How is your band set up as a legit business?

[formula2fast]

I am in the process of setting up my band as a legit business for a couple of different reasons. One being that to be on iTunes and other internet vendors, you must be a legal business or have a tax ID number, and two is for insurance reasons with liabilities and such.

 

I have been looking into doing an LLC and and S-Corp. I know there are a few other options out there too. How are you set up? What are the advantages and disadvantages of your situation.

[Poker99]

I am in the process of setting up my band as a legit business for a couple of different reasons. One being that to be on iTunes and other internet vendors, you must be a legal business or have a tax ID number, and two is for insurance reasons with liabilities and such.

 

 

Not really.

 

Just set up a cdbaby account.

[AndThinkOfTexas]

 

:Just set up a cdbaby account.

 

 

While other vendors offer similar services, I believe artists obtain a bit more credibility when using iTunes.

 

That's just my thought.

[formula2fast]

 

While other vendors offer similar services, I believe artists obtain a bit more credibility when using iTunes. That's just my thought.

 

 

I agree. We are also doing this so we can write off our expenses which is huge for us.

[AndThinkOfTexas]

 

I agree. We are also doing this so we can write off our expenses which is huge for us.

 

 

I'm glad you asked this question. I'm anxious to hear what others have to say.

 

This doesn't really answer a ton of questions in relation to how you set yourself up as a small business, but it's a start. It sort of details the "business plan" that bands should expect to create for themselves, assuming they decide to treat their band like a small business. It's a good read. Here's the link: http://www.musicdish.com/mag/?id=10390

[formula2fast]

I just read that article about a week ago. I is a good one and does give some good advice, but I am still not sure on which way to set it up so it is the most advantageous for us musicians.

 

This chart kind of lays out the basics of each way of doing it http://www.incorporate.com/business_structure_comparison_chart.html?utm_source=google&utm_medium=ppc&iq_id=5675324&cid=5675324&utm_term=5675324 but without being a lawyer or an accountant, I still am not 100% sure. The liability thing is really the scary part. I want a business set up so that I pretty much am not liable (personally) for any type of lawsuit or anything like that.

[AndThinkOfTexas]

 

but without being a lawyer or an accountant, I still am not 100% sure.

 

 

Many people that I know of have gotten lawyers for this exact reason. I'm not sure if there is a safer way, ha. But really, the LLC way looks the best, from what I can tell.

 

Take a look at this... maybe you've seen it?

http://www.magichappenslegal.com/MH/Articles/Entries/2007/4/16_Partnership_or_LLC__Choosing_the_Best_Business_Structure_for_your_Band..html

[BlueStrat]

 

I agree. We are also doing this so we can write off our expenses which is huge for us.

 

 

 

You don't need to do any of that. You can if you want, but having one guy in the band be designated leader collect the money and 1099 everyone else works just fine. Honestly, setting up a corporation is overkill unless you have a lot of assets together as a band like a bus or truck, a huge PA, lights, management, a record deal etc etc.

 

And FWIW, your social security number is also your tax ID number. I'm on itunes and never had any issues.

 

I ran my band for years as a sole proprietor and just did the 1099 bit with my guys. It's a hell of a lot simpler and I never had any problems writing off expenses. Just make sure you have a good accountant who's up on current tax law. They're worth every dime you pay them.

[primeelite]

You NEED to have your band as an LLC is you are pulling in any type of substantial income or doing shows. This will protect you and allow you many other options such as write-offs etc. The best way for a band to get this done as I have recommended to many other bands is use LegalZoom.com. They will set your band up as an LLC and the lawyer fees will be lower as they have a full company set up in a way to make it only around $350 including state fees to make an LLC. This is the way to go.

[intellectsucks]

 

You NEED to have your band as an LLC is you are pulling in any type of substantial income or doing shows. This will protect you and allow you many other options such as write-offs etc. The best way for a band to get this done as I have recommended to many other bands is use LegalZoom.com. They will set your band up as an LLC and the lawyer fees will be lower as they have a full company set up in a way to make it only around $350 including state fees to make an LLC. This is the way to go.

 

 

An LLC or corporation is NOT required to track your income and write of expenses for taxes. Each person is a business in and of themselves as a sole proprietor. Incorporating can also offer some problems of its own. If you switch members for whatever reason, removing them from the corporation can be tricky. It will also create issues regarding contracts and residual income. If you are really dead set on creating a seperate organized business, dig around to find a lawyer who has experience working in the music business and have them consult with you to let you know whether or not the legal protection offered by a corporation will offset the inherent problems of incorporating. I have been writing off my band related expenses for many years and tracking income without any type of business formed. As has been discussed earlier, a full band can elect someone to filter all monetary stuff through and then run 1099s to all the other members. An easier way to do this is to split the income evenly and have each member keep track of their own expenses. It is completely legal and safe, just work with your accountant to make sure you are filing correctly.

 

As a related side note, what do you think you will be held responsible for personally that incorporating will protect you from?

[AndThinkOfTexas]

 

As a related side note, what do you think you will be held responsible for personally that incorporating will protect you from?

