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Band Incorporation....important? and when?

Discussion in 'Band Management [BG]' started by Runnerman, Jul 18, 2012.


  1. Runnerman

    Runnerman Registered Bass Player Supporting Member

    Mar 14, 2011
    Hey guys. Looking for advice here.

    How important is it for a band to incorporate...or become a business entity?
    I've been in a good band for almost 3 years and we have had moderate success.
    We have had no written band agreement which I know is not good. The relationships are such that we are able to hammer out financial stuff together....so far without issue.

    Income so far has either be split or banked to purchase equipment/studio time/merch. We have an account that the BL basically keeps our balance in and sends out an email everytime we deposit/withdraw from it. My biggest concern is that we just finished a CD and have invested in a bunch of new merch and with the income from this we need to get a bit more serious in how we account for things, including the tax man, etc. We are also looking seriously at going with a management group....really just taking the next step I guess.

    I'm thinking we are already behind in where we should be. Thoughts? Advice?

    Chris.
     
  2. pedro

    pedro

    Apr 5, 2000
    Madison, WI.
    I've been a CPA for about 30 years and I would suggest a lot depends on the numbers involved and the accounting/business skill level of the band leader. Incorporating the band will complicate everybody's life considerably and may not offer much in the way of benefits.
     
  3. Runnerman

    Runnerman Registered Bass Player Supporting Member

    Mar 14, 2011
    Well the BL owns his own business so he must have some accounting skills. I just feel like its getting more and more complicated. The band account is in his name. Maybe a good band agreement and also some kind of better bookkeeping is all we need at this point.
     
  4. pedro

    pedro

    Apr 5, 2000
    Madison, WI.
    Quite possibly that might be a better solution. In lieu of a corporation you might consider a partnership instead.
     
  5. Dantreige

    Dantreige

    Oct 22, 2009
    Wisconsin
    Are you in the US? Do you get a 1099 at the end of each year from the BL? That should be some indication if you are doing it "right." Do you have a tax professional do your taxes at the end of the year?

    In some states a verbal agreement is just as valid as a written one.

    You may need to be more specific on what you think needs to be addressed before I give you advice on what the agreement should include.
     
  6. pedro

    pedro

    Apr 5, 2000
    Madison, WI.
    Depending on what the agreements are they might imply a partnership which would also require a separate tax filing, etc. Payment from a corporation would usually constitute either wages or dividends, and I'm not sure you want either. A general partnership would allow the partnership entity to collect all revenues, pay all band expenses and distribute remaining profits. Just keep in mind that you will be taxed on your share of the income whether or not the partnership pays it.
     
  7. Runnerman

    Runnerman Registered Bass Player Supporting Member

    Mar 14, 2011
    Yes in the US. No we don't get 1099. We have taken out little personally to this point, we have reinvested the majority of any income into equipment and promotion. And of course most recently the CD production and merch. We each had to kick in for the CD so net to date there's probably been little if any profit to the group. With the cd produced along with other merch I'm expecting income from that plus we are hitting the ground running with a pretty full calendar of gigs from now through Sept. Up til now it seems like it's been simple. It's getting to the point where a proper set of books is going to be needed I think. I just get this feeling we are flying by the seat of our pants. That's probably at the root of my question.
     
  8. Runnerman

    Runnerman Registered Bass Player Supporting Member

    Mar 14, 2011
    Wow....lots to think about. I have looked into entertainment lawyers in the past, perhaps a consultation would be a good idea.
     
  9. pedro

    pedro

    Apr 5, 2000
    Madison, WI.
    It's tough for me to gauge how serious all of this based on your postings. But unless you're negotiating a record deal or a tour etc I don't think you need an entertainment attorney.

    Yet.

    Ps I am happy to talk to you and/or your band if you like.
     
  10. ChrisB2

    ChrisB2 Bass... in your fass

    Feb 27, 2008
    TalkBass > Off Topic
    You are already a business entity, as soon as the first dollar crossed someone's palm.

    IMO and from what I can tell from your posts, all you need at this point is a good band agreement to define and protect each members interests, and to define the roles, duties, money distribution, and exit procedures. A partnership agreement would work; find one online and modify to suit.

    This is assuming you're operating at a level under five figures... ten grand is often the number that puts you on the radar. If you're over that, I would get a business or music attorney and go from there, and I would DEFINITELY go LLC at that point. Your attorney can advise you on the best way to set that up for your individual preferences.
     
  11. Runnerman

    Runnerman Registered Bass Player Supporting Member

    Mar 14, 2011
    Thank you for the advice guys. This helps. Pedro, I will pm you.
     

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