Q: Paying Musicians - Band Members

Discussion in 'Tax' started by justanother_bassplayer, Jun 14, 2005.

  1. 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
     
    justanother_bassplayer, Jun 14, 2005
    #1
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  2. 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
     
    Nan, EA in LA, Jun 15, 2005
    #2
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  3. 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.
    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.
     
    Paul A Thomas, Jun 15, 2005
    #3
  4. justanother_bassplayer

    Katie Guest

    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.
     
    Katie, Jun 15, 2005
    #4
  5. 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
     
    Harlan Lunsford, Jun 15, 2005
    #5
  6. justanother_bassplayer

    traalfaz2 Guest

    I am in a newly formed band and we are receiving payments
    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
     
    traalfaz2, Jun 15, 2005
    #6
  7. justanother_bassplayer

    R Guest

    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
     
    R, Jun 15, 2005
    #7
  8. justanother_bassplayer

    MTW Guest

    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
     
    MTW, Jun 16, 2005
    #8
  9. 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
     
    Harlan Lunsford, Jun 16, 2005
    #9
  10. justanother_bassplayer

    D. Stussy Guest

    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.
    << ------------------------------------------------->>
    << The Charter and the Guidelines for submitting >>
    << messages to this newsgroup are at www.asktax.org >>
    << Copyright (2005) - All rights reserved >>
    << ------------------------------------------------->>
     
    D. Stussy, Jun 21, 2005
    #10
  11. 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
     
    Last edited by a moderator: Jan 23, 2018
    Harlan Lunsford, Jun 22, 2005
    #11
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