The three letters “LLC” may seem like legal jargon to most, but they are quite meaningful if you understand their intent. Let’s look at the first two letters, which stand for “Limited Liability.” If a music artist or producer has their music under an LLC, they have done just as the first two letters suggest. They have taken a critical legal step to limit their risk and personal liability in the event of a potential lawsuit.
This is more common than you might think, especially when it comes to using samples from other songs in your own music. Even chart-topping artist Katy Perry has been legally accused of copyright infringement.
Whether an accusation is wrong or right, it’s a wise idea to “limit” your “liability” for your own peace of mind. A music business endeavor should add to your life, not put your personal assets up as a gamble. Let’s look at a general everyday example, outside of the music business, to further illustrate our point.
Take Joe. Joe is a trained mechanic who loves to work on cars and help people. He owns a $35,000 Ram 1500 pick-up truck which is his pride and joy. He also has $2,000 in a personal savings account. A year ago, Joe went rouge and quit working for “the man” as he calls it. He decided to financially support himself by doing side-jobs such as fixing vehicles for friends, family, and referrals. As risky of a business move as this may be, Joe has actually done pretty well. He managed to build up a trusting clientele and has even become a bit of a small town celebrity. People trust him and enjoy giving him business.
As bright of a picture as this is, there is a dark side. One day Joe took on a new client, Marty. Marty owns an $85,000 Cadillac Escalade. After following an enthusiastic recommendation from a college, Marty decided to take his Escalade to Joe for a tune-up. All is well at first, but later that week Marty crashed and totaled his newly serviced Cadillac. Marty claims that the work Joe performed on his vehicle was what caused the SUV to lose control and crash. Joe’s confident that this is not the case and he tries to reason with Marty. But Marty is infuriated and decides to sue Joe.
Joe has never been sued before and feels unsure of what to do. He’s confident that his work was not to blame for Marty’s accident, but can he prove that in court? What if he can’t? What if his work did have something to do with the accident?
Whether Marty’s claim has merit or not, Joe is at risk. Remember Joe’s $2,000 in savings? Well, Marty can come after that. Then, since $2,000 may not be enough, Marty can come after Joe’s prized Ram pick-up in efforts to recoup some of his loss. If Joe owned his home, his very dwelling place could be on the table. Right or wrong, Joe is at risk of losing A LOT more than he bargained for.
It may be too late for Joe to set up an LLC to protect him in his latest lawsuit, but let’s turn back time. If Joe set up an LLC one year ago when he went into business for himself, he would be in better shape. His personal assets – his truck, his bank account – would be protected from angry ex-clients such as Marty.
As a music artist or producer it’s a wise decision to establish an LLC for your music before officially going into business. It’s vital that you limit risk and your personal liability. It is also important to properly manage that LLC, but more on that later in another post.
Setting up an LLC may seem intimidating, but it’s the right move. That’s where Last Day Records comes in; we help facilitate this process. When looking out for yourself, you don’t have to do it alone. Give us a call today 314-334-5501 to get your music career started off right!
Please take note that the Last Day Records’ team are not tax professionals, CPAs, or attorneys. We prepared this material for informational purposes only. It is not intended to provide, and should not be relied on for, tax, legal or accounting advice. All recipients should consult their tax advisor for information regarding their specific tax scenario.
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External Sources:
https://www.rollingstone.com/music/music-news/katy-perry-dark-horse-copyright-win-appeal-969009/
https://www.upcounsel.com/does-an-llc-protect-personal-assets
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