I Want to Start My Own Independent Record Label to Release My Band’s Records. How Difficult is the Process?
Many performers are starting their own labels under which they can release their own records and/or other artist’s records. Some indie labels are no more than a name on a jewel case, while others are fully incorporated entities with trademarked names. No matter which route you want to go, the process is not as difficult as you might think. The costs, however, will vary.
If you want to keep set-up costs to a bare minimum, and are working alone, you can operate your label as a sole proprietorship. This is the simplest form of business organization. There is no statutory regulation of sole proprietorships but you will need to register the business name with your secretary of state. You do this by filing an assumed name certificate (in most states the fee is as small as $25.00). The main drawback to a sole proprietorship is since you are the business; there is no liability shield to protect you. You are personally liable for the debts and obligations of the business. Creditors can attach your personal assets (subject to some exemptions) to pay business debts. Despite this, it may be a good idea to begin your label as a sole proprietorship and as it expands, convert to a corporation or limited liability company (LLC).
If you have a partner(s), you can operate as a general partnership. An assumed name certificate is also needed and although not required, a written partnership agreement is recommended. You do not need to file the partnership agreement with the state. A statute called the Revised Uniform Partnership Act governs general partnerships and you can alter certain provisions of the Act with a partnership agreement. Otherwise, profits and losses are spread equally among the partners. The main thing here is that no subjective intent is needed to form a general partnership. This means that if you are in business with one or more persons and you are not organized as any other type of entity, you are a general partnership whether you like it or not. Also, there is no personal liability shield here either. To fully protect your personal assets, a corporation or LLC is needed.
Liability protection comes with the LLC and corporation. Articles of organization (LLC) and articles of incorporation (corporation) need to be filed with the state. The filing fee is more than in a sole proprietorship, but usually less than $200.00. Then there are various documents that are needed in order to identify the board of directors/governors, officers/managers and shareholders/members. An attorney’s advice is generally needed for the later documents. But once set-up, the business exists as a separate entity and can enter into contracts and sue or be sued on its own behalf while shielding the individuals. The LLC has become the entity of choice due to its decreased formality and lighter statutory regulation. But with either entity, one person can incorporate or form as an LLC; no partners are needed. Most attorneys assist you with the required documents for a reasonable flat fee.
The above advice can also be used to set up your band as a business organization. Your band is, after all, a business entity that will ideally earn money.
The information in this column is for general information purposes only. It is not intended to provide advice regarding a specific legal situation. Legal advice can only be provided after consultation with a specific attorney.