Your band may be your passion, but if it’s also your livelihood, you should consider registering your band as a business—particularly as an LLC. Registering your band as an LLC can protect your band members if you get sued and provide some other benefits. Here’s some information to get you started.
What type of business should a band be?
When deciding to register your band as a business, you have three basic business entity types to choose from:
- Sole proprietorship/partnership
- Limited liability company (LLC)
- Corporation
If you haven’t registered with the state and your band is making money, you already effectively have a sole proprietorship (if there’s only one “owner” of the band) or a partnership (if there are multiple “owners”). However, a sole proprietorship/partnership doesn’t offer you any liability protection if your band gets sued.
Most musicians who turn their band into a business form an LLC. Starting an LLC for your band gives you liability protection and could help you save money on taxes. LLCs are also fairly straightforward and flexible. Corporations are more complicated and take more work to maintain, so they’re not the right business structure for most bands.
Do I need an LLC for my band?
It depends. Forming an LLC takes effort and costs money in state fees, so if your band is just starting out or is more of a hobby, it might not worth forming an LLC. However, if you and your bandmates are serious about making music your career, it’s definitely worth thinking about making your band an LLC. Here are a few benefits for musicians in having an LLC:
- Liability protection. Musical artists get sued all the time for writing songs that sound too similar to other artists’ songs. If your band gets sued and isn’t an LLC or a corporation, you and your bandmates could be held personally liable. That means you could lose your personal assets, such as your personal savings or your car. However, if you have an LLC, your band can only be sued for its business assets. So they might take your amp, but at least they won’t take your house.
- Record labels might be more willing to sign you. As an LLC, the music created by your LLC can be legally owned by the band. This is appealing to record labels because if your band splits up, they won’t have to handle disputes over who owns the music.
- Establish member roles and responsibilities. You can create a legally binding agreement called an operating agreement that establishes what each member’s roles, rights, and responsibilities are. This can help you avoid disputes later on.
- Lease equipment more easily. With an LLC, you can lease equipment directly through the band, rather than having one member lease the equipment and be solely financially responsible for it.
- Tax benefits. Having an LLC often makes it easier to write off business expenses and save money on taxes.
How do I start an LLC for my band?
For the most part, starting an LLC for your band is the same process as starting any other type of LLC. The exact requirements and cost will depend on which state you form your LLC in. We recommend you consult a certified public accountant (CPA) before you take the leap. However, if you do decide to form an LLC for your band, these are the basic steps you’ll need to take:
- Appoint a registered agent. This is the person you designate to accept legal notices from the state on behalf of your band. You could appoint a band member, an outside person such as your manager, or a professional registered agent service.
- Choose an LLC name. You might want to use your band name as your LLC name, but first you’ll need to do a business name search to make sure the name’s available for use in your state. You’ll also need to make sure your name follows state laws, and it will need to include the words “limited liability company” or an abbreviation, like “LLC.”
- File the formation document with your state and pay a filing fee. In most states, this document is called LLC Articles of Organization.
- Get a Tax ID number from the IRS. This number is called an EIN.
- Draft an operating agreement. Your LLC operating agreement is where you put your band members’ rights and responsibilities into writing.
- Open a business bank account. It’s important to keep your business finances separate from your personal finances to maintain your band’s liability protection.
- File state reports and pay taxes. Most states require LLCs to file an annual report, and tax requirements vary by state.
Want to learn more? Check out Northwest’s guide to Starting an LLC.