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Band Charter?


Jason Stanfield

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Over the weekend, my band lost its drummer, who was also the lead singer, and the person whose home we practiced in. Being in the middle of a heavy schedule, which includes a weekly gig, his sudden departure was shocking. We've had to cancel one lucrative gig, and may have to delay the weekly appearance while we get a new drummer and work up vocals for enough songs to hold an entire gig, plus find a new practice space.

 

Now we're down to three members, and we really need five -- a drummer and a rhythm guitarist -- and while we have some prospects, the ideal candidates aren't able to become full-time members who make this their main gig. As we're sort-of reforming the band, we're considering issues that we never had to before, which creates an environment for people making decisions without talking to the rest of the band (cause of most consternation and drama).

 

Given all the drama we've been through lately, it seems to me that getting our "rules" in writing is a good idea -- to clearly spell out issues like who's a member and who's a hired gun / sub, how the band fund is to be used, voting rights, member responsibilities, how to recruit new members, audition process, and so forth.

 

My questions are:

 

-- Does your band have something like this, or do you not need one?

 

-- What has having a charter/agreement done for you - or did it turn out to be a bad idea?

 

-- Do you consider it a contract, or simply a reminder of how the band does things when odd situations occur?

 

I'm just curious, because I want to do everything I can to ensure we behave professionally, consistently, and (most of all) avoid drama.

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Lawyers will tell you that written understandings/agreements/contracts try (with more or less success) to serve two purposes: (a) they crystallize everyone's understandings and expectations, and (b) give the judge/jury something to read and base a judgment on if/when the deal goes sour.

 

A written agreement, however, is not likely to be enough to keep a pissed-off or otherwise momentarily irrational drummer from leaving you in a lurch, although my mind is turning over the kinds of liquidated damages clauses that might coerce him to give you at least 6 weeks notice (like less than 6 weeks notice and the player forfeits their share of PA/equipment/repairs slush fund/etc.).

 

Larry.

 

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If real money is involved, I would at least have a record of what the decisions were.

Agreed. We're not making thousands per gig yet, but the track we're on will get us into 4-figure territory soon. The contribution to the band fund has been that we divide the money equally between all performing players plus one, and that one portion goes into the band fund.

 

One of the issues we're dealing with now is that we've all put into the band fund over the past several months, and it's in the hands of the guy who left us. He promised me he won't screw us on the money, and that we'll get records, but we've not seen those records so far, so we don't have any way of verifying them and knowing if everything's there. And until the check clears ...

 

Thus, one of the new rules would be that every permanent member of the band gets to see what's in the band fund at any time, it all gets put into a checking account, and two signatories are required for any expense or withdrawal.

 

Also, there would be rules for using that money (your rig is your responsibility; band fund is for PA stuff, lighting, band travel expenses, or emergencies) and maybe a severance for members that leave the right way (i.e. help recruit a replacement, fulfill gig obligations until he's ready, etc.).

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... we've all put into the band fund over the past several months, and it's in the hands of the guy who left us... He promised me he won't screw us on the money ...

Ouch. Just in case, practice saying this in a confident voice: "your honor, I'm appearing this morning on behalf of myself and the remaining partners in the partnership Otis Lotus ..."

 

...it all gets put into a checking account, and two signatories are required for any expense or withdrawal.

I don't think much of the two signatories idea. Adds hastle and, as a practical matter, is unlikely to keep an unscrupulous band member from writing the single one-signature check to Guitar Center on his way to Montana that cleans you out. I do like the idea of giving (or making available) copies of all bank statements to band members.

 

Larry.

 

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If you are getting into making serious money going forward it might make sense to create and incorporate a business entity. A Corporation, LLC, LLP, what have you, that will define each person's rights and responsibilities to each other and to the entity. This can be easy and not too expensive. Contact your state's secretary of state's office or a lawyer. ($$ I know, but may be well spent). This would in effect provide a legal remedy to your current situation because the "treasurer" or "officer" as defined in your entity's bylaws would have a fiduciary duty to fulfill his role and you would have immediate legal recourse for a breach of that duty. Of course litigation is expensive, but often the simple fact that papers have been properly drawn up can serve as a deterrent to someone walking off with the cash, or otherwise screwing the entity. You could draft into the bylaws of the entity a notice clause and include consequences for not giving proper notice in any number of ways.
Hammond XK3, Rhodes 73 Mk1, Wurlitzer 140B, Kurzweil Pc2R,Kurzweil K2000, Wurlitzer 7300 combo organ
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LLC, Corp, LLP will require tax return filings, which means accurate books must be kept.....don't go this route until income and long-term plans justify it.

