’t know how to reach him. Remember, if you don’t have a contract, it’s always “No Pay, No Play!”
The purpose of a contract is to put down on paper everything you and your client need to know about the booking. It should be simple, yet complete. It can be as basic as, “who, what, where, when and sign here.” Or it can include a few formerly defined “terms and conditions.”
The terms and conditions of your contract or agreement should spell out exactly what you, the DJ, need from the client, in order to perform your service. First, it should be the client’s responsibility to provide you with a “reasonably” secure stage area with easy access. If there are a lot of stairs, you may need to bring a helper. If you don’t tell the client in advance that this will cost extra, he’s under no obligation to pay you. If you need a table 8 feet long and 3 feet wide, three standard chairs and need to be located within 15 feet of an AC outlet, specify so in your contract.
If the client has requested a light show, which will require you to connect your sound system and lighting system to different circuits, note this on the contract so the client can make the arrangements. If your light show includes fog, your contract should have a clause that states something to the likes of: “If any guest finds the fog discomforting, the DJ’s liability is limited to, upon the client’s request, curtailing the use of fog.”
Second, specify that you cannot be held responsible for things that are out of your control. What if you have transportation problems enroute to the job, such as an accident or traffic jam? What if you get to the location and find the client has given you the wrong address? (It’s happened.) Assuming you can find out where you are supposed to be, you’ll be late by the time you get there. This is not your fault and you need not compensate the client.
Tip: As a courtesy, when you arrive late for a job (whether it’s your fault or not), it’s good business to either offer the client “compensation time” or credit toward a future booking for the time missed. Clients are quick to recommend a DJ who gave them fair treatment even though the situation was out of the DJ’s control.
You also may want to include a phrase that permits you to stop your performance in the event any guest is behaving in a manner that puts anyone at risk. The obvious example would be guests who have had too much to drink and decide to hassle the DJ. If they are really obnoxious and falling all over your equipment, a brief shut down will usually get the attention of someone who can help you.
At many afternoon wedding receptions and family reunions, parents let their small children run wild. Kids are fascinated by what we do and love to get into our things. Your contract should give you the right to insist children be kept away from your gear. Here’s a suggestion: “In order to prevent liability resulting from an accidental injury to any individual attending this performance, (DJ service) reserves the right to deny any guest access to the equipment owned or leased by (DJ service). In the event the DJ believes an unsafe situation exists, he/she may call upon the client to remedy the situation. If no action is taken, the DJ may cease operation until the situation is resolved.”
In the final paragraph, state your terms for payment. Include:
The amount of deposit required (a minimum of $50 to 50% or more of total). If the client must cancel, specify that it must be in writing. It is a good practice to refund a portion of the deposit if cancellation is thirty days or more in advance of the event. If less than thirty days, that’s up to you. Some DJs refund all or most of the deposit (fair), some credit the deposit toward a future booking, others just keep it. Let your conscience be your guide.
When you expect payment of the balance (no later than the conclusion of your performance).
Your overtime rate (rate for each hour past the contracted stop time).
Note: Anytime you include “terms and conditions” in a contract, you should have a lawyer review it. What sounds good on paper, may be meaningless in court. Laws vary from state to state, province to province and country to country. The examples set forth here should not be construed as universally applicable or enforceable. On the facing page is a simplified standard agreement to supply DJ services used by many DJs in the U.S. and Canada. Enlarge by 125% on a copier to fit an 8 1/2” x 11” sheet of paper.
Contents |
Six-Step Bookkeeping System for Non-Corporate DJ Services
Keeping accurate records of how much money you make from, and spend on, your business is essential. If you understand basic bookkeeping, the following procedure will be easy to use. If you need further assistance, consult a qualified accountant or bookkeeper. There are also numerous user-friendly computer software packages that will do the job. Remember: The time to set up your bookkeeping system is when you start your business, not at tax time.
• “Bookkeeping” is simply the recording of day-to-day business transitions and transactions.
• Some form of bookkeeping is required by law for every business.
• Daily entries or business transactions are made in BOOKS OF ORIGINAL ENTRY, or JOURNALS. This is called JOURNALIZING.
