Q: Paying Musicians - Band Members

  • Thread starter justanother_bassplayer
  • Start date

J

justanother_bassplayer

I am in a newly formed band and we are receiving payments
from companies made out to the band leader who then pays the
members. He does not want to start a sole proprietorship or
LLC, which was my first thought. Most of our performances
will be corporate events so this is a significant issue.
What are our options here.

Any advice or recommedations would be greatly appreciated.

Thank you.

JB
 
N

Nan, EA in LA

I have a client who is in the same position. A partnership
would be legal but with musicians it's a mess. (Band
members have a way of quitting, joining, changing the amount
of time they play, etc, etc. We would have had to revise the
partnership every year.)

He does a sole proprietorship, reports the members who make
over $600 via a 1099 MISC, and lists, on his own Schedule C,
a category of "players who made under $600 on gigs" (his
words).

He reports all the income, any expenses that were for the
whole band (like my fee) and his own personal expenses and
it winds up as an acceptable burden.

All alternatives we kicked around were terribly complicated.

Nan, EA in LA
 
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P

Paul A Thomas

I am in a newly formed band and we are receiving payments
from companies made out to the band leader who then pays the
members. He does not want to start a sole proprietorship or
LLC,
Well that's too bad, because that is what he (or you) have
done.

Face it. You are in the music ~business~. Business
decisions, business recordkeeping, business accounting and
business tax returns all have to be kept up with.
which was my first thought. Most of our performances
will be corporate events so this is a significant issue.
What are our options here.
Sit down with a lawyer who is familiar with the music
business (yes, they charge money for this) and see what your
options are. It's either form a partnership or a
corporation, or one of you be the "sole-proprietor" and the
others employees.
 
K

Katie

I am in a newly formed band and we are receiving payments
from companies made out to the band leader who then pays the
members. He does not want to start a sole proprietorship or
LLC, which was my first thought. Most of our performances
will be corporate events so this is a significant issue.
What are our options here.
He has already started a sole proprietorship, whether he
likes it or not <G>. Businesses that hire your band must
1099 him if they pay more than $600 and the check is made
out to him. If you do nothing else by way of organizing
your business, he will have to report the gross income on
the Schedule C and claim deductions for the payments he
makes to the other members of the band, as well as other
expenses. Each of you will also have your own Schedule C.
You're all sole proprietors.

You could, as a group, organize a partnership or LLC. Or
any or all of you, separately, could organize your own
single-member LLCs. All that does is provide some
insulation of your other, individual assets from the claims
of creditors of your music business.

If this is going to be a continuing operation, not just for
a few performances, you should see an attorney who is
familiar with the music industry for advice on how to
structure your relationships with one another and your
customers.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.
 
H

Harlan Lunsford

I am in a newly formed band and we are receiving payments
from companies made out to the band leader who then pays the
members. He does not want to start a sole proprietorship or
LLC, which was my first thought. Most of our performances
will be corporate events so this is a significant issue.
What are our options here.

Any advice or recommedations would be greatly appreciated.
The facts are clear. The leader of the band IS a
proprietor, like it or not. This means he should in turn be
giving out 1099-misc forms to all of y'all for what he pays
you.

an LLC in this case is overkill.

ChEAr$,
Harlan Lunsford, EA n LA
 
T

traalfaz2

I am in a newly formed band and we are receiving payments
from companies made out to the band leader who then pays the
members. He does not want to start a sole proprietorship or
LLC, which was my first thought. Most of our performances
will be corporate events so this is a significant issue.
What are our options here.
easy enough and something several of my clients do each year:

Band leader who receives payments reports full amount as
gross income on his Schedule C. Expenses out the amounts
paid to other band members as Sub Contracts and, assuming
these amounts will exceed $600, issue his own 1099-MISC's to
them for Non-Employee Comp...

Then band members will each report their portion of the
income as Self-employment income on their own Schedule
C's...

