Legal Structures
Let’s start off with your legal entity. As mentioned, there are several legal structures in-
cluding sole proprietorship; partnerships; corporations and the newer Limited Liability
Company, or LLC. Corporations are further divided in C-Corporations and S-Corpora-
tions.
On the upside, sole proprietorships are easy to set up and a common legal structure
for many small businesses, particularly independent professionals and solo artists. They
also give the owner complete control over the business. On the downside, it exposes the
owner to more risk. Sole proprietors are personally liable for all financial obligations of
the business. Nonetheless, many bands and, of course, solo acts go this route. After their
business begins to grow, they may change to different structure. Also, be sure to check
with your state’s Secretary of State’s Office to see if you need to register a fictitious
name. In some areas it may be the County Clerk’s Office. In your case, the fictitious
name is the band name. In the case of a solo act that does business under a name that’s
different than the artist’s, the same applies.
Next up is the partnership. A partnership joins two or more people who agree to share
in the profits or losses of a business as well as the decision-making. Profits are passed
through to each partner, who report them on his or her individual tax returns. Like sole
proprietorships, each general partner is responsible for the financial obligations of the
business. That means if you form a band partnership, every member is responsible for the
financial obligation incurred by the band. So, if your drummer goes off and buys a new
kit on credit under the band’s name, each member is responsible for that debt.