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Distinguished SOTW Member, Forum Contributor 2015
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Discussion Starter #1
Hi folks,

I play in a "weekend warrior" band that plays mostly in places that wouldn't otherwise have live music (eg. art galleries, small parties, etc.). We aren't pros, but are decent enough to provide a nice atmosphere for whatever people are actually at the location for...

We have historically just played for cash, with rates varying based on the gig, typically about $100-150 per man, and have generally not made much over the course of the year to do any special incorporation/partnership for taxes... but recently, we've had the opportunity for some more "real" gigs, and I'm exploring if it would be more appropriate to register the band as a business entity to get things above board...

I went to the government sites online and saw a plethora of forms, etc.... which left me even more confused. Does anyone have a good resource to help me out with the basics? I'm looking for things like:

- Type of entity - incorporation, llc, limited partnership, etc?
- Tax implications and logistics?
- Setting up a bank account?

My fear here is that the overhead will eat up the entire earnings of our meager little band, and take the "fun" out of it as that's the primary point for us all (we all have day jobs). While we want to be nice and legal, it sure doesn't seem like anyone wants to make it easy for us to do that... I want to spend my time on the music, not the "business" of it....

General guidance is nice, but if anyone has some specific courses of action they could recommend, it would be greatly helpful.

Pete
 

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Distinguished SOTW Member/Forum Contributor 2014
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I operate as an independent contractor. My tax preparer handles gigs as a small business entity, which allows deductions for travel miles and other expenses. At the end of the year each individual and/or organization that I've earned $600 or more(you might want to check for the exact amount required) sends a 1099 form to me. [If less than $600you don't need 1099 forms, but, you should still file your earnings, of course, especially if you're paid by check or sign for your pay at the end of a gig. Keeps Uncle Sam happy. :)]
 

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Independent contractor is fine, if it's just you. When you're talking about a group that's more complicated. Each member of the group will probably be treated as a contractor at the end of the year, with the band issuing the 1099 forms.

Just a simple example - if the person paying you writes a check, who do they write it to? If they're writing it to an individual (the leader of your band, for example) then that individual could be liable for the taxes at the end of the year unless he can really prove that he paid everyone else out of that check. You REALLY have to keep your accounting straight if you start talking about any serious money.

The best course of action depends on a lot of things, an important one being the state you live in. Laws regarding corporations vary widely from state to state. I am not a lawyer, but I do have quite a bit of experience with business law. If this is going to make you any money at all you should treat it like a business. Uncle Sam will treat it like a business come tax time.

The easiest way is a DBA. This is just a person going to the courthouse to say they're opening a business and giving the name. You can take the DBA certificate to the bank and open an account (shop around, you CAN find free business checking) where you can cash checks made out to the band. Whoever controls the checkbook then writes paychecks to everyone else. The downside of this is that one man controls the checkbook and the bank account, since it will be registered under his social security number. Not good if there's a falling-out of any sort. That one man is also liable for all of the accounting and filing taxes at the end of the year.

My advice, especially if you're looking at significant money, is to form an LLC. Normally the cost is low (in my state it's $300) especially compared to a corporation (sometimes multiple thousands). In many states a corporation must pay annual fees to the state but an LLC is exempt from that. An LLC gives you many of the same benefits of a corporation without the overhead.

Your LLC can have one member (ie, the band leader) or many members (everyone on the band) or anywhere in between. This creates a separate legal entity, which could be subject to separate taxes - definitely consult a tax professional.

I will also say that there are many websites online where you can pay them some absurd fee to file your paperwork for you. It's usually not necessary. LLC paperwork in Texas is a one-page form with about 10 blanks for who's involved, what you do, what your address is, etc. Other states are similar.

Congrats on moving up in the world!

Disclaimer: I am NOT a lawyer, nor do I play one on TV. I'm just a businessman with experience in this field. This is NOT legal advice and you should consult a professional from your state with experience in business law.
 
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