The limited liability company, or LLC, is an attractive business form choice for many startup entrepreneurs due to its provision of limited liability and flexibility in terms of tax treatment. Each state has its own set of laws that govern LLC formation, and starting a music business LLC requires you to complete the same set of steps that you would take to organize any other business as an LLC in your state.
Fit your business needs with the right LLC package
Select a name for your company. Check with the secretary of state or division of corporations in your state to make sure the name you want isn't already in use by another company. As the music business can involve operations in more than one state, expand your search beyond your state borders by checking online to see if anyone else is using your intended name. Operating your LLC under the same name as another company already in operation may expose you to costly trademark litigation. Because you personally chose the name for the company, a plaintiff may bypass the limited liability shield and attack your personal assets.
Prepare your articles of organization. Akin to a corporate charter or articles of incorporation, your articles of organization contain key information about your company -- such as your registered agent for service of process -- that is required by state law. One piece of information commonly required on articles of organization is a brief description of the business purpose for which the company is being organized. Draft a broad description of your business purpose in order to maintain the broadest limited liability shield possible. Consider that your LLC may be involved not only in recording music but also distributing music online and in stores, buying and selling studio property, leasing studio property, and organizing or promoting concert events. File your articles of organization with the state and pay the required fee, which can range from $50 to over $500, depending on your jurisdiction.
Draft an operating agreement even if your LLC will have only one member or state law does not require one. Operating agreements, like corporate bylaws, contain the rules for the internal operations of the company, including adding new members, handling capital contributions and disposing of company assets. Having an operating agreement and observing its requirements adds another layer of protection to the limited liability shield. For multi-member LLCs, a well-drafted operating agreement may help protect the income of nonmanaging members from self-employment tax and preserve fringe tax benefits for managing members.
Obtain an employer identification number, or EIN, from the Internal Revenue Service. As your LLC is its own entity with a legal existence separate from your own, it needs a number by which state and federal tax authorities can identify it, serving a function similar to that of your own social security number.