Going legit and forming an LLC

Discussion in 'Band Management [BG]' started by mikeyvr6, Jul 21, 2003.

  1. mikeyvr6


    Feb 19, 2002
    Hey guys,

    A few of my bandmates are on the warpath to form an LLC and going legit since we are now booking 4-6 gigs/month averaging $500 per show. What really kickstarted this idea is our guitarist decided to go out and buy a cube van for hauling all our equipment even though he has no license and has 2 DWIs in the last year, so the only way we can get it on the road is to title and insure it in the name of the LLC.

    Right now, each member owns his own personal instrument, amplification, mic, and monitor. The drummer owns the PA system and we pay him $10 each per gig for maintenance, repairs, etc. on his equipment.

    Our keyboardist is an attorney (which is either good or bad, depending on the situation:rolleyes: ) and has just sent out an email detailing all the steps needed for creating an operating agreement, the need for business insurance, a checking account, etc. It kinda scares me a bit seeing all this! I can understand the need for all of this--well, maybe at some point! But do you think it's overboard for a band that is bringing in the amount of cash we are?

    With the exception of the lead singer, I have known and have played with the other 3 guys for upwards of 15 years now so there's no trust issues. I'm just afraid that I'm gonna end up with $20 in my pocket after the 7-8 hours of busting my tail setting up the PA and playing the show! I really do this for the love of music, but I'm also at a point in my life where the money matters as much as whether or not we get free beer during the show. Any of you ever gone through this before and care to share your thoughts? I'd really appreciate some other points of view before we head down this path!

    Sorry for the novel!

  2. Eric Moesle

    Eric Moesle

    Sep 21, 2001
    Columbus OH
    There's absolutely no benefit whatsoever to forming an LLC to play 4 to 6 nights a month aside from the van insurance issue, unless none of the members trust each other and need the operating agreement to resolve disputes. You simply don't make enough $$$ to make it necessary, IMO (and yes, I am a lawyer).
  3. wulf


    Apr 11, 2002
    Oxford, UK
    Is there a plan to increase the number of bookings or the rate they pay. There's a big difference between making a change to stay where you're at and making a change to enable you to move forward.

  4. ConU


    Mar 5, 2003
    La Belle Province
    Ridiculous IMO.Totally unwarranted,and you do realize that the little bit of $$ you're making now becomes a revenue you're going to have to declare come income tax time.
  5. mikeyvr6


    Feb 19, 2002
    Yes, we're fully aware of the tax situation. The comment has been made that the LLC will "show our professionalism" and will "propel us to the next level." But is there another level for a mainly blues & some classic rock group? We don't play the mainstream nu-metal/pop crap to do the large, lucrative venues & festivals. That leaves us with small clubs and smaller $$ (which we are more than happy with). I honestly can't see us booking for more than $700, and that's IF we can build a large following and become one of those "must see" bands in the area. At what point do you think it would make sense to form an LLC?

    Thanks for your responses so far guys---it's comforting to know that I still have my head on straight! If anyone else would care to share, please do!

  6. ConU


    Mar 5, 2003
    La Belle Province
    When the overwhelming majority of everyones income is derived from the band solely.

    I don't know any clubowners or agents for part-time bands who care if you're incorporated or not.
  7. fastplant


    Sep 26, 2002
    Forming an LLC is actually a great idea if you are being paid by check. Because the club will inform the IRS that you were paid and you will owe taxes on that money. Now, you can write off so much on the band, such as vehicles, insurance stuff like that. If you don't form an LLC you have to pay those taxes on your own, if you do you can most likely write off most if not all of your taxes.
  8. Eric Moesle

    Eric Moesle

    Sep 21, 2001
    Columbus OH
    Even if you don't form an LLC, you can still write-off those expenses, its just that the person incurring the expenses gets the write-off.

    Example, if your da bassplaya, you write off your string purchases, cords, speakers, amp, etc. etc. But only the owner of the band van can write off its expense. There's the difference.

