Incorporation advice for an events band.

[Rupe V]

Morning all,

I run a moderately successful band. We have a few different revenue streams split along the following lines:

Street entertainment: 35%
Online Merchandise: 5%
Bookings including self promoted ticket shows: 60%

Currently there are 4 core members plus a new singer who is now going to job share with 1 of the core members. There are also 3 deps, for sickness cover. There is also a main sound engineer and 2 dep sound engineers. We have a unofficial partnership set up via our accountant and HMRC for the bookings part of the business. The street entertainment and the merchandise are ad hoc and we process that money as sole traders. The unofficial partnership is made from the 4 core members.

I have two questions really, if anyone has any advice it would be very appreciated. Even if that advice is there to go to find out more! I'll split my post into the 2 questions now.

Question 1. Disaggregation/VAT

This year we are expecting to have to register for VAT, and want to make sure we are running in the most tax efficient way. I've been reading about disaggregation and want to obviously avoid that. I feel that the income streams are very different. Do you agree?

Stream 1: Street entertainment and merchandise sales.

These are ad hoc performances with no contract, or booking fee. They are done on smaller portable equipment with all the equipment being member specific and owned individually. The members who are playing at any point could be from a pool of 9 different musicians, and it can be either 2, 3 or 4 people.

Stream 2: Event and private bookings.

These are pre-booked events, with T&Cs and contracts. There are always 4 musicians, at least 3 core members present. All audio and lighting and stage equipment is provided by an external contractor.


What I am most interested in here is, could I incorporate the wedding/function band separately, and are they difference enough.

Question 2. Company Formation

This is actually a few different questions really. I take care of literally everything to do with the bands administration. The other guys have absolutely no interest in any of it. They just want to turn up, play and get paid. Which is fine by me. It seems I have a few options regarding incorporation. Firstly we could change from a partnership to an LLP. Secondly we could have an LTD with directors, and shareholders. Thirdly we could just stay as we are, an unofficial partnership with liability.

What I need to know is, could I set up my own company to deal with all of this? Would it make my life more simple to be a solo director? Then I would, as I already do, convert enquiries into bookings, deal with the clients, the venues, the suppliers and arrange all logistics. Would I then make the other band members shareholders? Or would they be external contractors? I've done the questionnaire on the HMRC website to see if someone is employed, or self employed when subbing. All the people involved with the band come out as self employed.

Does anyone have any advice at all on what way to go, as I can't seem to find clear pathway to getting this sorted.

I really appreciate any tips, or pointers.

Confused.

Rupe

 

[@aiteoconsulting]

Any advice you get on here will be generic without knowing the details of your circumstances and no doubt people will pitch in shortly. However, as a starter for ten, have you asked your accountant? This is precisely what they are there for...

 

[Uwe (Invoiceberry)]

I agree with @aiteoconsulting that your best bet is to ask your existing account who's already currently helping you with your set up. They should know the best as they are aware of your status quo.

 

[HFE Signs]

Agreed, you really need expert advice on this where you can discuss the pros and cons of each option available to you. Sounds like a fun business though, good luck with it all

 

[WaveJumper]

For reasons (I will not expand on here) of research I have been looking into various bands company accounts over the last month and have to say they generally have some very complex structures, ie companies cover ticket sales, merchandise etc as you have mentioned but also companies which cover stage set up (tour costs broken down to each string of events) to transport and of course music publishing the latter may not apply to your good selves.

So my overriding advice would be yes speak to an accountant as you are but you might wish to widen that to advise from one which specialises in the music business.

 

[Rupe V]

Thank you for your replies. I did try to talk to my accountant about this, but he is really busy at the moment, and I do need to speak, as WaveJumper said above, to a company that deals specifically in the entertainment industry I think. Really I was just hoping for some preliminary ideas and thoughts if anyone had anything helpful, so thank you.

The other three core band members have expressed the interest in becoming directors of a newly formed company, which I will then run. However I doubt any of them has even opened google to read a single article on company formation. 3 years ago I tried to open a partnership joint bank account and not one of them even met to go to the bank appointment to drop off our personal details. Roll on 3 years and we are still using one of my spare bank accounts. I also am not sure I want to be legally/financially linked with a few of them! It sounds awful in black and white but it is just practical thinking.

While I am content running and playing in this function band till I retire, we do have a turnover of members. Would I be better off, and would the business be more safe, if I were to be director and majority shareholder, with any interested band member being a shareholder?

