Structure, What Structure?
With music, as with any business, how you structure your business can be crucial to how successful you might be, or at the least, how difficult or easy you make life for yourself.

Working as Solo Artist
If you’re a solo artist, the simplest way to enter the wonderful world of the music business is as a “sole trader”, which really just means you operate as yourself. Plain and simple eh?

The advantages of being a “sole trader” are that it is relatively simple and cheap to set up, you have complete control and you won’t need to register a business name if you use your own name. Check out the “Band Names” page for more info on registering band names.

The disadvantages are that you will be personally liable for the debts of your “business” and if you hire employees, you’re responsible for their actions if they are negligent. There may also be income tax disadvantages, but you’d need to speak to your accountant there.

Its a great way to start out, but as your “music business” grows, it might pay to keep these things in mind and seek advice as to whether another structure may be more suited to you.

Band Structures
If you are a band, you should consider the nature of the relationship between each of the band members, and how you are going to structure the group. There are a few options:

• Partnerships
• Companies
• Trusts  

Each option has different costs and benefits in setting it up, running it, for financial risks and for tax liabilities, so it is a good idea to speak to your lawyer and accountant about the best structure for your band’s circumstances. There is no “general rule” for all bands.

To get you moving, the general nature of each structure available to you is set out below.

Partnerships
A partnership is the most common structure for a band or musical group. It involves two or more people who own and run a business together with a view to making a profit. It is pretty straightforward to establish, and there is no need to register a business name if you are simply using the names of each of the band members of “partners”. Like legal firms.

You need to be aware that partners are “jointly and severally liable”. That means partners are personally responsible for all the debts of the partnership, and not just their own. This includes debts incurred by other partners or the partnership as a whole. And if debts can’t be paid by the partnership, people it owes money to can pursue each partner’s own assets.

As a “partner”, you can therefore be liable for all debts incurred in performing as a band.

A partnership can often be created by a band without the band members realising it. The law will generally treat people who meet the definition of “partnership” (being “carrying on a business in common with a view of profit”) as partners in a partnership. In that case, the partnership is regulated under “statute” by the Western Australian Partnership Act, (or similar acts in other states) as well as by an extensive body of “common law” cases, and the band members may find that their rights and obligations weren’t as they intended.

A partnership does not need a formal written partnership agreement, but it is definitely advisable to have one. Although it will take time and some money to draw one up, it is far better in the long run for band members to consider matters that the Partnership Act or common law may not address, or not address in the same way the band intends (such as the contribution from each member of time and money, the share of band profits and how the band functions) than find themselves in a dispute about these matters down the track.

A partnership agreement can be very simple. A sample partnership deed and a checklist of the key issues to be considered for such an agreement is available (by order) from the Arts Law Centre of Australia (which are linked below) as well as from the Australian Music Industry Network's "Legal Pack" (also linked below).

Companies
A company is an independent legal entity established under the national Corporations Act. For a band, a possible structure will be a “proprietary limited” company. The name of the company must contain the words “proprietary limited”, or its shortened form “Pty Ltd”. You can then register your band name as a business name, for the company to use.

If a company is formed by a band, the company will own assets, be responsible for band liabilities and can sue and be sued in its own right. The “equity” of the company can be divided into shares, which can be bought and sold by band members, as its shareholders. Other parties, such as investors, may also obtain shares or “equity” in the band company. In essence, the company will be the legal entity that takes over the operation of the band, and the band members will be engaged or employed by it to perform “musical services”.

The major advantage of a company is that it limits the band member’s risk of liability for the band’s debts (as shareholders) to the amount of the shareholding, usually a few bucks.

The disadvantages are that it can be quite expensive to set up and run, and administrative regulations mean more paperwork. It’s also important to have a good understanding of director’s responsibilities – there are significant penalties for negligence by directors. It is also important to keep in mind that it is the company, not the band members, that will be carrying on the band’s business, which can become tricky to administer, with the need for director’s meetings and so-on. But if you can get your head around it, it may work OK.

Companies may also be suitable for solo artists, by setting up a single person “Pty Ltd” company, which means the artist is the sole shareholder and director. Of course, others can become involved as shareholders or directors of a standard “Pty Ltd”, if necessary.

All Australian companies will be regulated by the Australian Securities and Investments Commission, which offers a lot of company information, including about registration. A company can also be set up for you by “shelf company services”. If you do decide to set up a company, it would be advisable to obtain legal and accounting advice on it, as there may be agreements such as shareholder agreements or funding agreements to draw up.

You will need to go through a deregistration process if you do decide to disband the band.

Trusts
In a “trust”, one person (the “trustee”) is obliged to hold property for the benefit of others (who are known as “beneficiaries”). A trustee may be an individual or a corporation.

Trusts are created by a written “trust” deed. A trust will usually either take the form of a “discretionary trust” (under which the beneficiaries’ right to income is flexible) or a “unit trust” (where a number of “units” held by the beneficiary determines the right to income).

Although trusts are used as a business structure in the music industry, they are complex, and you will need to discuss with an advisor whether it is a good option for your band.

Let’s just say that of the “trust” you might need in the music industry, this may not be it!

Further Information
A summary of the taxation features of each structure is from the Australian Tax Office

Publications on business structures and other relevant aspects of setting up a business are also available from the Western Australian Small Business Development Corporation.

