Starting a Band: What You Need to Know from a Business POV

All bands require a little behind-the-scenes effort to keep things running smoothly. A successful band must pay attention to the business aspects of music. Read on for six tips that can help your band start off in the right direction.

1. Launch an LLC

It may seem odd to form a limited liability company (LLC), but the purpose is to shield band members from liability.

A band could face liabilities in many ways, whether with venues, publishers, a booking agent, tour manager, or other bands. An LLC would shield you from being personally liable for these lawsuits if you lose one, meaning your personal assets would be off the table.

A corporation offers this same protection, but LLC's are much more flexible when it comes to ownership, management, decision making, taxes, and profit sharing.

If you don't create an LLC, your band will probably be treated as a general partnership and you and the other band members would each be fully liable for any of the band's debts or liabilities. You could even be personally liable for something another band member did without your knowledge. 

Creating an LLC for your band is a simple process. You'll first check your state's business formation website (usually the Secretary of State's office) to make sure your band's name is available for use as a business name. If it's not available, you'll need to choose a new official business name and register the band's name as a DBA, or "doing business as" name.

You'll file a document with the state to officially create your company. You should also have an LLC operating agreement, which is essentially the same as a band partnership agreement, discussed below. 

The LLC's owners will share the band's profits in the way you've described in your operating agreement. If you have musicians who perform with the band but aren't LLC owners, you'll have two choices for paying them: 

• They can be employees of the LLC. If you have employees, you'll need to run payroll, withhold taxes, and pay half of your employees' payroll taxes. Employees need to fill out a W-4 to withhold taxes from their paychecks. 
• They can be independent contractors. Independent contractors need to fill out a W-9 and pay their own taxes. 

If you and your bandmates are close, you should chat with them about whether they prefer to be employees or contractors. More importantly, a business accountant can help you understand the difference between employees and independent contractors and choose the classification that's best for your situation. An accountant can also advise you on the tax aspects of running an LLC.

2. Register a publishing company

If you write songs, you might consider creating a publishing company. Even if you're a solo songwriter and not in a band, forming a publishing company can help protect your interests in your music's profitability.

Music royalties are a complex topic, but they stem from the fact that songwriters have a copyright to the music compositions they create. This copyright gives the songwriter the exclusive right to perform the musical work publicly, reproduce and distribute it, and create other works based on it. If anyone else wants to record the song, play it live at a music venue, or use it in another way, they must get a license from the copyright owner.

Fees for those licenses are paid in royalties. Songwriters are entitled to half the royalties for a given song, while half goes to the music publisher. To collect these royalties you have three options:

1. Register your songs yourself with a performance rights organization such as BMI or ASCAP and receive the songwriter portion of the royalties directly. If you register songs on your own and you don't have a publishing company, you can't collect publishing royalties for your music. 
2. Form your own publishing company. This allows you to collect both songwriter and publisher royalties. It also means you'll be responsible for making sure royalties get paid.
3. Work with an established publishing company. The company may handle the entire publishing process and keep all the royalties, or it may co-publish the work with your publishing company. The advantage to this is that publishing companies are industry professionals experienced in monitoring and collecting royalties. They may also market your songs to other artists, increasing your potential royalty income. But the publishing company will keep all or part of the publishing royalties.

The route you choose will depend on the stage you're at in your career, your willingness to deal with the administrative side of your music, and whether you need or want the kind of music promotion services an outside publishing company might provide. 

If you do form a publishing company, your publishing company can be a sole proprietorship, which may only require filing a DBA application to get started.

3. Start a business bank account

Keeping track of your finances while managing your band is a lot of responsibility. Instead, launching an LLC bank account as a newly formed business can help you stay on top of your money.

A business bank account allows you to separate your business expenses from your personal ones. While this may seem minor, keeping business and personal finances separated is the key to preserving the limited liability that comes with an LLC.

A business bank account makes your life easier because you'll always know how much money the band has. And when tax season comes around, you'll create a headache for yourself if you have to comb through your bank statements to find old business transactions. A business bank account keeps everything organized in one place. 

Opening a business bank account is a simple process. You'll first need to obtain a business tax ID number from the IRS website. Then you'll take the ID number and your LLC's certificate of formation to your bank.

4. Trademark your band name

With millions of bands creating music all over the world, there may come a time when another band tries to use your band's name. Another band with the same name can confuse your fans and make it harder to keep your audience engaged. A federal trademark comes into play to help your band stay distinctive.

Trademarks are registered through the U.S. Patent and Trademark Office (USPTO). Your band's name must be distinctive enough to qualify for trademark protection and not infringe on any trademarks that have already been registered for the same types of goods or services. 

To be distinctive enough to trademark, your band's name can't just be generic or descriptive, like The Big Band. A name that can be trademarked might be a fanciful or made up name, like Aerosmith; or an arbitrary use of an otherwise common word, like The Doors; or a name that suggests something about your music without naming it specifically, like Radiohead.  

Before you file a trademark application, make sure the name you've selected isn't already being used for the type of goods or services you want to protect. This and can be verified with a trademark search to see if a name is available. A trademark search combs the U.S. Patent and Trademark Office database, and may also encompass state business name databases to identify any unregistered marks that are in use.

The two primary types of marks that can be registered are:

• Trademarks: Identify goods. "Trademark" is also often used as a generic term to refer to marks that identify either goods or services.
• Service marks: Exclusively identify services