• Transferring those entries into the BOOK OF ACCOUNTS, or LED GER, is called POSTING.
• You can do your own bookkeeping while developing the skills to direct the financial affairs of your own business.
The two most widely used methods of accounting are: CASH BASIS —Where income is considered earned only when the payment is actually made and expenses are considered only when paid. DJ services (except corporate services) use “CASH BASIS.”
ACCRUAL BASIS —Where income is considered earned when goods have been sold or services performed, although payment may not have been received. Expenses, too, are considered when incurred and not when finally paid.
STEP ONE
Deposit all receipts from your business into your business checking account. Pay all payables (bills) by check from this account. If not possible, pay from your personal account by writing a check payable to cash. Reimburse yourself from your business account. Be sure to note on the check what you are reimbursing yourself for (postage, office supplies, etc.).
STEP TWO
When your monthly bank statement arrives, JOURNALIZE (write) the entries into a journal (notebook). Break down each entry in detail. For example, note whether each deposit is from a SALE (money from customers) or ADVANCE FROM PROPRIETOR (money loaned to business by you). Note each check you wrote on the account and for what purpose it was written. For example: office rent, purchases, fees paid to DJs, etc.
STEP THREE
Set up a book of accounts, or ledger, assigning a page to each account. POST each journal entry into your book of accounts. Note each entry with the journal page number (J1, J2, etc.), so that you have a journal reference to cross check later, if need be.
STEP FOUR
Prepare your “business profit” and “loss statement” from your ledger. This will give you your NET PROFIT (or LOSS) BEFORE PROPRIETOR’S PERSONAL EXPENSES.
STEP FIVE
Prepare your PERSONAL INCOME STATEMENT and PERSONAL EXPENSE CHART. This will show you the NET INCOME REALIZED FROM BUSINESS for tax purposes.
STEP SIX
File your BUSINESS INCOME STATEMENT, PERSONAL INCOME STATEMENT & PERSONAL EXPENSE CHART (see following pages) in your General Personal Income Tax file.
NOTE #1: You must keep complete and accurate records of the money you earn and what you spend on your business. Be especially careful recording your automobile expenses. Keep a notebook in your vehicle and, each day, log in your mileage, purpose of the trip and amount spent on fuel, oil and repairs.
NOTE #2: If you do not declare cash you take in as taxable income, you cannot deduct any of it that goes back into the business. Also, if you ever apply for a loan, you can not show these unreported cash earnings as part of your total annual gross or net.
NOTE #3: Because tax laws change frequently and because there are many things that may effect the percentage of tax you pay, use these charts only as a guide to setting up a bookkeeping system, not for paying your federal, state or provincial income taxes.
The following bookkeeping system is not designed to replace an accountant, however, it will give you a better understanding of what bookkeeping involves and save you the expense of going to an accountant with work you can easily do yourself.
J. Smith Disc Jockey Services Business Income Statement Year Ending December 31, 1997
Statement One Income:
Sales: $10,000.00
Advances: (Money you loaned to business) $ 1,000.00
Total Income $11,000.00
Expenses:
Rent $ 3,000.00
Phone $ 600.00
Advertising & PR $ 1,000.00
J. Smith-Draw (What you paid yourself) $ 2,000.00
Fees-DJs $ 2,000.00
Total Expenses $ 8,600.00
NET PROFIT TO PROPRIETOR BEFORE PERSONAL EXPENSES $ 2,400.00
John-Smith-Proprietor
Personal Income Statement
Year Ending December 31, 1997
Statement Two
Income: Net Profit from Business $ 2,400.00
add Drawings (Recapture of drawings from statement #1) + $ 2,000.00
Total Profit from Business $ 4,400.00
Less Advances (Your advance returns/deposits) $ 1,000.00
Net Profit from Business $ 3,400.00
Expenses:
In-Home Office Expenses $ 820.00
Auto Expenses as Per $ 440.00 $ 1,260.00
NET TAXABLE PROFIT FROM BUSINESS $ 2,140.00
(To your tax form as income)
John Smith-Proprietor
JOHN SMITH DISC JOCKEY SERVICES
Supporting summaries - Term: 1/1, 1997 to 12/31, 1997
Personal Expense Chart
HOME OFFICE EXPENSES
Mortgage (interest only) $6,000.00
Utilities (hydro/electric and water) $ 600.00
Heating (if not included in utilities) $ 500.00
Real Estate Taxes $1,000.00
House Insurance $ 100.00
Major Repairs (Not decorating expenses)
Total Overhead of Home for Year $ 8,200.00
Business Portion 10% $ 820.00
(assuming 10% of square footage of house is used for business)
AUTOMOBILE EXPENSE
Gas, Oil, Repairs $ 1,500.00
Automobile Insurance for Period $ 500.00
Depreciation for Period $ 2,400.00
Total Overhead of Auto for Year $ 4,400.00
BUSINESS PORTION 10% (Be sure you can justify) $ 440.00
Insurance
This is another area that calls for professional help. Herb Cohen, originator of THE PROS DJ service in Philadelphia, stresses that liability insurance is a must. Cohen explains: “Even if you’re not the guilty party, the cost of simply defending yourself can be very high. The cost of the insurance is certainly less than a costly defense, especially if you are innocent.”
