If you are serious about making a living as a musician, your band is your business, so why not make it official? Consider the pros and cons of registering your band as a business.
There are several benefits you may not be aware of that could make registering your band as a business a very good idea.
- As a registered business, you are eligible for business accounts and business funding.
- Although it depends on the tax laws where you live, it is almost always better for the self-employed to have their income being earned by their business, even if it is a business of one. This is due to businesses generally having a more generous allowance of what can be deducted as expenses and is sometimes also due to business tax rates being more forgiving.
- Business laws will force your band members to determine their roles in the group, how profits will be split, the responsibilities of each member, and what happens if someone wants to leave the group.
- Business laws offer a level of protection from financial liability should something go wrong, depending on the form of business you set up.
- Being a business can make it easier for your band to lease or purchase equipment. Instead of one band member being financially and legally responsible, the band could use its business entity and bank account to sign the contract and make the payments.
- Record labels may be less hesitant to sign you. Your band as a business can hold the rights to any music you create, which negates the potential for any legal disputes over who owns those rights should the band split up at any point.
- Thinking of yourself as a business may just make you take your career a little more seriously.
There are just a few downsides to consider but if you decide to go forward and register your band as a business, it's a good idea to plan now how you would handle these situations, should they arise.
- If things don't work out, your business will need to be dissolved, which can be a lengthy and complicated process.
- Your income tax filing process may change. Speaking with an accountant who specializes in small businesses—or, if you can find one, an accountant who deals with musicians' taxes—could be helpful.
If you've just started playing together, there's no need to fill out the business license form at practice two. Forming a business for your band can be helpful but is also a legal process you shouldn't rush into. When you're ready to get serious and try to make this a means of earning a serious income, that is the time to start thinking about setting up as a business.
The specific process of setting up your band as a business depends on where you live and the laws of your country and sometimes also your state. There may be more than one type of business your band is eligible to be.
Check with the business association or local council in your town for more information on how to proceed. You may also want to discuss the procedure with a lawyer who can guide you through the legal and financial process.