How much would it cost to start an indie record label?

[guitarguy101]

I wanted to start a small indie record label (5-6 bands.) I already have the bands that want to sign (and a sweet little recording studio.) How much would it cost just to get it off the ground, and what work would this entail?
We're all in high school. My dad has an MBA and a degree in law, I preemptively took (and passed) the bar exam, so technically I am allowed to practice law. Between my dad and myself, we are capable of writing any contract or legal document necessary.
I'm getting better and better at making clean recordings. I'd also be willing to fund any recording studio trips if the bands were unsatisfied with my recordings, and I could see a profit in what I was doing.
Also, should I make it an LLC, or a non-profit? The LLC would mean I keep whatever I have left over at the end of the day, the non-profit would be giving dividends to the bands, with whatever profit I have.
I have a few basic contracts drawn up, and if anybody feels like reading them, I'll post them.

 

[miroslav]

Are you asking just about the cost of filing a DBA and whatnot...?

Otherwise...it costs as much as you are willing to sink into it to get it going.

Indie labels are a dime-a-dozen these days...and some are huge and make good profits with serious artists...some are just working out of the garage to promote their own music...and not making anything.

 

[guitarguy101]

Yes, I was referring to the cost of filing the DBA and such. To allow me to legally sign bands, and file for tax breaks, etc.

 

[miroslav]

I think your Dad would be able to give you the best answer on that...but I don't think it's more the a few hundred $$$ to get things filed.

When you find out what is needed legal-wise...post it up. I'm sure some other folks would like to know all the legal stuff too.

AFA the taxes and all that...it comes back to how much you are making...if anything. It would nice to be able to write off gear/studio expenses and all that, but as a *business* you have stuff like insurance and local laws to consider.

I mean...you need to really weigh out the pros/cons. You might be better off just keeping it a "private" kind of affair (you guys can still have agreements between each other)...and then if there's some serious possibility of $$$$ and real business at some point...THEN take it to that level.
I would focus more on the music making at this point.

 

[Capt Hair]

Depends on where and who does it. My registry was just over $100. I'd definitely set it up as an LLC, also can be done online for around $150, always separate business from personal finances. Being a small business owner, I can't think of a situation where you wouldn't want to be a LLC.

Again, if you go to individual office to file and register it could potentially cost a lot more.

Make sure your registered with both federal, state, taxes; and check to see if your city has any taxes of it's own as well. The SBA site is great for starting up if there's any questions what so ever that you can't figure out. You can even get free mentoring locally or via the internet. The SBA website is really a great tool to use, there are so many little licenses and fees that you have to pay starting up that it's hard to keep up with a lot of it.

Like Miroslav said, it costs as much as you want to put into it. You can get 7a startup loans if you have good enough credit and a solid business plan if you really wanted to.

I'd suggest buying most of your equipment first, which is sounds like you have, and start things up slowly.

Then buy awesome equipment at the end of the year to write off for taxes.

 

[moresound]

I'll tell you how to do it for free but then there is my fee.

 

[guitaristic]

You're in high school yet you've already taken and passed the bar exam?

I bow to your greatness

 

[Capt Hair]

oh yea, check out your local zoning laws as well. You want to talk about getting shut down fast lol

 

[stevieb]

I wonder if you are perhaps a little confused on what it is you really want to do.

Okay, so you have a nifty little home studio. That's great. That's for recording bands. A "label" usually is responsible for "signing bands" for the purposes of distributing bands' records. It's even called a "label" because originally, they might slap LABELS onto the recorded phonographic discs, then package them for distribution. Then, various people would do things like "shop" a record around to radio stations, record stores or chains, national distributors, etc. to get the station to play the song(s) on the air, and the stores to carry the records. It takes an incredible amount of "leg work" to get it done. Running a label is a LOT of work, and small indies rarely turn a profit or last very long. I knew Hammond Scott when I lived in New Orleans (met him through his cousin, Natalie, who was my up-town neighbor)- here is a short version of his label's history:
Black Top Records - Wikipedia, the free encyclopedia

Hammond did not rely on his label as his means of support, which was probably a good move- it was more a labor of love.

 

[miroslav]

I would be surprised to find 5-6 high-school bands from the same area ready to be on a record label... ...but it can be fun to sort of try and do it like a big pro label, following all the processes and requirements. It could be a great learning experience that will come in handy down the road when some of the bands mature into more serious contenders.

Hey...do it like a high-school Junior Achievers business project. I'm not joking. If nothing else, turn it into school credit, and get some support also from your teachers/counselors. Like how many Junior Achievers started a record label in high-school.........???

 

[elbandito]

I'll tell you how to do it for free but then there is my fee.

this guy is hilarious. nothing but jokes. haha

 

[miroslav]

this guy is hilarious. nothing but jokes. haha

Please...don't encourage him, he can't help himself.

 

[guitarguy101]

Please...don't encourage him, he can't help himself.