 

 

 

I would imagine that one would want protection from the un-predictable. There are so many circumstances that could arise in which being an LLC would serve advantageous to an artists/band.

 

Granted, I'm not a lawyer- but it seems to me that there are different determinants for every artists that could help them decide whether it is necessary to become an LLC, small business, or what have you. My personal belief is this: The more serious you take yourself as an artist, the more serious others will take you. Presenting yourself professionally can go a long way in an industry over-run by amateurs, not to mention the fact that certain decisions can help and protect you in the rare case that something crazy happen - i.e. a drummer tosses his sticks into the crowd and pokes an eye out, ha.

 

Things happen... in any business. One should always be prepared for such cicumstances as a part of their business plan.

[BlueStrat]

The more serious you take yourself as an artist, the more serious others will take you. Presenting yourself professionally can go a long way in an industry over-run by amateurs, not to mention the fact that certain decisions can help and protect you in the rare case that something crazy happen - i.e. a drummer tosses his sticks into the crowd and pokes an eye out, ha.

 

 

Having an LLC doesn't necessarily have anything to do with how seriously or you take yourself nor how professionally you present yourself.

 

If your band sucks, no one cares that you've incorporated. And if your drummer acts recklessly, being in a corporation isn't going to absolve him of personal responsibility from his actions. Neither is not being incorporated going to make you liable for them.

 

Things happen... in any business. One should always be prepared for such cicumstances as a part of their business plan.

So is it safe to assume your band has an attorney, an accountant, 6 months of operating expenses in the bank and liability insurance?

 

 

I'm not trying to be cute here, and like I said, you can do what you want, but unless you're in a position where alot of money and assets are involved, incorporating isn't necessary and isn't going to gain you much if anything.

 

But wtf do I know?

[AndThinkOfTexas]

So is it safe to assume your band has an attorney, an accountant, 6 months of operating expenses in the bank and liability insurance? I'm not trying to be cute here, and like I said, you can do what you want, but unless you're in a position where alot of money and assets are involved, incorporating isn't necessary and isn't going to gain you much if anything. But wtf do I know?

 

Many, if not most, professional bands have attourneys - whether it be to explain the prupose of copyrights or to aide in other legal matters. I can't say I know many people with accountants, however, as there isn't as large a demand for one in a mid-level band scenario, where income and outcome can be recorded, reasonably easy, by members of the band. And not every business is the same... so while having 6 months operating expenses for a band would help, I don't see why it's crucial. Unless there is absolutely no money being made, which seems to contradict the purpose of running a band as a busines, there should reasonably be enough money to sucessfully operate without it - which you should agree with, being as you were bringing the point up sarcastically. And YES... liability insurance. Many venues have made it their policy to only allow bands to play if they have obtained liability insurance. And regardless of whether it is required by a venue, it would be a good investment, assuming a band is touring as a part of their profession/career... hence the band being a business.

 

And, whether you're being "cute" is beside the point. I already mentioned that there are different determinants as to whether an artist/band should evolve itself into a business. Little Johnny in his bedroom, occasionally playing at a house party, should probably reconsider the idea - obviously. But there are scenarios in which it would benifit arists to take these necessary steps... otherwise, it would never be done - ever.

[intellectsucks]

 

Many, if not most, professional bands have attourneys - whether it be to explain the prupose of copyrights or to aide in other legal matters. I can't say I know many people with accountants, however, as there isn't as large a demand for one in a mid-level band scenario, where income and outcome can be recorded, reasonably easy, by members of the band. And not every business is the same... so while having 6 months operating expenses for a band would help, I don't see why it's crucial. Unless there is absolutely no money being made , which seems to contradict the purpose of running a band as a busines, there should reasonably be enough money to sucessfully operate without it - which you should agree with, being as you were bringing the point up sarcastically. And YES... liability insurance. Many venues have made it their policy to only allow bands to play if they have obtained liability insurance. And regardless of whether it is required by a venue, it would be a good investment, assuming a band is touring as a part of their profession/career... hence the band being a business . And, whether you're being "cute" is beside the point. I already mentioned that there are different determinants as to whether an artist/band should evolve itself into a business. Little Johnny in his bedroom, occasionally playing at a house party, should probably reconsider the idea - obviously. But there are scenarios in which it would benifit arists to take these necessary steps... otherwise, it would never be done - ever.

 

 

I think that BlueStrat is talking about keeping a lawyer on retainer, which would be very helpful but also very expensive. Most bands simply don't have enough income to justify such an expense. I think what you are referrring to is to have a contact with a lawyer who can answer your legal questions as they come up. I agree that this is a great idea. However, I would recommend that the band consult with this lawyer first before they decide to incorporate so that he can evaluate whether or not they are exposing themselves to enough liability to justify incorporating.

 

Also, while being able to present yourselves as a business CAN add a certain air of professionalism, below a certain level, it may be more trouble than it is worth. If you are an S-Corp, and your band gets paid in cash, to create the proper paper trail needed for tax purposes, you need to deposit the money into an account, then pay each member out of that account as part of their salary. THEN you need to file tax forms for each member of the band. If the cash is divvied out the night of the gig and each member files as a sole proprietor, it is much simpler. Of course this is not the only factor involved in that decision but that is why I recommended that the OP consult with a lawyer to decide if incorporating would be beneficial to them.