Then, I could pay them on invoice for the individual shows that we perform, and then once or twice a year they could have a shareholder dividend? I understand from my reading that in this scenario I would be able to undertake day to day running of the business with no interruption, and that we would write our articles of association to frame what decisions also needed the agreement of a majority of the shareholders, and what decisions could be made purely by the director.


In fact, am I right in understanding that when we form the company the articles of association are drawn up, and agreed to prior to the formation? And that once they are down, that is how things are, and the only way to change those articles is by holding a meeting and having approval?

Moving on from here is the best scenario really that I form the company as a sole director with no shareholders at all, and then just pay the lads on invoice from them as sole traders? But give them a monthly financial statement, and then once or twice a year we have a profit split from the other cash? And then we keep the street entertainment as it already is, completely separate, and keep the merchandise completely separate as well?

What would the potential pitfalls be of either of the above? Also, does anyone have any further suggestions for alternative set ups please?

Thanks once again.

 

[Uwe (Invoiceberry)]

While I am content running and playing in this function band till I retire, we do have a turnover of members. Would I be better off, and would the business be more safe, if I were to be director and majority shareholder, with any interested band member being a shareholder?

Then, I could pay them on invoice for the individual shows that we perform, and then once or twice a year they could have a shareholder dividend? I understand from my reading that in this scenario I would be able to undertake day to day running of the business with no interruption, and that we would write our articles of association to frame what decisions also needed the agreement of a majority of the shareholders, and what decisions could be made purely by the director.

It's safe to say that the fewer directors and other shareholders you've got in the Band LTD, the easier and safer it will be for you. If you're concerned about being financially linked to any band member, then I recommend not doing it (or spending a bunch of money on lawyers/accountants to figure out all the details and what could go wrong, etc.)

I think the bigger question for me would be – would your fellow band members be OK with you owning the Band LTD and being the sole director? If that's a possibility and they don't care about the legal structure as long as they get their cut, then why not simply open your own company, you're the sole shareholder and director and then each band member has an agreement with your LTD. They invoice you after each gig or once a month or whatever payment modalities you choose. If they leave the band, no more money from gigs, but maybe another 1-2 years of money from royalties or whatever. You can work out the details to make everyone happy. And you'll stay safe.

 

[Gyumri]

From an administrative and tax point of view an Ltd with just you as the director and shareholder ought to suffice. The band members invoice the company based on what is taken at any gig. They're no different than what you would pay session musicians in the studio. They could have a service contract. The sale of merchandise based on "the band's" sales is more problematic if the members change from time to time; but as long as they remain a member and perform under their service contract or as agreed then they would get their cut of sales or a percentage of profit - whatever.

It seems like you want to act as a manager for the group so you will need to really work out the financials with your colleagues as everybody will want to have their snout in the trough as you become more successful.

A good accountant dealing with bands looks to be essential but an Ltd will in the meantime smooth out many issues.

 

[The Byre]

Does anyone have any advice at all on what way to go, as I can't seem to find clear pathway to getting this sorted.

OK - this is one of those questions I am destined to advise on!

The best way to explain your options is to give you well-known examples of musical acts and how they are organised -

The Hallé Concerts Society. A not-for-profit society that runs The Hallé Orchestra and with many full-time employees.

Pink Floyd 1987 Ltd. A limited liability company with senior and junior partners and several employees. The original band was also a Ltd. until R.Waters left and a new Ltd was formed in '87.

The Small Faces A common law partnership based (unwittingly) on the 1890 Partnership Act. When one member left, because it was a partnership, the partnership was automatically dissolved and a new band called The Faces had to be formed. A common law partnership is therefore a very dangerous structure - but it seems to be the one you are in right now!

Roxy Music. A limited company owned by someone that began as a common-law partnership of Bryan Ferry and Graham Simpson with others as temporary employees, it became a Ltd owned by Ferry when Simpson left. Members of the band were paid the usual way when touring, rehearsing and recording.

Queen. A partnership in the form of a limited company. Like most bands, they started out as a common law partnership, but when they became aware of the legal side of things, the four members formed Queen Productions Ltd. with each member owning 25% of the company. Today, 25% is owned by the heirs to the estate of Freddy Mercury.

The Big Money Orchestra. This is just a name - there is no such act! It is just the registered trademark for an occasional scratch orchestra conducted by Jon Brion that performs and records in and around Los Angeles and pays those playing the usual union rates. Film music is usually done this way.

Other formations such as an LLP is possible and is popular for small orchestras.

Once things become more complex and successful, spin-off companies are usually formed to cover touring, films, merchandise and even promoting other acts.

I really appreciate any tips, or pointers.

Yes - remember to register your trademark! And whatever formation you decide to go for, have a partnership and/or shareholders' agreement!