You're right hahaha

 

[moresound]

I'll tell you how to do it for free but then there is my fee.

this guy is hilarious. nothing but jokes. haha

Please...don't encourage him, he can't help himself.

You're right hahaha

Hey! That's show biz.

 

[guitarguy101]

I wonder if you are perhaps a little confused on what it is you really want to do.

Okay, so you have a nifty little home studio. That's great. That's for recording bands. A "label" usually is responsible for "signing bands" for the purposes of distributing bands' records. It's even called a "label" because originally, they might slap LABELS onto the recorded phonographic discs, then package them for distribution. Then, various people would do things like "shop" a record around to radio stations, record stores or chains, national distributors, etc. to get the station to play the song(s) on the air, and the stores to carry the records. It takes an incredible amount of "leg work" to get it done. Running a label is a LOT of work, and small indies rarely turn a profit or last very long. I knew Hammond Scott when I lived in New Orleans (met him through his cousin, Natalie, who was my up-town neighbor)- here is a short version of his label's history:
Black Top Records - Wikipedia, the free encyclopedia

Hammond did not rely on his label as his means of support, which was probably a good move- it was more a labor of love.

That's what I want to do. I want to be responsible for producing their music AND overseeing distribution (I understand this is atypical, but they're okay with it, so...)
And the goal's not to make money. First of all, having fun is the top priority. A close second is getting my band's music and our friends' music out there. Third, starting a buisness of any kind looks killer on a college application

 

[moresound]

starting a buisness of any kind looks killer on a college application

So is a filing of a chapter 11. It shows that you fully understand today banking institution and all that goes with it.

 

[mshilarious]

If you passed the bar you ought to know the difference between a DBA and an LLC . . . a DBA ("doing business as" for those not in the know) is not a legal entity at all, it's a name you make up for a business that has a different legal name. For example, you. You can run your business in your own name as a sole proprietorship, or a fictitious name (DBA). It's still a sole proprietorship, which means your personal assets are on the hook for all claims against the business. To execute a DBA you just need to file a fictitious name registration, usually with your county/city registrar of deeds, for a filing fee. $20 in my county.

An LLC is a legal entity that provides some (and I emphasize some) protection of your personal assets from claims against the business. You need to draft an LLC agreement and file that with your state corporation commission (or sometimes just a registration form) and pay that filing fee, plus there will often be an annual registration fee that can vary by state quite a lot, say from $0 to $800. If the LLC is just you, then for tax purposes it is considered a "disregarded entity", which means you claim the income directly on your own return. If you are bringing in the bands as partners (technically called "members"), then you'll have to file a partnership tax return.

Unless you anticipate people making donations to your label and wanting corresponding tax deductions, stay away from the idea of a nonprofit, that adds many layers of complexity that you really don't want to deal with.

 

[wheelema]

If you passed the bar you ought to know the difference between a DBA and an LLC . . . .

I suspect that when he claimed to have 'passed the Bar' he was alluding to the chin-up bar at his high school.

 

[stevieb]

That's what I want to do. I want to be responsible for producing their music AND overseeing distribution (I understand this is atypical, but they're okay with it, so...)
And the goal's not to make money. First of all, having fun is the top priority. A close second is getting my band's music and our friends' music out there. Third, starting a buisness of any kind looks killer on a college application

Well then, good luck to you. Hammond and his brother had pretty deep pockets and some serious connections (political and social) in Louisiana- and they folded after about 18 years. From your "looks killer on a college application" remark, I get the sense you are planning on doing this for a couple years or so- I wonder if you are being realistic about how much traction you can get in only a few years. But, whatever. Like I said, good luck.

 

[guitarguy101]

I suspect that when he claimed to have 'passed the Bar' he was alluding to the chin-up bar at his high school.

I've been taking law classes since sixth grade to pass the bar, don't belittle my accomplishments. If you've taken the bar, you'd know it's based mostly on criminal and tort law. Contractual and buisness law are both elements, but they are subordinate to the two forms of law listed above.
Second of all, I know what both mean, and the connotations of both. What I was asking is which I should apply for, an LLC or a non-profit license. Like I said, making money is not a priority, and if I file for a non-profit, then I'm tax exempt, which is pretty nice.
And by non-profit, I meant running it like a Co-Op, where members are refunded money not put into the company. That's what I was referring to. I still would ask for 20% of all sales, but anything I didn't use to cover expenses would be refunded in the form of a dividend to my clients. In my opinion, that's how all the world's businesses should be run, and that's what I would prefer to do if it's at all possible. Plus, any time spent working for a non-profit entity counts as community service hours, which also looks good on a college resume.
If not, an LLC would be the next best thing because it would protect my personal assets, just in case anything went wrong. The question was directed at people who have started a record label and have experience with this kind of thing. I know the distinction between a sole proprietorship, an LLC, and a bona-fide corporation, I was just wondering which one you guys thought I should apply for.
And Stevieb, I was only planning to do it for the next 2 or so years. I understand I won't ever be a "real" record label, but I'll do enough to have fun and gain a little bit of buisness experience.