Making a band into a business

Tom Kerswill explains how it can be worth forming a company for your band, and what you'll need to do it.

Overview

This article details:

• Why should you think about turning your band into a company?
• When is it worth forming a company?
• Companies for solo performers
• Conclusion
• Useful numbers

Disclaimer:

All this stuff is just for information - the author makes no claim as to its legal reliability. Consult a lawyer if you're unsure!

Why form a company?

If you've formed a band or are starting out as a solo performer, chances are it started off as fun - sorry, as a means to artistic expression and fulfilment. You might hope to make money from your music one day, but probably turning your band into a company - some kind of corporate money-making machine - seems a bit absurd.

It's worth thinking about what's going to happen when you hit the big time, though. And you might find a little bit of thinking about stuff now will save major headaches and cock-ups down the road.

Here I'll give you some steps you can take to keep things running smoothly. I'll show you how and why you might want to formally designate your band as a company, and how it can make things less of a headache, not more of one.

Not many people know this, but as soon as you start working as a band, you've already formed a business... of sorts. Any group of people working towards a goal are officially recognised as a partnership and this has major implication if things turn sour later on.

From a legal point of view, here's where you stand if you leave it at that:

• You and your band mates have an equal share in the "assets" of the band. That means not just any money you get from gigs and record sales but also...
• Any equipment you've bought together with band money.
• The name of the band.

If the band splits, then you'd have to divide all this stuff equally, and that could messy if you don't have an agreement as to who has what. And it's tricky to split a band name four ways. And if you did, it would probably look shit.

Legally speaking, even if only one member leaves, the "partnership has ended". So if you sack your brain-dead drummer and he turns out to be an arsehole, he could legally stop you using your band name.

That's what happened with Pink Floyd - when keyboardist Roger Walters left he decided he wanted to keep the name.... and in the legal battle that followed the lawyers were the only winners.

Not that we're implying that Roger Walters is brain-dead or an arsehole.

There's one other major thing to be aware of from this implicit partnership:

• You all have an equal share in the liabilities of the company

That means if the band somehow got into debt, you'd all shoulder that debt equally. Yes, even if your bass player goes on a spending spree with the all-new band credit card.

You're all also decision-makers for the band. Any one of you could sign a crap record deal or tour agreement, without consulting the others. And that would be legally binding.

And if you manage to do something really bad (lead guitarist stage-dives and kills a fan or two?) you're all equally in the shit, legally speaking. Even a laid-back acoustic folk band could run into trouble if they wrote of someone's car on the way to a gig, say. If you got sued, the "liability" of the band extends to the band members' personal money and possessions too.

Forming a company protects you from both these things. The liability of this company only extends to what fund are owned by the company in the first place. So if your band is sued, you might loose everything that belongs to the band, but you wouldn't loose your personal stuff or money, beyond what you'd invested in the band in the first place.

You can also get things sorted by entering into a formal band agreement - that's where you specify who gets what in the event of a band split-up. This agreement can be as arcane and specific as you like - you'll need a lawyer and a bit of imagination (so you can think up all those nightmare scenarios).

Read on for the nitty-gritty on forming a company.

Registering a company

It's not as tricky as it looks. You just have to choose a unique name - presumably the name of the band, and register that name as a company. Plus, you have to hand over a fee... more on that below.

All company registrations are handled by "Companies house" in London (originality is not where it's at in the world of companies). If you're sado-masochistic and a cheapskate, save your pounds and fill in the registration forms yourself. And weep. They're long, tedious, and impossible to understand.

Better, go to a company registration agent (you'll find them in Yellow Pages, on the Net, and of course right here in the NMN directory). They'll do all the legal stuff for you. You just give them your company name and some other stuff. Expect to pay anything from £70 to a few hundred. It's worth shopping around.

You can also by "Off the Shelf" companies. These are companies that have gone bust, and can be bought as-is, without having to do any registration. You'll have to change the company name though, and given that this can cost a few hundred quid in itself, it's probably not worth doing it this way.

You'll also need to give a "place of business" for the company. This could be the address of your band studios... or, moving back to reality, a home address of one of the band members.

Now that you're running as a formal business, you'll need to keep accounts and nasty things like that. It's not as bad as it sounds though - keep good records of money coming in for gigs, and put them in a special ledger (you can get them from Smiths) or get an accounting program for your computer. The Inland Revenue will need to know about these accounts, but I've found they're more than willing to give you information, especially when if you're due to be paying them money.

Actually the Inland revenue are very helpful. They'll also send you loads of info and a lovely posh hardback book all about how to start up in business and how to do the nitty gritty.

On that note, you'll find there's another advantage to forming a business - if you keep good records of your expenses you'll find that the tax costs associated with band income can be kept down.

Once you've formed a business, it's best to draw up a "band agreement" as we mentioned above - that makes sure that if the band splits up, or something bad happens, or even if you begin to sell loads of records, you'll know what the score is legally and financially.

Going it alone

Solo artists don't need to feel left out. It's not as crucial to form a business if you don't have band mates to fight with. But if you're starting to sell loads of records, and you're employing a manager, an accountant, and publicity people then it becomes worthwhile. If you're lucky enough to be in this situation, you'll often find that your manager will have a good idea of what's best.

For smaller artists, or those setting out, it might be necessary to register as self-employed with the Inland Revenue. In this case, you'll need to keep accounts of what money is coming in from the music, as well as what you're spending. You'll then be sent a "tax return" in April, where you give the Inland Revenue info on all this financial stuff. And if you're earning quite a bit in a year (around £4000) you'll pay tax on some of this income.

Registering as self-employed is pretty easy. Call the Inland Revenue self-employed helpline on 08459 15 45 15. They can give advice and tend to be friendly and helpful. They'll also send you a nice book with lots of info, and are pretty good at explaining what you need to do.

Conclusion

Forming a company for your band might not seem like a very high priority compared with rehearsing, gigging, and all the other stuff that will be landing on your plate. But if you're serious about making a good go of the music, you'll find it is worthwhile in the long-run. Forming a business can give you security if things go tits-up, and can help you work out exactly where you stand financially. And hopefully that will mean you can spend more time doing music.