Well, my band mates have been chewing on this idea and I like the sound of it. I just want to see your advice. We have thought about and have found that technically, we, as a band, are a business. We are a few people making money off goods and services that we provide at concerts. What we've been thinking about is taking out a small business loan. Not much. Just enough to buy a a cheap 15-passenger van, production of all of our music, and some merchandise. (i.e. Shirts, CDs, Stickers, Pins, ETC.) Right now, we won't be going on tour till sometime this summer. And we figured, that because we all work, we can come very close to paying a whole entire $10k loan off by the time we go on tour. And we can pay the rest off with shows we play locally and a couple of hours a way. So by paying everything off by that time, we will have instant profit on all the stuff we sell and the money we make from playing shows. Most bands from out-of-state make about $75+ just for playing. And depending on the market in that area, can make $100+ in merch and CD sales. So say it's a good night, we walk away with $100 for playing and about $400 in merch; that leaves us with $500. That's just for gas and food. Most of the time on tour, you can find someone that went to that show to help you out and lend you a hand on staying in a place. Or you can just get a motel or sleep in the van. The reason we have been thinking about doing this is because it is very difficult to be signed to a label without ever touring or anything such as that. But it's very hard to start a tour without any financial backing. So what do you guys think?
I think that sounds like a good idea, you guys sound like you would be responsible enough to pay off the loan. The only problem I am seeing is trying to convince a bank that you guys are legitimately a small business.
Clyde's already said what's most important - if you can afford it anyway, why take the loan (and pay interest)? I'll just add that the hassle of establishing yourself as a "business entity" is most likely not worth it (ignoring the fact that it'll probably cost a bit as well or at least demand a certain amount of starting capital). It'd probably also mean you'd have to pay taxes and adhere to regulations and shit. Also - about your calculations. I won't go into how you make/don't make money economically speaking here (opportunity costs etc.) but I'd just advise you to be very cautious. Also, especially the car thing - it isn't ONLY gas it's also insurance and lots of other costs (around here the most cautious calculations say one kilometre = 40 cents). So yeah, I'd just say try to be on the cautious side.
Well, Business 101 (and it'll have to be quick, so I'll only hit the high spots): There are a couple ways to organize a business that are relevant to you--a partnership, a limited partnership, and an LLC. Each has certain benefits and liabilities to you. PARTNERSHIP: A partnership is sort of a communist kind of structure. Each member has an equal share in the business. This is nice because it's simple and inexpensive to do. Essentially, you guys are a partnership already. You'd just need to file the paperwork with your state and forward along sales tax on anything you sold (I'm not sure how $$ from gigs would work--your providing contracting services essentially, so I'm guessing you'd be on the hook for FICA, Unemployment, and such out of your checks for each "employee"). The downside is if things go badly. Say you split up (as bands are wont to do). Then it's much more difficult sorting out who's entitled to what--even stuff like the name of the band. And say you pull a Great White and start a fire that gets lots of people killed or something. A partnership provides no protection from liability. If you get sued and it wipes out the band's $$, then the creditors can go after each of the members of the band. Or say your drummer shoots a hooker and the hooker's family sues the band--and wins. If the settlement wipes out the band, then they get all the drummer's personal assets too. And if that still doesn't pay the settlement, they can go after the bassist's personal assets, and everyone else in the band. In a limited partnership, some paperwork is written up, and one (or more) people are the full partners while everyone else is a limited partner. Full partners potentially reap the most benefit--they get anything over and above any agreed upon shares and they have the most control over decisions for the band. They also run the most risk. Say our drummer in the story above is a limited partner. After the settlement bankrupts the band the drummer is off the hook (well apart from any jail time a conviction could cause) and the full partners' personal assets can be attacked. Limited partners, on the other hand have less risk, but they get less reward and have less control. A limited partner is only liable for the amount they've put into the venture. I believe they only get a share proportional to what they've paid in as well (10% of the assets=10% of the profits). They also don't have any say in how the business is run--apart from being able to sell off their share and leave if they don't like things. Finally, there is the LLC. An LLC combines the best of both worlds. It protects your personal assets from any lawsuit or such, and you don't pay any of the additional tax a corporation pays. There are a couple more control requirements--mission statement, treasurer, etc--and you'll need to file paperwork that'll probably cost a couple hundred bucks, but an LLC is one of the most common business structures for a small venture. As far as money? Surprisingly, loans aren't the most common way for a lot of ventures to secure capital. To get a business loan, you're going to have to have a business plan. That'll probably run around 50 pages or more and contain stuff like a detailed profile of the band, the target market (size, demographics, etc), a marketing strategy, detailed info on the service you'd be providing, who your "management team" is, and a five-year projection of costs and profits, with the first year or two broken down by month. Then there's the whole "paying interest" aspect of it. So what a lot of start-ups will do is find "angels"--to a degree, this is a fancy term for borrowing from successful friends and relatives. There could be some high visibility angels--say Gene Simmons likes your work and writes you a big check for funds--but a lot of your angels will be friends and relatives. Oh, your angels are going to want a return on their investment too, but there is a bit more leeway working with them on it than working with a bank. One final thing on the business plan: It isn't necessarily a bad thing for you to do--even if you aren't going after a bank loan. It can help you focus on what your goals are for the band, how you can position yourself, and get everyone on the same page about where you're going with the band, who gets paid and how, and who makes the decisions. It can also help you figure out who to go after to line up new gigs and whether or not things like a van and merchandise are cost-effective. OK. Now that I've taken all the romance out of having a band, you may continue with your conversation.
as other have said, save up rather than borrow. have you got a myspace area set up for the band yet? if not, get that sorted out and try linking with other local and similar bands - don't just fire a friend invitation though, thats really fucking annoying, ask them first. a bit of networking might get you a few extra gigs come summer. also, are local gigs out of the question? if not, you can use those to bulk up the savings and get some feedback on your goods before touring.
See, this is why I wanted to have this forum. I know, this'll probably make me look like a pathetic loser but the stuff Volp just posted - that almost turns me on (almost). It's the stuff I fucking live for, I find it EXCITING. Comparing and contrasting with Swiss law (and Liechtensteinian law, for that matter), finding all the similarities - that's just INTERESTING. Yes, I'll now retunr to my nerd corner. One more question though: don't you guys need some kind of "seed money" for the LLC?
Well, the reason we would need the van now is because when we currently drive to shows, it's all of us in our own cars pretty much. Myself with my drum kit and a friend. Tyler and Adrian in Adrians car with their Amps and Fish in his car with his bass and amp. That's using a lot of the money the way I see it. But by getting a van now, we can save more money in the end. I don't know if we're going to go about it this way, but we have to come up with a source of money soon. Thanks for your answers guys!