Dave
 
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R

R

I am in a newly formed band and we are receiving payments
from companies made out to the band leader who then pays the
members. He does not want to start a sole proprietorship or
LLC, which was my first thought. Most of our performances
will be corporate events so this is a significant issue.
What are our options here.
By de facto, he already is a sole proprietor. Unless he
forms a legal entity (e.g. S Corp, LLC, etc.) he is a sole
proprietor for tax purposes. In this case, he needs to keep
track of *his* income and expenses from the band. The host
pays him, and then he pays you and the rest of the band.
His income is the total received. One of his expenses is
the amount he pays you and the rest. Anything left over is
taxable profit to him. Also, if he pays anyone (generally
speaking) in the band more than $600 USD in a year, he also
has to provide them with a Form 1099, and report the sum
total on all Form 1099s to the Social Security Admin on a
Form 1096.

Hope this helps,
Russell Tuncap, CMA, CPA
www.tuncap.com
 
M

MTW

Any advice or recommedations would be greatly appreciated.
Note that if these dudes are in the Musician's Union, the
terms of union contracts probably specify the that "leader"
must treat the other members as "employees" and withhold
appropriate taxes. This provision is likely included to
provide "protection" on employment issues to the clubs and
venues where they perform.

You should also check applicable state requirements. As I
recall, the unemployment agency in my state (WA) has issued
some specific guidance on musician/performer issues.

MTW
 
H

Harlan Lunsford

R said:
(e-mail address removed) wrote:
By de facto, he already is a sole proprietor. Unless he
forms a legal entity (e.g. S Corp, LLC, etc.) he is a sole
proprietor for tax purposes. In this case, he needs to keep
track of *his* income and expenses from the band. The host
pays him, and then he pays you and the rest of the band.
His income is the total received. One of his expenses is
the amount he pays you and the rest. Anything left over is
taxable profit to him. Also, if he pays anyone (generally
speaking) in the band more than $600 USD in a year, he also
has to provide them with a Form 1099, and report the sum
total on all Form 1099s to the Social Security Admin on a
Form 1096.
Two corrections here. The 1099-misc reporting threshold is
over 599$ (instructions say 600 or more). Also the 1096
form along with 1099's go not to Social Security
Administration in PA, but to the designated service center,
Austin, TX in my case. Not sure about others.

ChEAr$,
Harlan Lunsford, EA n LA
 
D

D. Stussy

Katie said:
(e-mail address removed) wrote:
He has already started a sole proprietorship, whether he
likes it or not <G>. Businesses that hire your band must
1099 him if they pay more than $600 and the check is made
out to him. If you do nothing else by way of organizing
your business, he will have to report the gross income on
the Schedule C and claim deductions for the payments he
makes to the other members of the band, as well as other
expenses. Each of you will also have your own Schedule C.
You're all sole proprietors.
I disagree. I will agree that he has started a business,
but not necessarily that it's a sole-proprietorship. It
could be a partnership - if he has the same other musicians
playing with him on a regular basis and they get a
percentage of the cut. You allude to this below but seem to
cut immediately to an SP above.
You could, as a group, organize a partnership or LLC....
<< ------------------------------------------------->>
<< The Charter and the Guidelines for submitting >>
<< messages to this newsgroup are at www.asktax.org >>
<< Copyright (2005) - All rights reserved >>
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H

Harlan Lunsford

I disagree. I will agree that he has started a business,
but not necessarily that it's a sole-proprietorship. It
could be a partnership - if he has the same other musicians
playing with him on a regular basis and they get a
percentage of the cut. You allude to this below but seem to
cut immediately to an SP above.
And I likewise disagree, D. For a partnership to even
exist, there must be an agreement aforehand, a genuine
meeting of the minds, even in absence of a written
instrument. In this as in all such cases I've ever seen,
it's just a bunch of guys playing (music) together without
any inkling of the financial arrangements or implications.
Hence the "leader of the band" is in charge, since the
check is made out to him, or rather in 90% of the cases, he
is the one that is handed the cash at the end of the "gig."
Clearly a proprietorship now, and until the band gets
together and decides to incorporate, form a partnership, or
an LLC formerly. I'm sure that IRS would consider it so,
too.

ChEAr$,
Harlan Lunsford
 
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