[AndThinkOfTexas]

 

I would recommend that the band consult with this lawyer first before they decide to incorporate so that he can evaluate whether or not they are exposing themselves to enough liability to justify incorporating.

 

 

Agree 100%.

[primeelite]

And yes you do need an LLC for the one who wrote the large article quoting me. With an LLC you can easily edit out a band member when it happens via a one page form. Asking "What do you really think an LLC will protect you from". Lets say your band went to a venue and played and the owner thought you screwed him over and sues you. If the court believes you are wrong and lawsuit goes through then you could owe the venue owner 25,000. Most bands can't afford 25k in cash so next thing they do is go to your assets. Which means band members cars, etc to pay off that debt. With an LLC they cannot take any of your personal items but only the businesses assets.

[formula2fast]

 

Asking "What do you really think an LLC will protect you from". Lets say your band went to a venue and played and the owner thought you screwed him over and sues you. If the court believes you are wrong and lawsuit goes through then you could owe the venue owner 25,000. Most bands can't afford 25k in cash so next thing they do is go to your assets. Which means band members cars, etc to pay off that debt. With an LLC they cannot take any of your personal items but only the businesses assets.

 

 

This is what I meant by being protected.

 

 

This seems to be a great discussion topic. Keep the responses going.

[intellectsucks]

 

And yes you do need an LLC for the one who wrote the large article quoting me. With an LLC you can easily edit out a band member when it happens via a one page form. Asking "What do you really think an LLC will protect you from". Lets say your band went to a venue and played and the owner thought you screwed him over and sues you. If the court believes you are wrong and lawsuit goes through then you could owe the venue owner 25,000. Most bands can't afford 25k in cash so next thing they do is go to your assets. Which means band members cars, etc to pay off that debt. With an LLC they cannot take any of your personal items but only the businesses assets.

 

 

Sure you can fill out a one page form. What happens if the person who did all the filing is the one who leaves? What happens if you forget or if it is processed wrong? Now you're looking at more potential legal headaches if you are signing contracts as an LLC, because the person who was supposed to be removed is technically still part of the LLC. Also, lets say you have four members and three are 100% agreed to sign a certain contract but the fourth is 100% against it. He can then use his status in the LLC to prevent that contract from going forward (or give the other three a big headache in getting it finalized). If you're all sole props, then the three who agree sign the contract and move forward, the fourth either gets the boot or leaves.

 

As far as getting sued, the situation you are referring to is very very unlikely. For one thing, you would have to be getting paid very close to that amount, if you are not, then there is very little you would be responsible for. If you do something that makes the club owner want to recoup whatever money he paid you, then you'll more than likely go to small claims court. No WAY the court costs are getting anywhere near 25 g's. The other way you would be getting sued for a large amount like that would be if you cause that much damage to property or people. If your stage show contains that potential (pyro technix, dangerous props, lots of crowd participation on stage etc), then an LLC might be a good idea. The idea that you could "screw over" a club owner that is paying you a couple hundred dollars and then get sued for $25,000 is just not feasible.

[primeelite]

I was just using an example with the club owner getting ripped off but you would be surprised the lawsuits I see daily working in the music industry, people get sued a lot for crazy things and every once in awhile they get through. If you are concerned about a one page form or having to call your local government office you maybe should not think about trying to make any serious money with music. Once you start making money in music you and your manager, lawyer, and business manager will be sitting down with 1, 2, 3, and even 100 page contracts on a weekly basis. It is better to be protected than to get into legal trouble. Also many bands perform under a trade name without even a DBA and that is actually illegal if you are taking money to do it, you can even get sued for fraud by another band who has the same name.

[intellectsucks]

 

I was just using an example with the club owner getting ripped off but you would be surprised the lawsuits I see daily working in the music industry, people get sued a lot for crazy things and every once in awhile they get through. If you are concerned about a one page form or having to call your local government office you maybe should not think about trying to make any serious money with music. Once you start making money in music you and your manager, lawyer, and business manager will be sitting down with 1, 2, 3, and even 100 page contracts on a weekly basis. It is better to be protected than to get into legal trouble. Also many bands perform under a trade name without even a DBA and that is actually illegal if you are taking money to do it, you can even get sued for fraud by another band who has the same name.

 

 

You're absolutely right, once you reach a certain level, having a legal incorporation is essential, however below that level, it can be a real waste of money. Four guys who are playing local bars and clubs for $200 bucks a night to a max of 100-200 people probably don't have any need for incorporating. Once they start playing to 1000-10000 people for 5-10k a night, then all of a sudden the need to be incorporated becomes very clear. Other factors come into play too. Do you have an elaborate stage show? Do you use pyrotechnics? Do you have other risk factors that need protecting against? Then yes, by all means incorporate, no matter how big or small your gigs are. If not, then you probably don't need to incorporate. Bottom line: ASK A LAWYER.