Equipment insurance is another matter. Cohen advises that, “Sometimes it pays to self-insure, not to buy insurance but to hold the risk yourself. This only makes sense if you can quantify the downside. Which is cheaper in the long run, replacing an occasional system or buying the insurance? Check with the agent who carries your homeowner’s policy or car insurance and see how much an extra “rider” is. Explain to your insurance agent or representative the type of business you have. Find out what kind of coverage is appropriate. Once you have all the facts, you can make an intelligent decision. Think about it. What are the possibilities of a total loss of your audio, lighting and records? What is the total dollar value versus the likelihood of it occurring?”
In Canada, two types of insurance are available to professional DJs who are members of the Canadian DJ Association at very reduced rates (compared to normal consumer rates).
1. Liability Insurance with coverage of $2,000,000.00.
2. Physical Damage or All Risk Property Floater coverage for the loss, theft or damage of sound and lighting equipment. Canadian DJs are encouraged to contact the CDJA for more information.
Public Performance of Copyright Material
There are several organizations in the U.S. and Canada that protect the rights of those who write, perform, publish and produce recorded music. The responsibility of these groups includes making sure that their members receive proper compensation for their work. In the U.S., these organizations charge licensing fees to broadcast stations (radio and TV) and public places that have musical entertainment. Mobile DJs are exempt from paying fees provided they play at facilities that are licensed or play only for private parties. For your reference, here are the names and addresses of the primary organizations:
The Canadian Copyright Controversy
In Canada, DJs are acknowledged as an active and vital part of the music industry. This recognition has lead to open communication between the Canadian Disc Jockey Association and the major record labels represented by the CRIA (Canadian Recording Industry Association). The Canadian government accepts “Mobile Disc Jockey” as an occupation and allows CDJA representatives to speak before Federal Senate Committee hearings on issues effecting the industry. Information and instructional materials on operating a Mobile DJ service are available at most libraries and educational institutions. But Canada’s DJs have found that, along with all this positive attention, have come some rather unwelcome problems.
During the last half of the 1980s, the music industry became aware of the large number of MDJs using their own compilations (A compilation is a collection of songs and artists contained in a single set of record albums, cassettes or CDs). In this instance, the concern was with operators who purchased one copy of a song and duplicated it onto several compilations. In the past, little notice had been paid to DJs (and others such as aerobics instructors) who illegally (without permission, license or authorization) copied music to tape. Canada’s original Copyright Act, passed in 1924, allowed for a maximum penalty of only $200 which made the law hardly worth enforcing. Now, an upgraded Federal Copyright Act has been enacted and violators are subject to fines of up to $25,000 per music selection copied (to a maximum of $1 million) and up to five years in prison. A single violation could take away everything a DJ owns or hopes to own simply because they copied a song on to a cassette tape for DJ use. Obviously, this new act was not good for DJs and, therefore, did not totally serve the best interest of the music industry.
