The Business of a Band
By Michael McCready
Attorney at Law
Not enough bands realize that their band is a business.
Some band members may be familiar with business practices, but my
experience has been that most are not. Therefore, this column
will address what to do when you start a business.
The very first thing a band should do is get a business
license from the county they live in. A business license is also
called a "fictitious name certificate" or a "doing business as"
(d/b/a) license. What this certificate does is tells the world
that X,Y & Z are doing business using the name "The Band" and
where their business address is located. The procedure for
obtaining a d/b/a license is through the County Clerk. They will
require an application and a small fee. Generally, another legal
requirement is that you publish your application in a newspaper
for 3 weeks. Most newspapers do this in their legal classified
sections. The newspaper will publish your d/b/a license and it
will read something like this: "LEGAL NOTICE: X,Y & Z are doing
business as "The Band" with principle place of business at 123 N.
East St. Chicago." The newspaper will take care of the rest and
you will soon receive your business license. The main reason you
need this license is to open a checking account in the band's
name.
The next thing you should do is get a tax ID number for the
band. I realize that very few bands pay taxes on what they earn.
I am not sanctioning not paying, but this is the procedure for
doing it the legal (and correct) way. You need to file form SS-4
which can be obtained by calling 1-800-829-3676. Fill out the
form and mail it to the IRS regional office for your area.
Once you have a tax number, you should keep track of all the
income the band earns. More importantly, you should keep track
of all the band's expenses. This includes everything from
promotion costs (flyers, 8x10's, etc.) to equipment (guitars,
amps, PA's, etc.) to tour expenses (gas, meals, etc.). All of
these are tax deductions. Taxes can be complicated so you may
want to see an accountant. Don't worry, even the accountant's
charge is deductible, as is a lawyer's incidentally. The IRS
also puts out a great, though lengthy, tax guide. When
requesting your SS-4 form, also request Publication 334, "Tax
Guide for Small Businesses." Anything you ever wanted to know,
or not know, is contained in this guide.
Another tax issue bands should be familiar with is sales
tax. I have yet to encounter a band who was aware that they were
supposed to pay Illinois sales tax when they sold tapes, CD's and
tee shirts. Sales tax is what you pay when you buy something
tangible, whether it is a pack of gum or a new car. Procedures
vary from state to state so you should contact your Department of
Revenue or Taxation for more information on sales tax.
I also recommend bands consider taking out insurance. You
can buy insurance for anything. For example, sports teams often
take insurance out on their star's physical ability. Consider
insuring your equipment. If it gets stolen or damaged, the
proper insurance policy may go a long way toward getting the band
playing again. Also make sure whoever drives the band has auto
insurance. Once again, insurance is deductible as a business
expense.
Michael McCready
represents clients in all areas of the music industry including
music, radio,
television,
stage, and book publishing. His music law practice includes
representing bands, record
labels, production companies, recording studios, promoters, and
music publishers.
His work includes copyrights, analyzing and drafting contracts,
trademarks,
publishing,
and litigation.
Michael McCready
Attorney at Law
1900 Chicago Road
Chicago, IL 60411
McCready@music-law.com
(708) 754-6212
Fax: (703) 754-8658