 

Well, any money-making musical enterprise requires tax return filings of one form or another (how else will they balance the budget!?!), and the OP has already made it pretty clear that he'd appreciate accurate books.

 

That said, I agree that an LLC or corporation might be overkill. Typically rock and blues bands are general partnerships unless/until they expressly do otherwise, and the general partnership business model is ideal for the "one for all, all for one" attitude that prevails in most such bands. Alternatively, some bands with a strong, show-running leader fall into an employer/employee or contractor/sub-contractor business model. That can work too.

 

But Jason sounds like he's talking about a partnership of more-or-less equals. It wouldn't take long to set a partnership agreement down on paper to accomplish his goals if the other partners are amenable to the idea.

 

So Jason, who's going to get to fill out the annual IRS Form 1065 and pass out the Schedule K-1s? It's really not that hard, but if it's going to be you, you might want to have the agreement cover whether you get a little something extra at the end of the year for your trouble.

 

Larry.

 

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So Jason, who's going to get to fill out the annual IRS Form 1065 and pass out the Schedule K-1s? It's really not that hard, but if it's going to be you, you might want to have the agreement cover whether you get a little something extra at the end of the year for your trouble.

 

Unless any of the others have experience with that, I figured we could hire an accountant.

 

I'll likely keep the books for the band, but this is the first "above board" band I've been a part of (all other bands I've been in fizzled out before the band has made but a few hundred bucks), so I'll need some help in ensuring the taxes are done properly.

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First generally familiarize yourself with IRS income and expense categories. Then get a copy of Quicken Deluxe (the cheap one) and set it up just for the band, categorizing income and expenses consistent with IRS categories. Then be diligent about tracking income and expenses through the year. Come January, you'll take your bank year-start statement and year-end statement to the accountant along with the Quicken file and the accountant will smile.

 

And you may soon realize that it's so easy, why are you paying an accountant? Then before you know it, you'll be looking into what it would take to become a CPA ... and pretty soon you can afford any piece of gear you want and a house with a dedicated rehearsal studio ... :thu:

 

Larry.

 

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Seriously, don't go the entity route unless your are interested in limited liability for personal assets that need to be protected from band activity. File as a Sole Prop, issue 1099's to bandmates, be sure all monies go through a dedicated bank account that can be seen by all, and get paid a bit extra as band bookeeper.....KISS!
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Seriously, don't go the entity route unless your are interested in limited liability for personal assets that need to be protected from band activity. File as a Sole Prop, issue 1099's to bandmates, be sure all monies go through a dedicated bank account that can be seen by all, and get paid a bit extra as band bookeeper.....KISS!

 

I agree that this is a simple way to go, and is the way that lots of bands handle their finances. The problem I see with this business model is precisely Jason's problem. There is such a thing as organizational psychology. When a band is set up as a sole proprietor with sub-contractors it can breed the feeling within the band that it's "Jason's band" and the rest of them are his at-will employees, who are free to come and go more or less as at-will employees please. The paperwork may be is only a little easier (after all, you've still got to fill out a Schedule C and 1099s, which is the functional equivalent of a 1065 and K-1s), but and the "we're all in this together" esprit de corps can get lost. Sooner or later the drummer is taking off for Colorado with his new girlfriend with no notice because, heck, it's not his band, it's Jason's band.

 

On the other hand, if it truly is "Jason's band" then he ought to set it up (and pay himself) accordingly.

 

Just my random thoughts on the subject.

 

Larry.

 

 

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Exactly, Larry -- this isn't "my" band, it's "our" band.

 

It was started by the drummer to be just a rock cover band, but we've moved into the whole Grateful Dead tribute thing (incidentally, the main musical reason the drummer backed out - he wasn't into playing Dead as much as the rest of us).

 

So now that we're reforming, we want to ensure everything's copacetic, and we'll probably organize into a business entity at some point late this year or early next. Until then, we just want to keep the band fund secure, used properly, and available for all to see. As to whose name that will be in, don't know yet (still need to get the money first!).

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....There is such a thing as organizational psychology. When a band is set up as a sole proprietor with sub-contractors it can breed the feeling within the band that it's "Jason's band" and the rest of them are his at-will employees, who are free to come and go more or less as at-will employees please.....

Okay, Im hooked. Ive often thought about how organizational psychology plays out in a band context, as it relates to variables including decision making, autonomy, leadership, etc.

 

Seems to me that Jason may be the emergent, if not implicit leader. There are many models of leadership styles, but Ive always liked the (albeit somewhat dated) one below. Basically, the model sets forth two dimensions:

 

1. Autocratic-Democratic - representing the extent to which leaders permit subordinates to take part in decisions.

 

2. Permissive-Directive - representing the extent to which the leader directs the activities of subordinates and tells them how to carry out their jobs.

 

The two dimensions can interact in the following manner:

 

The Directive Autocrat makes decisions unilaterally, and closely supervises the activities of subordinates.

 

The Permissive Autocrat makes decisions unilaterally, but allows subordinates considerable latitude in carrying out assigned tasks.

 

The Directive Democrat makes decisions participatively but closely supervises the activities of subordinates.

 

The Permissive Democrat makes decisions participatively and allows subordinates considerable latitude in carrying out their tasks.

 

The key task is to match the leadership style to the needs of the organization, and to change as organizational needs shift and evolve. For example, the Directive Autocrat style has been found effective when the leader has an inexperienced or under-qualified staff.

 

I suspect if Jason is able to move toward the Permissive Democrat style, this would moderate perceptions of the group being perceived as Jasons band. Providing open books regarding the bands financial status may facilitate this approach and develop trust, concurrently.

 

"We don't stop playing because we grow old; we grow old because we stop playing."

- George Bernard Shaw

 

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This is why I like to show up play what the boss wants then get paid and go home. I love being an independant contractor who works for a band leader.

 

I have played in bands that were partnerships and would recieve a 1099 once a year and it works out pretty well. Thank God for the vehicle mileage deductions on Schedule C.

 

My money is my money and my gear is my gear. Simple is good.

"It doesn't have to be difficult to be cool" - Mitch Towne

 

"A great musician can bring tears to your eyes!!!

So can a auto Mechanic." - Stokes Hunt

 

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Over the weekend, my band lost its drummer, who was also the lead singer, and the person whose home we practiced in. Being in the middle of a heavy schedule, which includes a weekly gig, his sudden departure was shocking. We've had to cancel one lucrative gig, and may have to delay the weekly appearance while we get a new drummer and work up vocals for enough songs to hold an entire gig, plus find a new practice space.

 

 

 

Welcome to my world ......

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Dyin Breed Band

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Thank God for the vehicle mileage deductions on Schedule C.

 

Yup, this is a life saver at 50 cents a mile. I have to drive 800 miles for a gig this weekend.

Gigging: Crumar Mojo 61, Hammond SKPro

Home: Vintage Vibe 64

 

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Seriously, don't go the entity route unless your are interested in limited liability for personal assets that need to be protected from band activity. File as a Sole Prop, issue 1099's to bandmates, be sure all monies go through a dedicated bank account that can be seen by all, and get paid a bit extra as band bookeeper.....KISS!

 

Be careful. This is how we always did it, except I only wrote 1099s out for what I actually paid to the band members, which meant I paid taxes on everything that went into savings. To make up for it, I took the deductions on everything bought out of band savings. This may or may not wash out. This was complicated when I decided to turn finances over to another band member. Now she has the account but I have to take deductions on expenditures to compensate for taxes I paid on band savings. I went to a CPA and he said we should have had the band as a separate entity all along because we each pay taxes at different rates. As it so happens, I pay the highest rate in the band, and savings were taxed at that rate - though it came out of my pocket, not the bands.

 

We never had a charter...never needed one. And we Gross over a quarter million a year and had over $6k in savings until our recent video. I'd worry more about taxes than a charter.

 

Talk to a CPA.

Dan

 

Acoustic/Electric stringed instruments ranging from 4 to 230 strings, hammered, picked, fingered, slapped, and plucked. Analog and Digital Electronic instruments, reeds, and throat/mouth.

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You mean you paid taxes on money that wasn't yours? That's, well I'll withhold comment.......always distribute all the income, then issue 1099's.

 

Obvously there comes a point when an entity should be established, both for legal and tax purposes. My point is simply that, until that time comes, it can be handled nicely with the Sch C.

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You mean you paid taxes on money that wasn't yours? That's, well I'll withhold comment.......always distribute all the income, then issue 1099's.

 

Obvously there comes a point when an entity should be established, both for legal and tax purposes. My point is simply that, until that time comes, it can be handled nicely with the Sch C.