The record companies, represented by the CRIA, began to talk of a special “license” for DJs and others who copied music as part of their occupation. Wanting to protect it’s members from prosecution under the new act, the CDJA responded immediately and requested the right to be included in any discussions or negotiations relative to the development of this license. Their request was granted.
After eighteen months of meetings and confrontational negotiations between the A.V.L.A. (Audio-Video Licensing Agency Inc.), which represented the record companies and the CDJA, a DJ license supported by both was formulated and instituted on September 17, 1987. This license allows Canadian DJs to duplicate and distribute music on audio cassette for DJ use only. Tapes cannot be produced for sale or any other use.
In January of 1991, a second license, called a “Tape Supply License” allowed license holders to produce tapes for DJs, aerobics instructors, dance studios, exotic dancers and other uses. Although these tapes cannot be sold, they can be leased. This license permits a broader use of music duplication and distribution and is more expensive than a regular DJ license. These two licenses issued by the A.V.L.A. offer users a chance to join the system and eliminate the risk of heavy fines or a jail term.
Canadian DJs can obtain information and a licensing fee schedule by contacting the A.V.L.A., 1255 Yonge Street, Suite 300, Toronto, Ontario, M4T 1W6. Note: The only agency with an accepted licensing program for DJs is the A.V.L.A. This does not exclude the requirements for permission from the other two rights holders: PROCAN and CMRRA.
Musical Copyright in the United States
Does a licensing program similar to the one in Canada await DJs in the U.S.? According to David Leibowitz, General Counsel for the RIAA, there is, at the time of this writing, no plan by American authorities to license DJs. Leibowitz explains that to enact such a law would require a great deal of congressional maneuvering as the antitrust laws of the U.S. restrict this type of licensing. Mr. Leibowitz adds, however, that DJs should not take this as permission to illegally use or duplicate music. DJs should still receive permission from the record companies for the tracks they are using off compilations they have self-produced.
Registering Your Business
To open a business checking account under the name of your business and insure that yours is the only business in your area using a certain name, you will be required to register your business under a “d.b.a.” This stands simply for “doing business as” and ties your business name together with your name. The process for obtaining a certificate of “d.b.a.” involves going to the county clerk’s office and searching through files of previously used business names. If you are the first to open a business under the name you have selected, you will be asked to fill out some forms and pay a fee.
Canadian DJs are required to register for a “c.o.b.” which stands for “carrying on business as.” A c.o.b. can be obtained through your local provincial office of The Ministry of Consumer and Commercial Relations, Companies Branch. For Ontario, the address is: 3rd Floor, 393 University Avenue, Toronto, M7A 2H6, phone (416) 593-8880. Like in the states, a fee is involved.
If you wish to obtain a trademark for a business logo, call or write The United States Department of Commerce, Patent and Trademark Office, Washington, DC 20231. In Canada, a copy of the Trade Marks Act and Rules can be obtained from Supply and Services Canada, Printing and Publishing Division, 270 Albert Street, Ottawa, Ont. K1A OS9 or from any Supply and Services bookstore. Other information may be obtained from the Bureau of Intellectual Property of Consumer and Corporate Affairs Canada, Place du Portage, 1 Victoria Street, Hull, PQ K1A 0E1.
In either country, the Trade Marks office may not express an opinion about a particular trade marks eligibility for registration until a formal application has been filed. It is imperative that a search be done prior to the filing.
Incorporating
On the topic of whether or not a DJ service operator should incorporate, attorney at law, Sheldon Starke advises in favor of incorporation. According to Starke, “In general, operating under your own corporation, where permitted by law, may protect you from vulnerability and eliminate headaches you do not need. For example, what happens if someone gets hurt tripping over one of your cords? Are you, the DJ, responsible? As you get more experienced with the legal system, you will realize that the answer is not whether you have or have not committed a wrong, but whether or not you are a good candidate for a lawsuit. It is possible for you to be 100% in the right but the manner in which the evidence is presented to a jury could result in a guilty verdict. By operating under a corporate veil, it is the corporation, and not you personally, that is the guilty party.”
