Don’t just talk about it, be about it. You say you’re serious about a career in the entertainment industry, well then, put your money where your mouth is. And let’s get it done. If you follow any of my other blogs or check out some resources on my website, you’ll see information about what you need to do and why you need to do it. Now, here’s the how. So, you can’t say I never gave you anything. Here’s a step by step process to setting up your entertainment business:
- Examine the various corporate structures and determine which is right for your business, given your goals, the people involved, the roles and duties of those people involved, earning potential, products and/or services offered, and tax considerations.
- Pick a name for your business. Pick an alternate. Pick an alternative to your alternate.
- Research your name choices – Conduct a general google search, Secretary of State search, United States Patent and Trademark Office (USPTO) search, Performing Rights Organization (PROs – ASCAP, BMI, SESAC) search, American Federation of Television and Radio Artists (AFTRA) search, etc. to make sure your name is available in your state and that it won’t conflict with other artist’s names, publishing companies, labels, or businesses already in existence.
Setting Up a Loan Out Company
A loan out company is a legal business entity that is established for the sole purpose of providing the personal services of its owner to other parties. It provides a shield of personal liability for the individual performing the service. As an artist, producer, songwriter or any creative in the entertainment industry, you should never contract your services to another entity in your individual capacity, instead, you create a loan out. And this is how you do it:
- Become acquainted with your state’s Secretary of State website. It has a wealth of information to guide you in creating your corporate structure. Most states allow for you to form businesses online by filling out contact information and providing the applicable fee.
- Do a name search again, just to be sure that the name is still available in your state.
- Locate the corporations tab on the relevant Secretary of State website and follow the prompts to creating the corporate structure of your choice.
- You must have a registered agent in the state of registration of the business. There are entities that provide this service for a yearly fee. If you are filing a business in the state in which you reside, you may be your own registered agent. The registered agent is the individual responsible for receipt of service of process for your business. All this means is that if you are sued and have to be personally served, someone has to be on file as a person authorized to receive summons on behalf of your business.
- Wait for confirmation from the Secretary of State that your business entity has been formed.
- Draft internal entity documentation (Operating Agreement for LLC, Bylaws for Corporation, Partnership Agreement for Partnerships, Joint Venture Agreement for Joint Ventures, etc.). This is super important when the company created involves more than one owner. If you are a sole owner of the company, you should still have these documents drafted because you will need them to open a business bank account.
- Apply to the Internal Revenue Service (IRS) for an Employer Identification Number (EIN). The application is fairly simple and straight forward and can be done online at www.irs.gov, or you can file a paper application (Form SS-4) and mail it in to the IRS. More information can be found on the IRS website. An EIN provides the business with an identification number for income tax purposes so that you do not have to use your social security number on financial documents related to your business. You will need this to set up a business bank account also.
- Open up a business banking account with an accredited financial institution (e.g. Bank of America, Wells Fargo, PNC, SunTrust, etc.). You will need a copy of your organizational documents (i.e. Operating Agreement, Articles of Organization, DBA certificate, etc.) indicating that you are a registered entity and describing the people who will be authorized to transact with the bank on your company’s behalf. Shop around to different banks to find out their account requirements and associated fees in order to ensure you select an account type that is best suited for your needs.
- Handle all your entertainment business in the name of your loan out company. This means sign all contracts in the name of your business. Pay yourself a salary from your business account to your personal account – DO NOT just use your business bank account as your personal account. Your business bank account statement should only contain transactions related to your business!
- If you are a songwriter (artist or producer), affiliate with a Performance Rights Organization and SoundExchange. If you are an artist, register all the songs in which you perform as a recording artist with Sound Exchange.
And you’re set up. There are additional steps in building and securing your business foundation, but this is an excellent start.
Lerae Funderburg, Esq. is the Managing Attorney at Funderburg Law, LLC, an Atlanta based law firm specializing in business, estate planning and entertainment transactions. As a lawyer and blogger, Lerae keeps her viewers and subscribers up to date with legal news, especially in the areas of business, estate planning, music, copyright law and trademark law. If you are local to Atlanta, call and set up a consultation! She would love to hear from you!