Lawyer 4 Musicians ™

Let’s say you are a traveling dj. You get a gig in Vegas that pays you $500 bucks. Not bad. Problem is, your travel, meals, and other miscellaneous expenses are not covered. Without setting up a legal entity, you can’t get the same tax benefits as other “business types”. If you want your music or art to be a business, its time to start treating it like a business.

A limited liability company (LLC) may be just the thing. Not only is your personal liability covered (so if you get sued and lose, you aren’t going to lose your personal assets, like your condo or your car) but you can itemize your business related expenses and get a nice little tax break at the same time.

LLC’s are easy to set up with the help of a handy dandy lawyer. In Illinois, Blagojevcih takes $500 up front and another $100 to expedite the application or “Articles of Organization”. If you don’t expedite, the state takes about 3 to 5 weeks to process your application. If you are in business for yourself, you will become a single member LLC and you will not need much more in terms of documentation. Once you are organized as an LLC you can get a Federal Tax ID Number and open up a business bank account. Any agreement you enter into from this point forward should be on behalf of the LLC, so you remain protected. Obviously, you should and will need to consult an attorney to guide you through this process.

There is a lot more to LLC’s; their advantages, disadvantages, comparisons to C or S corporations. But we can get into all of that later.

Being independent is great. Everyone wants to be independent from little kids on tricycles to old people who shouldn’t be driving anymore. For an artist holding on to their independence can be as important as the art that they produce. Keeping your independence as an artist should be a priority; but at what cost?

When an artist wants to release her work, she usually needs help to do so. Most of the time that “help” is money. The trend in music right now is for artists to produce their own music and then license it exclusively to a distributor or a label rather than sell their masters outright. In theory (and hopefully in the long run) this enables the artist to release their work to the public while still maintaining some semblance of their independence. A means to an end and a slight hiccup to achieving true artistic independence.

Yet, a license agreement does not pay the same as a master recording agreement. The advances are not as big, the tour support is not as big, the mixing/mastering: not included. So the artist looks for help again. This time they may offer points (percentages) to music engineers, maybe borrow some money and promise a return based on their royalties; each time adding new hands deeper into their pockets.

In order for an artist to be truly independent, she MUST be patient. Try to get a license deal that only grants exclusivity for a short period of time. Even though it is only a license agreement, try to get up front advances to help you survive while you are finalizing the music that you are licensing. Use your friends and your resources to finish your work. Get that work pre-approved by the label/distributor before you enter into the agreement and make sure you document that fact in the agreement. Finally, be ready to wait.

If you have a good team behind you from management to PR to label to legal, the fact that you own your music will pay off. You will be able to earn money from your work while the label has exclusive control of the masters you licensed it, but the big pay day may be further down the road. The label that has the license to your masters should work its butt off to make sure that your music is out there and sells during the time that it has the license. This process takes time. If things go well, you will make money with the label during the license term and then capitalize from your work AND the label’s work when that exclusivity ends.

Independence is the goal but planning is the key.