Last updated: December 30, 2022

A Limited Liability Company can be advantageous to music group members if the band has enough money and material goods worth protecting in case of legal action.

Limited liability companies help prevent members from losing personal assets if something happens with the money or property of the band (i.e., somebody sues).

To provide a comprehensive answer to all musicians considering this decision, we sought insight from our top legal advisors, who have had years of experience with clients in this very area.

Keep reading to find out more.

What Is an LLC in the Music Business?

A man setting up an LLC in the music business

A limited liability company in the music industry is becoming the go-to option for artists who don't want to deal with self-employment taxes (since it has a lot of tax benefits) and other financial issues involved in running their record labels. Consider hiring a tax professional to get the most out of your investment.

It means an entrepreneur starting a music career should consider what type of legal structure to use and if it would be wise to hire an entertainment lawyer to secure liability protection during their music career.

Also, when looking into buying or investing in a record label, it is advised that you look into the company's structure.

So if you are considering entering the music industry or starting a record label, learning about an LLC as a business structure can be quite beneficial.

Why Should A Music Group Form An LLC?

A music group should form an LLC because an attorney or law firm offers legal protection for your band. When you form an LLC, personal liability protection is offered for any claims against the music group.

If you consider this information and want to learn more about what an LLC is in the music industry, then speak to a lawyer who specializes in these matters because liability protection and legal protection are offered for your band when it becomes an LLC.

Why Make Your Band An LLC

A musician working on files and documents

Let's say that there is a vast music group with many fans, and it is an LLC; then someone sues them because they didn't credit him on their album.

Then, since this is an LLC, only that specific member has to pay for the lawsuit.

Even though LLCs are becoming more popular in the music industry, some naysayers want to know why it's good that you should be one.

One of the main reasons is this: when you are an LLC, your personal assets aren't put at risk. It doesn't matter if you make millions of dollars or nothing at all. You won't lose anything because of the business.

However, there is a downside: if the group has to file for bankruptcy and their assets aren't enough to pay off their debts and liabilities, then they will be put into personal bankruptcy by force.

So, should your music group be an LLC? Well, it's up to your team, but if they want to protect themselves and not lose everything in the case of a lawsuit, then it is recommended that they go for an LLC.

How Do I Form a Band as an LLC?

To form a band as an LLC, you must file with the Secretary of State, where the LLC will be based. However, if your state does not offer online forms, you may need to contact an agency that can help you.

Operating agreements are often helpful in the case of a suit because they show that each member is responsible for their actions. An LLC operating agreement should include the responsibilities of each member and how they will be compensated for their work.

Please note: Operating agreement is not legally binding and only outlines the expectations and responsibilities of all members in a band or LLC. If there is no operating agreement, then state laws will determine how business disputes are handled. The best choice would be to have an Operating Agreement.

An IRS (Internal Revenue Service) Employer Identification Number is required for an LLC to do business. This number will be needed to open a business bank account, file taxes, receive tax benefits, etc.

Operating agreements are not considered legal documents by the IRS and thus do not need to be disclosed when applying for an EIN.

Finally, if you want to form a band as an LLC, you'll have to pay an annual charge for a registered agent as business expenses to manage various business aspects.

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FAQs

Are Most Bands LLCs?

Yes, most bands are LLCs. There has been a growing trend of musicians choosing to set up their own LLCs because it provides liability protection. The best way to learn more about what an LLC is in the music industry is by speaking to a lawyer who specializes in these matters.

Should I LLC My Artist Name?

Yes, you should LLC your artist name. An artist's name is only as good as trademark laws allow it to be. Trademarking your artist name can help protect the uniqueness of your work under that name, thereby protecting your brand.

Where Can I Register My LLC?

You can register your LLC by filing articles of organization with the secretary of state in the state where you have your principal place of business. For most States, the articles are filed electronically and submitted through a website maintained by the secretary of state. The process can take just a few minutes to complete.

How Do I Set Up an LLC for Music Group?

A group showing teamwork

First, you need to decide upon a business name. The state can reject names, so it is best to run through the state's name registration service to make sure your intended name is available.

Before filing for LLC status with the state, you need to designate a registered agent that can accept official documents on behalf of your new company.

The state typically requires a registered agent, and this will be the person who represents your company in legal dealings.

The registered agent can be a person, business, or organization.

When you register your Articles of Organization with your state's Secretary of State office, you will also need to file Articles of Organization Online. This is where you will file for Articles of Organization as well as any other information such as Articles of Incorporation and amendments.

After filing the Articles of Organization, you need to create an operating agreement.

Operating agreements serve as a guide for your new business, and they provide instructions on how the LLC will be managed and run. This is where you set rules and guidelines for your business entity, so it is recommended that all members sign this document.

It is important to have a signed Articles of Organization form to present when filing Articles of Incorporation.

You should be ready for business expenses such as filing fees, LLC taxes, etc.

You can also contact a business lawyer like ZenBusiness for legal advice on filing Articles of Organization and Articles of Incorporation.

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