Starting a production company

[dystinktmusic]

Hello everybody, this is my first post and I apologize if I'm posting in the wrong group. I've been following taxi over the past year and the initial interest I had in joining is still strong, but there are some things I would like to have set up and running as well as cleared up before I do join.I'm a record producer/songwriter, I've been involved in music for about 5 years now working with Hip Hop/R&B/Pop artists, along with plenty of live instrumentalists. I was never really interested in the business aspect of what I'm doing until last year, around the time I came across Taxi.com. The more I read up on business the more I realized I could eventually really turn this into a full-time career. On that note, I'm interested in starting a production company with a long-time friend of mine (who is, and will continue to be actively involved in promoting my creative work). We know exactly what it is that we want to be doing, but the legal part of being able to do that as a company is a little bit of an enigma since it is related to the music business and none of the books and packages we read on starting a small business mention running a music company or anything to do with the music business.In essence, what we want to do is set up a Music Production Company focusing on,along the music itself, developing and promoting up-and-coming talent. Even though we will be doing other things besides just creating music (since we already have an artist we've worked with for 4 years whom we plan to develop, make records with, and sell those records) the very root of our company will be producing music and shopping/selling the music to other artists, record labels and whoever else is in need of our services.We are well educated on producing, networking, and basically doing business to make money with what we do, and we have basic knowledge on legal things (such as legal structures), but when it comes to the legal part of RUNNING a business of this sort we have some questions; 1. Considering that our company will be based on generating revenue through music which isnt physical product (even though we want to sell merchendise like CDs, posters, shirts etc.) as opposed to selling product such as computers, hardware, shoes etc., when starting/registering our business (we chose incorporating), is there a special process made for a company of this kind? Or does the way we generate profit not make a difference in the set-up process?2. If there is a special process made for music companies;What are the steps we need to take in order to successfuly operate as a music production company?3. Once the company has been set up, are the taxes we need to claim the same as other businesses? The main reason why we are unsure of this, is because we plan to sell our work worldwide, and we are unsure if (local) tax (such as GST in Canada) should be in effect when dealing with customers across the globe, on top of that selling them a piece of music. Or does that not make a difference?4. Are we able to collect publishing royalties through our production company? Or do we have to set up another company just for publishing itself?5. Last but as important - If we sign an artist to our company, and once we start selling records, does he/she then become an employee on the payroll, or are we paying them in royalties and it's not necessary for them to be on the payroll?So to summarize everything, we need to know how to LEGALLY set up and run a music production company to be able to legally generate profit and eventually make it a full-time venture.Your help, and Your time is very much appreciated. Any suggestions are very welcome.Thank You

[ddusty]

Tommy,There may be some people here who can help you, but the scope of your questions are so huge that my only suggestion is to buy TONS of books and make an appointment with an entertainment lawyer.There are so many different ways to do what you are asking, that it would be almost impossible to answer them all in a forum. (And I certainly don't have many answers either)Good Luck with your endeavor.Rob

[mazz]

I'm no lawyer or music biz guru but it sounds to me like you have at least 2 different companies here: 1. A record label, 2. A production company, and maybe 3. A publishing company. (If you take those one at a time, there are books that will help you determine how to approach each and wrap them in to one entity.)From what I get from your post you are planning on being engaged in:1. Producing records for artists (possibly co-writing with them, see 2 and 3) and selling them under your own business, i.e., record label.2. Producing records for artists and possibly co-writing (and handling the publishing, see 3) with the idea being to sell the masters to a larger company. This would be the production company aspect of your activities.3. Publishing: any of your writing or co-writing royalties would be handled through this entity.Now I don't know if you'd be setting up an umbrella corporation that contains all of the sub-businesses or what. That is way beyond my knowledge. The legal, tax and whatever other ramifications you'll have to research yourselves and hopefully run it by an entertainment lawyer and/or an accountant that has experience in the music business.Particularly if you are going to be doing artist development, you need to be VERY clear up-front with your clients, particularly if you are co-writing with them and trying to become attached to them as producers in case they land a big deal. There are many horror stories out there about producers that got left behind when the artist got the big deal. I think Moses Avalon has been writing a colum in one of the mags, it might be Recording Mag, addressing this very issue. Tread carefully and get as much knowledge as you can before you jump in. I think TAXI has a good list of books that might have some of what you are looking for. The Brabec brothers have some great info and their book "Music, Money and Success" is one of the bibles. They usually hold at least one class at the Road Rally so if you are coming, you might be able to get some of your questions addressed by these gurus.Good luck,Mazz

[dystinktmusic]

Thank you for your time everybody, it's really appreciated. Mazz: thank you for your lengthy and informative input. I'm not so sure about having to set up multiple companies, yet I think you're right when it comes down to "putting it under one umbrella". But at the same time I don't see why I would need different legal entities to work different aspects of the same record (ie. selling, shopping...). I think that could be done through departments and organizing the company myself on the inside. I just wanted to make sure I go about everything right, and see if anybody went through setting up a company themselves. I believe that at the end of the day the number 1 thing is that everything goes good with claiming taxes, and paying everything on time.Thanks again

[mazz]

Tommy,It's hard to put this stuff in a concise post but I think you got the gist. You were there already. I think at the end of the day, the business structure has to work for you, what I was hoping to help you see was that there were some distinct activities you were engaging in and that there needed to be some conceptual separation between them for clarity.I wish you success.Mazz

[gitarrero]

hi tommy,I think it would be not only a good idea but necessary to have a business plan. without it there are lots of possible mistakes, pitfalls etc.theres a good book about building a businessplan for a music business: "succeeding in music"cheers,martin

[edteja]

Tommy,In some cases you might have to have separate organizations. FOr instance, if your PRO won't let you use your first choice name as a publisher, and you want to get paid for the publishing, you would at least need to organize the publishing under a doing-business-as name (DBA). It isn't that they would have to be completely separate companies, but you might find advantages in separate organizations. For instance, someone (an artist) might realistically want to know who is the publisher, versus the producer. It is a way of presenting a business face. Furthermore, you can find good books on setting up publishing companies, record labels and production companies and integrate the information.Good luck.