LLC or not to LLC?

[sophie]

In considering working in artist management, and in starting one's own publishing company, would it be wise to start up an LLC?

 

Making a living in this business is tough enough, personal assets are limited and savings?? Hello?? What's that.. that's kind of like "what's health care for full time musicians!"

 

Anyway.. back to my point, is it best, when considering working with one or two artist, as a personal manager, using a fair and reasonable contract, and actually doing your job, and NOT conflicting as a business manager, etc., to set up and LLC (Limited Liability Corp?).

 

Would it be wise to do so, just in case the artist decides to blame you for their lack of fame, or if they make it, they decide they made it with the wrong label and that suddenly it's all the personal managers fault they signed the recording contract!

 

You know, sue the one who spent all their time and money, seldom made a damned dime, put all their efforts into promoting and selling someone unknown. Does this happen often??

 

The same question for a new publishing company.

 

If so, is there a way to put them both under one umbrella?

 

Yes, I know, consult my attorney, and accountant.

 

Just wondering if it's really worth all the added expense, or if that's much expense at all?

[BandProfit]

sophie, I have to commend you on your reasons for looking into the LLC. Most people look into different business entities based on some shallow understanding of tax law. But you are looking for the correct reasons. The number one reason for choosing one entity over another is Liability.

 

You are thinking correctly. The reality is that you should calculate the "actual" risk that you are exposing yourself to (in dollars) and then make your protection equal or greater than that. If you are only dealing with one artist, then a sole proprietorship may work fine, especially if they have yet to provide any sort of cashflow where there is a libility.

 

In other words if no one is using the publishing rights to your artists works then you really have no liability right? I would worry about the added expense of setting up a higher protection business entity once the business "proves itself" as a proftable venture.

 

I am not trying to down-play the liability aspect of what you are dealing with because you have some legitimate liability on you hands. After all you are involved in handling the dreams of artists who may assume that you are the reason their dreams did not become reality or that you did not pay them their fair share. I am just saying that for your sanity and expense you may want to take a more scaled approach to covering your liability.

 

It takes next to no work to start up a sole-proprietorship and as you move up the spectrum toward the pinnicle "C" corporation, you incure more work and expense.

 

Hope that helps...?

 

Oh while you are doing your investigation of business entities you may want to check out an "S" corp which protects like an LLC but with some of the Tax benefits of a "C" Corp. See which would work better for your situation.

 

- Sean

[sophie]

We already operate as a sole-propeirtorship, and have for many years now, in the music industry.

 

I am considering artist managment after having realized that I am dumping all of my knowledge into young artist(s), for "free," and its eating into my time, and my experience and time IS actually worth something. (I do consult services etc., for a decent hourly fee).

 

It would be only one or two artists that I would take on. I have a stock contract that I would titrate to meet the needs of each individual and I would/will give the artist the opportunity to have an attorney review the document. I will certainly include a termination for convenience clause for both parties, etc.

 

If they don't want to engage an attorney, then we can BOTH waive our right to an attorney. I want to emphasize that I am NOT asking for much at all. Some managers want a set monthly fee of at least $200 per month in the event that the artist isn't making a particular monthly income. I will NOT do that to a young artist who is not making much money.

 

I'm not going to ask that of them, because I have been a working musician. I know the expense. The percentages are fair in respect to covered items, the terms quite fair (no percents from publishing or endorsements) etc. etc. I emphasize fair, fair, fair.

 

 

So, in reading what you wrote: no, there's not much money involved here and although I will keep separate records, it can fall under our sole-propeitorship for tax purposes.

 

With the publishing company, it is only our works, I will not publish the artist I manage. I feel that would be a conflict of interest.

 

Would it be safe to say that at this point, I'm okay to stick with the sole propeitorship?

 

However, what about the preverbial "what-if" there is a copyright dispute? What IF we have a song that hits, and out of the blue someone says "Hey I wrote that.." and they elect to sue? I would think if a song made it to that point; placed with a major label they may fight on behalf of the song?

 

However, I know not to assume squat in this business!

[BandProfit]

You are right not to assume anything. And I have to say that it sounds like you have put some "brain time" into the operations portion of your business. Which - as I'm fond of saying - is the one thing most people will never do.

 

You must understand that I am very conservative in recent years. Consequently I think of a new business venture as a test. Because my crystal ball has been broke for quite some time I run my new business ventures at the lowest level of effectiveness until they prove themselves to be profitable.

 

This includes keeping costs low. Monitary costs, as well as time costs. The more complex you make your business entity the more of both

resources it will take to maintain.

 

It sounds as if you are running contracts with your clients, which is always your first line of defence. If there is some area of liability that you are specifically concerned about see if you can make a more robust contract to cover it.

 

Now, since you are probably not planning on suing youself, the publishing company is not a factor. So you only need to consider the liability of the management. If you keep it simple and have a plan to scale up your protection then you should be fine.

 

Having said that I must state that I am not an attorney nor do I play one on TV and I haven't stayed in a Holiday Inn Express in quite some time.

 

Hope this helps - Sean

[sophie]

Okay, so I watch Boston Legal, once in a while! LOL Anyway, I hear what you are saying. I think that I'm pretty well covered in my contracts; especially since I am not asking much of anything from the artists, and that I am not running up many expenses at all.

 

Given we operate a full time music business, long distance is not an issue, cell phone bills are not something that I run up, webspace is piggy-backed etc., etc., and to be very honest, I can integrate into my day to day work promoting the artists.

 

The only expense, to which I will be able to work around, is recording them for demos to promote them, but even then, that's their responsibility, so I don't have to do that but I have the equipment to do it with; so no big deal.

 

The biggest expense is attending out of town gigs, which I don't anticipate many at the beginning, or business meetings, which again, a lot of those contacts are in my backyard, and I don't have to go to gigs, but make reasonable efforts, etc. etc.