Structure, What Structure?
With music, as with any business, how you structure your business can be crucial to how successful you might be, or at the least, how difficult or easy you make life for yourself.

Working as Solo Artist
If you’re a solo artist, the simplest way to enter the wonderful world of the music business is as a “sole trader”, which really just means you operate as yourself. Plain and simple eh?

The advantages of being a “sole trader” are that it is relatively simple and cheap to set up, you have complete control and you won’t need to register a business name if you use your own name. Check out the “Band Names” page for more info on registering band names.

The disadvantages are that you will be personally liable for the debts of your “business” and if you hire employees, you’re responsible for their actions if they are negligent. There may also be income tax disadvantages, but you’d need to speak to your accountant there.

Its a great way to start out, but as your “music business” grows, it might pay to keep these things in mind and seek advice as to whether another structure may be more suited to you.

Band Structures
If you are a band, you should consider the nature of the relationship between each of the band members, and how you are going to structure the group. There are a few options:

• Partnerships
• Companies
• Trusts  

Each option has different costs and benefits in setting it up, running it, for financial risks and for tax liabilities, so it is a good idea to speak to your lawyer and accountant about the best structure for your band’s circumstances. There is no “general rule” for all bands.

To get you moving, the general nature of each structure available to you is set out below.

Partnerships
A partnership is the most common structure for a band or musical group. It involves two or more people who own and run a business together with a view to making a profit. It is pretty straightforward to establish, and there is no need to register a business name if you are simply using the names of each of the band members of “partners”. Like legal firms.

You need to be aware that partners are “jointly and severally liable”. That means partners are personally responsible for all the debts of the partnership, and not just their own. This includes debts incurred by other partners or the partnership as a whole. And if debts can’t be paid by the partnership, people it owes money to can pursue each partner’s own assets.

As a “partner”, you can therefore be liable for all debts incurred in performing as a band.

A partnership can often be created by a band without the band members realising it. The law will generally treat people who meet the definition of “partnership” (being “carrying on a business in common with a view of profit”) as partners in a partnership. In that case, the partnership is regulated under “statute” by the Western Australian Partnership Act, (or similar acts in other states) as well as by an extensive body of “common law” cases, and the band members may find that their rights and obligations weren’t as they intended.

A partnership does not need a formal written partnership agreement, but it is definitely advisable to have one. Although it will take time and some money to draw one up, it is far better in the long run for band members to consider matters that the Partnership Act or common law may not address, or not address in the same way the band intends (such as the contribution from each member of time and money, the share of band profits and how the band functions) than find themselves in a dispute about these matters down the track.

A partnership agreement can be very simple. A sample partnership deed and a checklist of the key issues to be considered for such an agreement is available (by order) from the Arts Law Centre of Australia (which are linked below) as well as from the Australian Music Industry Network's "Legal Pack" (also linked below).

Companies
A company is an independent legal entity established under the national Corporations Act. For a band, a possible structure will be a “proprietary limited” company. The name of the company must contain the words “proprietary limited”, or its shortened form “Pty Ltd”. You can then register your band name as a business name, for the company to use.

If a company is formed by a band, the company will own assets, be responsible for band liabilities and can sue and be sued in its own right. The “equity” of the company can be divided into shares, which can be bought and sold by band members, as its shareholders. Other parties, such as investors, may also obtain shares or “equity” in the band company. In essence, the company will be the legal entity that takes over the operation of the band, and the band members will be engaged or employed by it to perform “musical services”.

The major advantage of a company is that it limits the band member’s risk of liability for the band’s debts (as shareholders) to the amount of the shareholding, usually a few bucks.

The disadvantages are that it can be quite expensive to set up and run, and administrative regulations mean more paperwork. It’s also important to have a good understanding of director’s responsibilities – there are significant penalties for negligence by directors. It is also important to keep in mind that it is the company, not the band members, that will be carrying on the band’s business, which can become tricky to administer, with the need for director’s meetings and so-on. But if you can get your head around it, it may work OK.

Companies may also be suitable for solo artists, by setting up a single person “Pty Ltd” company, which means the artist is the sole shareholder and director. Of course, others can become involved as shareholders or directors of a standard “Pty Ltd”, if necessary.

All Australian companies will be regulated by the Australian Securities and Investments Commission, which offers a lot of company information, including about registration. A company can also be set up for you by “shelf company services”. If you do decide to set up a company, it would be advisable to obtain legal and accounting advice on it, as there may be agreements such as shareholder agreements or funding agreements to draw up.

You will need to go through a deregistration process if you do decide to disband the band.

Trusts
In a “trust”, one person (the “trustee”) is obliged to hold property for the benefit of others (who are known as “beneficiaries”). A trustee may be an individual or a corporation.

Trusts are created by a written “trust” deed. A trust will usually either take the form of a “discretionary trust” (under which the beneficiaries’ right to income is flexible) or a “unit trust” (where a number of “units” held by the beneficiary determines the right to income).

Although trusts are used as a business structure in the music industry, they are complex, and you will need to discuss with an advisor whether it is a good option for your band.

Let’s just say that of the “trust” you might need in the music industry, this may not be it!

Further Information
A summary of the taxation features of each structure is from the Australian Tax Office

Publications on business structures and other relevant aspects of setting up a business are also available from the Western Australian Small Business Development Corporation.