Band as a business - need advice.

[Kingfan]

I co-own a big band. Prior owner ran it as an individual. We have two paid gigs coming up this year, and are looking for more. Suggestions wanted on how to handle finances. I have already been asked for a tax ID number, which we don't have. Form a corporation? How do your bands work? I don't want to use my own SSN to get band payments then have to figure out later my income tax hit.

Thanks!

[Matt K]

Disclaimer: I'm neither a lawyer nor an accountant.

I'd setup an LLC and treat the members as contractors. I don't know these figures by heart but it's something like $600 before you have to give them tax forms. Co-ownership can be more complicated but doable. If you do a single-member LLC you can use it as a passthrough, meaning the band gets it's own tax ID you can use but the income isn't counted for you personally. Keep a separate bank account, then it's clear to see that your gross may be, for example, $2k, but your profit was $1800 because you paid 18 people $100. If you spend those $200 on related business expenses, that can be deducted from your personal tax burden.

[BGuttman]

Note: 1099 forms are required if the contractor earns over $599. I don't think IRS will gig you if you paid $600 and didn't issue 1099s, though.

I ran my band through my personal SSN. We agreed that any income from the band would have the taxes taken out before we paid any players.

My guys generally got $50-100 per gig, but we were a 6 piece Dixieland ensemble and I had to pay a wagon driver when we did parades.

I like the idea of an LLC. We didn't really know about those when we set up the band.

[hyperbolica]

A lot of musical organizations are run as non-profits. That way any volunteer work is tax deductible, and you can apply for government grants and take donations. Some of these organizations also pay players. I don't know all the rules, which may be a pain in the butt, but it would be worth looking into.

[BGuttman]

In order to operate as a non-profit you need to be recognized as an IRS Code 501 organization. The one to get is 501(c)3, which means any donations are tax deductible. You will need a lawyer to file a ton of paperwork and this can get expensive. If you have a lawyer as one of your players who will do the job pro bono you may want to look into that. I would think that if you only get a couple of thousand dollars a year in income, you might want to look at something else.

I'm not an accountant (although I have a certificate from a college in accounting) and would recommend you talk to an accountant about your various options.

[Kingfan]

Thanks, all. Our band income for this year should be under a grand, next year it may go up. I play in a community band that is a 501(c)3 and the fiscal officer is in my quintet, so I will check with him. My cousin is an accountant, will pick his brain when I get my ducks in a row.

[boneagain]

I kinda like the 501(c)3 approach. For starters, it lets the "buyer" write one check without it going onto YOUR IRS forms. Then there's the book you bought. Everyone benefits from the book. You could sell it to the 501(c)3 over time so the BAND owns the book. That would make the next leader transition more graceful as well. In the meanwhile, you get a few protections from inadvertent misbehavior by band members (we all TRY to behave... really!) I suspect, though, that the governence requirements will need VERY careful review. You have voice anxiety about being the leader. You could end up worrying about an elected "management" of the 501(c)3 changing leaders. I REALLY doubt they would, but that probably wouldn't stop you worrying

I bet you would really profit from some one-on-one with an accountant, as Bruce suggests. All the options have differing costs, liabilities, and other worry points. An accountant would likely point you toward what best fits your presonal worry profile.