    Frankly, at what you're making, its not worth the LLC IMO.
  9. ConU


    Mar 5, 2003
    La Belle Province
    They don't pay by by check.It's a cash buisness.
    And if you want to claim all your expenses as a musician,you have to provide receipts from the clubs.You'd be hard pressed to get a receipt from any club-owner I've ever dealt with.
    Maybe the odd festival gig or special event here or there,but that's about it.
  10. Murf


    Mar 28, 2001
    It's a funny one allright, personally I wouldnt go down the LLC route if your doing 4/6 gigs a month (we do 4/6 gigs A WEEK).

    Theres a band in my area that went down that route, basically they get paid by cheque for every gig and then the bank gives them a weekly wage out of that, however, because of whatever agreement they have they have to meet a certain quota every month and as such they have to take every crappy little gig they can get their hands on.

    Also the bassist is an "employee" of the company (he joined after they went legit) so even if theyre not gigging he HAS to be paid. Might be worth bearing in mind if down the line you want to take on board new members.
  11. fastplant


    Sep 26, 2002
    Are you sure about that? I talked to an accountant friend the other day that said you can't do that. If you can, that sounds pretty good.
  12. mikeyvr6


    Feb 19, 2002
    Is this a stipulation in your contract? I'd say about 1/3 of the clubs we've played have paid by check. I figured it was the club owner's preference whether he pays cash or check.

    Thanks for everyone's comments so far. I talked in depth with my attorney-keyboardist and after crunching some estimated numbers it looks like our take per man after all costs associated with keeping a clean LLC, vehicle expenses, insurance, etc. would come out to about $35 a show. Absolutely not worth it at all! Let's just hope we can convince the other 2 guys of this...


    Thanks for all the insight guys!
  13. ConU


    Mar 5, 2003
    La Belle Province
    Really:confused: Not up here.(Canada)I've been playing clubs up here for 10 years,I can count on one hand the number of cheques I've seen.I played alot in the states on the hotel circuit,and that was cheques,here too,but not clubs.
    Most club owners don't want a money trail,because they don't pay performance rights fees or union scale for muzo's or tech's.
  14. lneal


    Apr 12, 2002
    Lee County, Alabama
    Silly idea, that LLC. Since you'll have employees, you will have to fill out reams of paperwork. I was incorporated once and having to fill out all the 941, 940 telefile, FUTA, all the SSI forms and a bunch of others I can't even recall made a wreck of me! This could piss off the club owners as well, because as mentioned earlier, they hate paper trails. And you'll be making one big honking one right to their door. Sorry to shout but, DON"T DO IT! :cool:
  15. ding_man


    Dec 24, 2006
    Celina, OH
    Everyone knows that you can write off musician expenses.. it was on a Tax company's commercial last year.
  16. Jazzdogg

    Jazzdogg Less barking, more wagging!

    Jul 29, 2006
    San Diego, CA

    If you haven't written a business plan that includes a detailed partnership agreement, as well as cash-flow and profit projections - and had it reviewed by a competent and dispassionate attorney and CPA, your band probably isn't ready to contemplate a formal business venture.

    If all aspects of the proposed venture don't stand up to scrutiny on paper, it really doesn't matter what any of us think.
  17. SteveC

    SteveC Moderator Staff Member Gold Supporting Member

    Nov 12, 2004
    NE ND
    You only give the PA owner $10 a show?
  18. mrpackerguy

    mrpackerguy Supporting Member

    Jul 3, 2004
    Madison, Wisconsin
    By whom and how? You think the attorney is gonna quit his day job for the band? I've played in a cover band for 29 years and at our peak we played 4-6x/month. The only thing a venue owner cares about is his bottom line - he could care less about whether you have an LLC. I don't see the point.
  19. barthanatos

    barthanatos Insert witty comment here

    Feb 8, 2006
    South Carolina
    He said each of them do.
  20. BadB


    May 25, 2005
    How much will the bloodsucking attorney be making? :eek: