Should an Independent Artist Form an LLC?
What an LLC is, what it can and cannot do for a music career, and the questions to bring to an attorney and accountant.
Key takeaways
- An LLC is a state-law business structure intended to separate business liability from personal assets.
- It does not automatically reduce taxes.
- Protection depends on operating it as a genuinely separate business.
- Get individualized advice from an attorney and accountant.
Becoming a business before becoming a brand deal
At some point, a music career is also a small business. Income arrives from several sources, expenses pile up, and contracts get signed. One question that comes up often is whether to form a limited liability company.
What an LLC is
An LLC is a business structure created under state law. It is generally designed to separate the business's liabilities from the owner's personal assets, provided the business is run properly as a separate entity. Formation requirements, fees and annual obligations vary by state.
What an LLC can help with
- Separation. Contracts, bank accounts and expenses can sit in the business's name.
- Professional structure. Some partners prefer to contract with a business entity.
- Organization. It encourages keeping music finances separate from personal finances.
- Holding assets. Some artists hold their catalog or business assets in an entity.
What an LLC does not do by itself
- It does not automatically lower your taxes. For federal tax purposes, the IRS treats LLCs in different ways depending on the number of members and elections made.
- It does not protect you if you personally guarantee obligations or mix personal and business funds carelessly.
- It does not replace good contracts.
Practical steps people often take
- Talk to a qualified attorney and accountant about your state and situation.
- If you form an entity, obtain an EIN from the IRS as needed.
- Open a separate business bank account.
- Keep records of income and expenses by source.
- Sign agreements in the business's name when appropriate.
When the question becomes urgent
The question tends to matter more as income grows, as you sign more agreements, as you hire contributors, or as you begin to own valuable masters. Even before forming anything, separating your music finances is a simple first step.
Do this now
- Open a separate account for music income and expenses, even before forming an entity.
- List every income source you received last year.
- Book a consultation with a qualified accountant.
Common mistakes
- Forming an LLC and then using personal accounts for business.
- Assuming an LLC is a tax strategy on its own.
- Ignoring annual state filing requirements.
Free tool
Artist Business Checklist
The basic structure that turns a music career into an organized business.
Terms in this article
- Catalog
- The full body of recordings and compositions an artist or company owns or controls. A well-documented catalog can continue to earn over many years.
- EIN (Employer Identification Number)
- A federal tax identification number issued by the IRS to identify a business entity.
- LLC (Limited Liability Company)
- A business structure created under state law that is generally intended to separate business liabilities from personal assets when operated properly.
Sources & further reading
Written by
Al WestFounder, Masterpiece Recording Group
Al West is an independent recording artist, author and speaker, and the founder of Masterpiece Recording Group. He writes The Masterpiece Artist Blueprint from the perspective of an artist building his own label infrastructure — releasing music on his own platform, selling directly to listeners and documenting what he learns about ownership, money and audience along the way.