 

Well that's where it get's sticky. Whose is it in the eyes of the IRS is it's a sole proprietorship and it's going int my account? Granted it was a separate business account, but with my SSN.

 

Dan

 

Acoustic/Electric stringed instruments ranging from 4 to 230 strings, hammered, picked, fingered, slapped, and plucked. Analog and Digital Electronic instruments, reeds, and throat/mouth.

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You mean you paid taxes on money that wasn't yours? That's, well I'll withhold comment.......always distribute all the income, then issue 1099's.

 

Obvously there comes a point when an entity should be established, both for legal and tax purposes. My point is simply that, until that time comes, it can be handled nicely with the Sch C.

 

Well that's where it get's sticky. Whose is it in the eyes of the IRS is it's a sole proprietorship and it's going int my account? Granted it was a separate business account, but with my SSN.

 

Always get an IRS EIN rather than using your personal SSN, IMO. I always do this for business ventures--you can open bank acounts as well, depositing all band proceeds here, even get a band credit card. If you 1099 then tax accounting is a snap (BTW I use Quickbooks, which is now available in the cloud.)

Steve Force,

Durham, North Carolina

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You mean you paid taxes on money that wasn't yours? That's, well I'll withhold comment.......always distribute all the income, then issue 1099's.

 

Obvously there comes a point when an entity should be established, both for legal and tax purposes. My point is simply that, until that time comes, it can be handled nicely with the Sch C.

 

Well that's where it get's sticky. Whose is it in the eyes of the IRS is it's a sole proprietorship and it's going int my account? Granted it was a separate business account, but with my SSN.

 

Always get an IRS EIN rather than using your personal SSN, IMO. I always do this for business ventures--you can open bank acounts as well, depositing all band proceeds here, even get a band credit card. If you 1099 then tax accounting is a snap (BTW I use Quickbooks, which is now available in the cloud.)

 

I would still contend that as a sole proprietorship, you'd have a hard time writing 1099's for money that is going into the business account for which you are the sole proprietor. Either the people you're writing the 1099's to would have to be partners, or the band would need to be a separate entity - which seems to be the cleanest way to do it.

 

When I first took things over, I just did it the same way the last guy did, which is the same way everybody on here said to do it. But at that time we had no savings and the income has more than doubled since then. I wish I would have talked to a CPA back then. Just saying, NOW is the time to have that discussion with a CPA, not AFTER you've made the money and things have gotten complicated.

Dan

 

Acoustic/Electric stringed instruments ranging from 4 to 230 strings, hammered, picked, fingered, slapped, and plucked. Analog and Digital Electronic instruments, reeds, and throat/mouth.

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One of the nastier aspects of a separate entity is that a disgruntled musician, or even the IRS, can make the claim that the "entity" employed the musician(s) then failed to withhold payroll taxes for the "employee" AND failed to pay the "employers" share of its payroll taxes as well. Now, everyone associated with the entity is on the hook for payroll taxes, penalties, interest......real fun stuff.

 

On the other hand, when each bandmember files his/her own Sch C, there is no reason to assume they were "hired" by anyone....they are sub-contractors by definition.

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One of the nastier aspects of a separate entity is that a disgruntled musician, or even the IRS, can make the claim that the "entity" employed the musician(s) then failed to withhold payroll taxes for the "employee" AND failed to pay the "employers" share of its payroll taxes as well. Now, everyone associated with the entity is on the hook for payroll taxes, penalties, interest......real fun stuff.

 

On the other hand, when each bandmember files his/her own Sch C, there is no reason to assume they were "hired" by anyone....they are sub-contractors by definition.

 

This is where the 1099 comes in.

Steve Force,

Durham, North Carolina

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My Professional Websites

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Yup, the 1099 is a good start, but just because you issue a 1099, an opponent can still assert you should have issued a W-2. The IRS will look closely because it means more revenue for them for the payroll taxes due.

 

I contend that if you create an entity, the best thing to do is have an attorney write a "Contractor Agreement" that everyone signs, and which is renewed each year.

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Yup, the 1099 is a good start, but just because you issue a 1099, an opponent can still assert you should have issued a W-2. The IRS will look closely because it means more revenue for them for the payroll taxes due.

 

I contend that if you create an entity, the best thing to do is have an attorney write a "Contractor Agreement" that everyone signs, and which is renewed each year.

 

Sounds like a plan. :thu:

Steve Force,

Durham, North Carolina

--------

My Professional Websites

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