Monday, January 6, 2014

Sole Proprietorship Isn’t for Musicians In the previous blog post I wrote entitled Why Record Labels Won’t Sign You, I embedded a table which listed several business entities, including Limited Liability Company (LLC), S Corporation and C Corporation (Inc.), Non-Profit, General Partnership, and Sole Proprietorship. Sole proprietors are the same as general partners, except that general partners are two or more individuals with ownership. One of the main reasons for choosing an entity is for taxing purposes, as one entity is best suited for you depending on your business. Entrepreneurs and investors weigh the pros and cons when choosing the appropriate entity. In some cases, they decide to change their entity to another, even long after the business first launched. But I want to encourage my fellow music professionals to never structure a business as a sole proprietor or general partnership. The only reason why I suggest against filing as such is because one’s personal belongings are at risk in the case of a lawsuit. When McDonald’s is sued, for example, none of the owners are personally liable for damages. That means the owners do not have to go in their personal bank accounts. The company itself is sued. However, as a sole proprietor, the individual and the business are the same. The music industry is very litigious. Too many lawsuits are filed. Copyright holders sue others in response to possible infringement. It is therefore too risky for musicians, record labels, songwriters, producers, composers/beat makers, and artist managers to file as sole proprietors. Imagine paying thousands of dollars out of your pocket. You’re bound to be in debt with the possibility of filing for bankruptcy, which isn’t good for your personal credit history. This is why those working in the music and entertainment industry are recommended to “incorporate.” The word incorporate means to create a body (person), as in a corpse. Your business becomes a person (although not human) and you conduct business on behalf of that person. So when a business face litigation, the incorporated body is in trouble, not you. On the other hand, a sole proprietorship and general partnership are considered as “unincorporated” businesses. If the business gets sued, the owner potentially loses his house, cars, and other personal possessions. Be sure to file as a limited liability company (LLC) or corporation (Inc.). If you’re already a sole proprietor or general partnership, STOP making music. Don’t do anything else. Postpone all collaborations until you change your entity. If you haven’t filed as anything at all, then the government may see you as an individual contractor, which may be just as bad (so to speak) as a sole proprietorship. Christopher Patton Hot Bird Music The business and music development services at helps you beat 90% of musicians and companies that fail.

Thursday, January 2, 2014

Music Business Defines Vocabulary for Warren Buffett Have you noticed that the music business has a set of vocabulary words not typically spoken in the rest of the business world? Of course, every industry has its jargon, but the music business tend to give occupations a title that significantly differs from what outsiders name it. This isn’t a reference to the terminology communicated among students of music theory, or tech words audio engineers can relate to. I’m regarding music-oriented corporations and freelancers that aren’t known by generic names. So if a record label needs a financial backing from, say, Warren Buffett, how would the owners of that record label define their products and operations in (business) laymen terms? What is the time efficient way to translate the language of the music industry before Mr. Buffett tilt his head backwards to a snore? As the famous Apostle Paul once wrote, “If then I do not know the meaning of the language, I will be to the one who speaks a barbarian.”1 Below is a cross-referencing table comparing the vocabulary of the music business to that of generally used business words. Some of these comparisons may seem obvious. For those of us already operating in the music industry, the benefit to reading this table is you’ll gain a clearer understanding of the music roles. .tftable {font-size:12px;color:#333333;width:100%;border-width: 1px;border-color: #000000;border-collapse: collapse;} .tftable th {font-size:12px;background-color:#EFEFEF;border-width: 1px;padding: 8px;border-style: solid;border-color: #000000;text-align:left;} .tftable tr {background-color:#ffffff;} .tftable td {font-size:12px;border-width: 1px;padding: 8px;border-style: solid;border-color: #000000;} .tftable tr:hover {background-color:#EFEFEF;} Music Business General Business A&R (Artist and Repertoire) Recruiter On-the-job Trainer Agent Booking Agent Artist Development Business and Operation Development Management Consulting Technical Consulting Professional Development Artist/Personal Manager Business Manager Operation Manager Sales Representative Business Manager Accountant Finance Officer Deal Contract Written Agreement Independent Record Label Small Business Major Record Label Big Corporation Performance Rights Organization Collection Agency Record Label Marketing Organization Brand Consulting Service Sales Force Record Label Manager Chief Executive Officer Record Producer Project Manager This list is not meant to be extensive, but to provide enough information about the prominent keywords investors and entrepreneurs outside the music business may possibly find confusing. Even music-oriented individuals will find this favorably palpable. Are there any pairs of vocabulary words you believe should be listed here? Please leave a comment below. P.S. I couldn’t figure out if there was a generic equivalent to the word “imprint,” or “music imprint.” In case you are wondering, it is a company that signs artists to its record deal, develop the artists’ music, and pitch the music to a record label for marketing and/or distribution purposes. The record label split royalties with the imprint, and the imprint pay artists their share. If you are already familiar with “production houses,” then this shouldn’t be a surprise, because an imprint is nothing more than a production house.2 Do not confuse an imprint/production company with being a record label. Christopher Patton Hot Bird Music The business and music development services at helps you beat 90% of musicians and companies that fail.