by Stephanie Self
Musicians may decide to put together a team to help with business decisions and vision execution along the way. They may choose an attorney, a manager, a business manager, a booking agent, a record label, a publisher, and so forth.
Once significant income is generated or there are contracts in place projecting out what expected earnings will be, musicians may need to run their income and expenses through more than a sole proprietorship or social security number. They will have to assess what type of artist they are—solo performer, a group with equal owners, or a group with one or multiple owners with the other band members as hired musicians.
They will have to decide if they are going to run business activity through a Sole Proprietorship, a Partnership, a Corporation, or an LLC. A sole proprietorship is the default entity when there is one owner, and the owner has all the risks as well as all the benefits. As a sole proprietor, the individual is personally liable and is taxed at the individual level.
A partnership is the default entity when there are multiple owners. Owners share the risks and benefits equally unless there is an arrangement otherwise. Like a sole proprietorship, a partnership’s owners are personally liable and are taxed at the individual level.
Touring artists may want to look into setting up a separate entity for touring/merchandise specifically, with the most common entities being S Corps or LLCs. LLCs are partnerships with benefits of limited liability like a corporation. S Corps offer a single level of taxation, and shareholders are taxed at the personal level like a partnership. Both an S Corp and an LLC provide more protection for the owners and shield other non-touring activity from any liability brought on from touring.
Most important, musicians should educate themselves on the different entity options and discuss with their team before making decisions so they find the best fit for their scenario. Stephanie Self
Farris, Self & Moore, LLC
www.fsmnash.com/stephanie-selfFarris, Self & Moore, LLC (FSM) aims to make a positive, impactful difference in the life of the upper echelon songwriter, national and international touring artists and producers. The boutique firm was formed in 2015 and specializes in business management, financial planning, accounting and human resources.