For most musicians, the most effective way of protecting themselves legally is forming a limited liability company (LLC). Many musicians fail to realize the benefits of forming a business entity. The business aspects of a music career are very competitive.
LLCs can provide a variety of benefits, including beneficial tax treatment and legal protections. An LLC can form with a single member or with multiple members, meaning both solo musicians and musical groups can choose this business structure. The best reason to form an LLC as a musician is protecting your personal assets from lawsuits involving your band. After forming an LLC, you could not be sued personally for a legal situation involving your band.
Benefits of Registering as a Business
Another benefit of establishing an LLC is that it can allow you to formalize your band’s relationship. For instance, although it is not required, most LLCs have an Operating Agreement, which is a document that defines the rules of the LLC, including the responsibilities of its members. You can use your Operating Agreement to help prevent disputes between you and your bandmates. In this document, you can set expectations for each of your band members and can also outline a policy for a member leaving the group. You can also decide if your band members will manage your band or if you will hire an outside manager.
Forming an LLC can also provide you with impressive tax benefits. You can use your LLC to handle all revenue related to your band, and you can access beneficial business tax deductions. Establishing an LLC for your band can also help you avoid paying self-employment taxes.
How do I start a musician LLC?
If you are a producer, artist, songwriter, or anyone in the music industry who wants to build a business like an LLC then you’ll want some guidance on how to get started.
- The first step is to register in your state. Preferably, where your home state is located. If the LLC is not in your state, you may need to contact a third party agent to receive legal filings.
- Second step is to choose your business name for the LLC. Remember that the music business is huge so the name you have chosen may be taken. Consider alternative name for your company or business. You want your name to correctly describe your business. An example would be a recording studio, with the right description of it’s services.
- Next step is to file your business with the appropriate documents. This includes an operating agreement which has all the business owners listed. A lawyer can help you with draft documents in creating your LLC. There is a filing fee as each state charges a different fee.
- You’ll then need to obtain an employer identification number. To get an employer identification number you can contact the internal revenue service.
- Lastly, you’ll need to open a bank account. This is a way to keep your business and individual accounts separate. Your business bank account should finance all of your business expenses. From assets and liabilities, a tax professional can help you for more in-depth analysis of your business tax deductions.
Can an LLC be a music label?
An Limited liability company (LLC) is the best option for a record label. Why? Because it is less expensive and easier to set up. Whereas an S corporation (S corp) is usually more complex for a record label company.
If you need help with determining should a musician form an LLC, you can post your legal needs on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.