 

Truly, I drew up fair contracts, beyond fair, and in the best interest of both parties. We can both bow out with proper notice.

 

Anyway, the publishing issue can get ticky if you sign to a label and make the mistake of signing a pub deal with the label! You do a co-pub deal and then that label crashes and burns and a dispute developes.

 

No label, no more co-pub; not if the co-pub deal did not list any assignees etc. Oh, and don't sign with an affiliate; publisher, of the label. Find your own, or become your own. If you sign with any outside publisher (other than yourself) get a reversion clause!!

 

We've run into that before. The publishing is within the recording agreement, then the label goes under,yet they think they still own the co-pub rights, then you try to push your songs somewhere else, the old publisher wants a piece of the pie and you've already registered the titles which are rightfully your intellectual property, to your publishing entity.

 

If you have to go to court and IF you lost, then you can be threatened with infringement; HOWEVER, usually they give warning: pull the titles or else and if you made any money, give us our lions share.

 

Generally, this does not happen, but it can, so that's why I'm thinking, LLC for the publishing co?? However, then I think 99 percent of what one worries about never transpires, so ??

 

The biggest lesson learned: never, never sign a recording contract with the publishing agreement in the body of the contract UNLESS it's a lame paragraph that only defines the company and no other entities; assignees etc.

 

When signing a recording contract, be your OWN publisher!! Or find a reputable outside entity NOT affiliated with the label you are signing too. Make sure the publisher, if they are also the administrator, does their job keeping up with your payments!!

 

Also, read the clauses about "accounting statements!" Never assume you just get regular statements. Generally, you have to request an account statement and then it's a particular time frame that you must do it within.

 

Ah, the little things that make life so grand.

 

Also, get signed up with BMI or ASCAP! I learned that one over the years too. No one can collect or report to you, if you are not affiliated!!

 

Hey, it could mean the difference in dog food money in your old age; those little royalty checks!

 

You've acutally been a big help; a rather cathartic exchange for me! This has elped me think through my own hesitations and unjustified neurosis.

 

Believe it or not, I've access to three attorneys! Family, friends, etc., and one says "LLC" the other says "too much expense.." It's all about what's going to cost money.

 

I'm all about low overhead. I've got it down to art! Think cheap. Think recycle aka if someone is throwing out office furntiture haul it home! LOL!

 

I think I'll keep on keeping on and just not freak out, not yet. Not until I'm driving a car worth more than my house!! LOL!

 

I am more concerned with filing taxes on time AND trying to find a way in this business, to help promote awareness abou the lack of health care to musicians!!!!

[BandProfit]

Rock On - Sean

[redviper]

All I can say is wow. I wish I could find people to work with like you guys. You really have your stuff together and actually care about other people instead of only caring about yourself. I hope someday to be able to work with people just like you.

 

I hope you are successfull in your business adventures, because you definitely deserve it.

[sophie]

There are a lot of snakes in this business, but there are good people out there too. The one thing to look at when you are dealing with a possible management situation is not how expensive their car is, our how big their home is, or how many credit cards they drop on a dime.

 

I read a quote, which was pointed out to me once, and I've never forgotten it: "Despise the free lunch."

 

To take that too literally is not something I would do, hey a free meal is a free meal, but the basic foundation of being overly impressed and allowing someone to be in charge of every move you make in respect to your career, can destroy you.

 

That's why your personal manager should never even suggest wearing the hats of your business manager etc. Early on in the game, you are your own business manager, and if you have enough savvy, you can continue to do so, and you should ALWAYS keep up with what that "business manager is doing on your behalf."

 

Never give anyone all of your power.

 

Also, understand that the little guys, managers just getting started, have much more at stake and more to gain by working with you. If their roster is small then you won't get lost in the shuffle. They'll have time to focus on you and if they are ambitious, which you'll see right away, you can make great strides towards achieving your goals.

 

Working with someone who has "been there and done that" from your artist perspective can be a great thing, UNLESS that person is still spending most of their time gigging and promoting themselves on a regular basis AND in with this they possess a jealous spirit.

 

There are people out there who will want to help you out, but they'll also be jealous of you, and hence they may act in your best interest to a degree and then hold you back from moving forward; say for instance encouraging you to get locked into a deal that would tie you down for years to come and thwart off any major label representation.

 

The biggest issue is for you to become self-educated. Berklee online, offers some INCREDIBLE courses. I've only taken one, Music Publishing, but I am thrilled with what I learned! Our instructor knew what he was talking about and it was GREAT!.

 

It is all online and I'd recommend it to anyone.

 

Also, if you write songs, which ALL performers should do original material, check out songwriters101! Great website.

 

Go to the library of congress website and read up on copyright law.

 

Join a performing rights agency, like ASCAP or BMI. Have you done that yet??

 

You should.

 

Read, read and read some more and then keep reading! If you are tenacious in this business, you will be approached by a lot of people who will want to help you. Take your time and get to know the person(s) before engaging their assistance.

 

There's so much information on the internet and in books, plus college courses, it just takes research and then the field is broad with many "if's and or's," etc.

 

Most of all, enjoy you career and only work with people who appreciate your talents at all times, i.e., whether you are playing in a pizza joint, or headlining fesitvals!! Your true supporters will be there for you all of the time!

 

Do you have a website?

[redviper]

Thank you all the information is very helpful. I'm basically going to be the manager of my band for now. I'm just trying to learn as much as possible about the business and how to go about it.

 

I've always wanted to go into business management anyway so this is a good start for me to learn a little bit about it.

 

I still have sooo sooo much work left to do. I still have to do a website and record a CD, we are about to start playing shows. Alot is starting to happen for us so I'm hoping I can get everything sorted out.