Linux, musical road-dogging, and daily life by Paul W. Frields
Getting serious as a band with an LLC.

Getting serious as a band with an LLC.

It’s been nice to be in a band again. I missed having a couple nights a week of music that don’t require me to do all the creating. And having somewhere to go on a Friday or Saturday night is good too. As a bonus, all the band members are very strong at what they do. We have a mix of personalities, but in general there’s little friction, other than expected from any self-organizing unit. As a result, we decided to take the next step — something I’ve not done before with a band. We formed a limited liability company (LLC).

The LLC serves a number of purposes. For instance, it protects our personal assets in the highly unlikely case of a legal action. In the USA, it basically functions as a “pass through” for gig pay. Everyone takes care of their own taxes on that income. The LLC can also become the entity that contracts with venues and other folks for shows. Let’s face it, that just seems more legit, official, and professional.

I had done reading on the topic for a previous band. But in that group one member was trying to evade taxes on band income — so there, it was a no-go. It’s been relatively painless, but here are the steps we followed:

  • Agree as a band we wanted to do this. That wasn’t too hard. We did have to agree we had the right lineup of people to do this. But we also know that in Virginia it’s easy to both form and dissolve LLCs. So the risk and cost are both extremely low.
  • File articles of organization with the Virginia State Corporation Commission. There’s an online system for this as well. It’s designed to automatically create the paperwork that meets minimum legal requirements. If you use that option, the online service produces the certificate and other establishing documents for the LLC instantly.
  • Request a Federal Employer ID (EID) from the Internal Revenue Service. Again, this was an online system. Once we had the LLC paperwork, we could apply for the EID. That lets the LLC become the payee for gigs as a contractor. It also means the LLC will be recognized when it’s time to file taxes next year.
  • Execute an operating agreement. The operating agreement sets out how we manage the company. In most cases it’s quite simple — majority vote. We used a standard form for creating our agreement. The terms get quite detailed for someone being let go or leaving the company (band), or dying (yikes! hopefully not). But they are understandable to a reasonably well-read lay person, meaning you don’t absolutely need an attorney for this step. This was the most “official” or formal step, because we all had to sign the document in numerous places! It felt like we were really doing something grown-up. We agreed to each do a small capital contribution of $20. That way, the company would have some value at the outset, but it’s not clear this was necessary.
  • Apply for a local business license. Similarly, we weren’t sure we absolutely needed this local business license. We don’t have any real estate or other property for the business, nor are we setting up an office. But it seemed like it couldn’t hurt so we did this as well. We used my address because the county I’m in doesn’t levy a tax or license fee. So again, this was a no-hassle online operation. It just requires a few days’ wait to receive approval from the county commissioner’s office.
  • Set up a bank account. We used BlueVine for this because it has good online support. BlueVine also requires no minimum deposit, and no minimum daily or monthly balance. It also supports an appropriate level of services. For us that means depositing checks, ACH or wire transfers, and a debit card for use with mobile payment apps.

And with that, we created our own LLC. There is a feeling in the band that we have a bit more of a commitment. Interestingly, that’s helped us have some discussions with more of a mature feel. Everyone has in the back of their mind that they want to make sure the company (band) keeps moving forward. Thus we all have a stake in solving problems and finding consensus. I expect it won’t be any less fun in the future. Just a little more professional feeling for our clients as well as us!

Photo by Sharon McCutcheon on Unsplash.