A knowledge of music trends and an eye for musical talent can help a label to secure artists who will drive sales and become successful. Starting a Record Label – Licenses, Permits & Insurance The Best Legal Entity to use for this type of business Depending on the part of the world you intend situating your record label company; if you love want to start this type of business in the United States of America or Canada , the best legal entity to use is perhaps a Limited Liability Company (LLC). 2017 – 2020 StartingYourBusiness.com – All Rights Reserved. Musicians are increasingly crossing over into acting, developing their own fashion lines, and even hosting their own shows. Soundcharts predicts that technology will continue to change the way that we consume music. Finally, an LLC structure can enhance the credibility of your record label business venture. Ideally, having held an internship or employment at a record label will give a business owner a comprehensive understanding of how labels operate and what can make them a success. They take care of all the legal paperwork so you can focus on what you do best. Labels earn royalties off of not only the albums that each artist sells, but also off of music downloads, radio plays, concerts, merchandise, and more. LLCs are formal legal entities that are typically taxed similarly to sole proprietorships and general partnerships, in that the owners include any company profits or losses into their personal returns — the LLC itself does not owe income taxes. How are they analyzed and interpreted? An understanding of how the music industry works is essential in running a record label. reports that smaller labels may spend $15,000 and up per album on recording, while larger labels’ recording bills can be $100,000 to $500,000 for a single album. It may sound a little cheesy, but staying positive and rolling with the punches has a … Traditionally speaking, record labels selectively sign artists that they wish to represent, focusing on the artists that the label believes to be most promising. This is the first thing people will see, and it will be recognised for years if you manage to start a successful independent record label. ZipRecruiter reports that independent record label salaries average $52,230 per year, though salaries can range from $19,500 to $102,000. This is the age of the indie label. A label owner needs to be well-organized and able to balance multiple projects and priorities, especially as that label grows. In 2017, streaming alone accounted for $4.3 billion in revenue, equating to about 38% of the music industry’s entire revenue that year. Here’s how. That’s obviously an enticing offer, especially when you consider that they also provide a year of registered agent. record label owner will need to obtain certain business licenses and permits. While a lawyer is an essential part of a record label’s team, a business owner who has some basic legal knowledge will be able to understand some of the concepts behind contracts, royalties, and other elements of the industry. The music industry changes rapidly, and that will continue in 2020 and beyond. The record label industry is dominated by three major labels: Warner Music Group, Sony Corporation, and Universal Music Group. Running a record label is a complicated endeavor. Take some time over your logo – If you want to be taken seriously, your brand needs to look professional, and while it's entirely possible to design it yourself, the touch of a professional is invaluable. While a lawyer is an essential part of a record label’s team, a business owner who has some basic legal knowledge will be able to understand some of the concepts behind contracts, royalties, and other elements of the industry. The record industry is in turmoil. Why Starting an LLC for a Record Label Is Important The top reason to form an LLC for a record label is to gain access to the personal asset protection provided by this business structure. are a hybrid between Sole Proprietorships and Corporations. Northwest is a bit more expensive, but their industry-best registered agent service includes local scanning of every document they receive on your behalf. Record labels are also embracing this trend, and more labels are financing biopics and documentaries that feature their artists. Record labels need to market themselves to attract the quality artists that they hope to represent. But, there is a way to make all of this change and upheaval work to your advantage. The other option is S corporation taxation. Rules and regulations for starting a business change frequently. Things to consider before starting a record label, American Association of Independent Music, Recording Industry Association of America, Common business licenses, permits and registrations by state, The Music Business Advice Book: 150 Immediately Useful Tips From The Pros, Music Money and Success 8th Edition: The Insider’s Guide to Making Money in the Music Business, Social Media Promotion For Musicians – Third Edition: The Manual For Marketing Yourself, Your Band, And Your Music Online. Marketing costs will depend on the type and volume of activity performed. If you operate your record label as a sole proprietorship or general partnership, your personal assets — like your house, car, personal bank accounts, etc. Another important aspect is taxation. An LLC may also elect to be taxed like a corporation, although this is not a very common option. Skills, experience, and education useful in running a record label. Should I use an LLC formation service or do it myself? We ranked and reviewed the top 7 options online. DJ Mag reports that no labels make profits during their first few years in operation, but as they develop a body of work, record labels start to enjoy multiple revenue streams which can lead to increased profits. More and more people are prone to being accepted by a large mass of people. Startup costs for record labels vary widely. As an example, let’s say that you record a musician performing a cover song. Walt Disney Records is the most successful independent music label in America. Whether you have dreams of having a big business or want to keep things small, starting a record label could open up exciting avenues in the music industry. Whether you operate your business as a small independent label or a large recording company with an array of clients, you need the limited liability protections that an LLC can provide. In other words, your personal assets will be protected by the business structure you’ve chosen. Our guide on starting a record label covers all the essential information to help you decide if this business is a good match for you. With the step-by-step guidance of this book you could be starting your own record label sooner than you think. But those profits aren’t typical, and independent labels tend to make much less. Be prepared to spend years developing your label and focus on what value you can give to the artists who sign with you. As more and more people stream music from all over the world, streaming trends will also become increasingly linked to the local markets. After coming up with the idea, the next step in starting your business should be to write a record label business plan. If you own and operate a record label, you’ve probably at least considered forming a limited liability company (LLC) for your business. If your goal is to be the go-to label for 21st century post avant jazzcore, your focus and approach will be much different. A report from Music Business Worldwide revealed that in 2019, Universal, Sony, and Warner made a combined average of $19 million per day from streaming services alone.