The Benefits to Owning Your Own Record Label

A business that produces and releasing original music CDs is called a record label. Many artists dream about having their own record label. In reality if you have produced and released your own music CD, you have for all intents and purposes created your own record label. However, there are some additional steps to becoming an “official” record label recognized in the music industry.

Many of today’s better known labels were started by artists who just wanted to release their own music to the public. Everyone in the music business has heard Heb Alpert’s story. He started A&M records with $500 and a dream. You can do the same thing. Start out small by creating your own music and then releasing it the public. Later after you are successful with your own stuff, you can sign on other artists.

Actually Starting Your Record Label

The following are the steps necessary to make your label “official”:

Decide on a business model - I like to decide what form of business first because it will be important when you actually choose your business name. The three most common forms of business are the sole proprietorship, partnership and corporation.

A sole proprietorship is the simplest form of business. It has one owner who provides all of the startup capital takes all of the risks and owns all of the profits or losses. You must keep records of sales and expenses and file a schedule C for the business as part of your personal income tax return each year.

A partnership has more than one owner. Each partner provides a portion of the startup capital and shares the risks and the profits and losses. Never start a partnership without first drawing up a partnership agreement that spells out exactly what each individual’s duties, responsibilities and share of the profits are. Partnerships must file a information return to the IRS and provide each partner with a schedule K to attach to their personal income tax return each year.

A corporation is a legal entity that can own property, sign contracts and be sued. A corporation also files an income tax return pays its own income taxes. The corporation shields the owners from risking all of their personal property while conducting business.

Each form of business has a different registration process and different filing fees.
If you are just starting out, a sole proprietorship or partnership is probably the best choice unless you already have significant personal assets that need protecting. Talk to a lawyer if you are not sure.

Select a Name - Once you decide on your business form, it‘s time to pick your business name. This can be a lot of fun but takes some serious thought. You will have to live with the name for a long time. Try to come up with three or four names that seem to fit your style and reflect what you are all about.. Next list them in order starting with the one you like best.

Register the Name -There is a good reason for choosing several names. You cannot legally use the same name as another business. So, now you need to go to your state or county government office and register your business. If you are lucky, the first name on your list will be available. If not, try the next one on the list until you either find one that is available of run out of names.

You will need to fill out all of the necessary forms for the business form you selected. The most important one is the “Doing Business As” form. This registers your business name and allows you to start a business bank account, get a business credit card, etc.

Buy a License - You will need to get a business license if it is required by your local or state governmental agency. Laws vary so always check to see what is required.

Sales Tax Number - Like a business license, this may or may not be required. Sales tax laws can be complex. Check with your local government agency to see what is required where you live.

Basically, that’s all there is to starting your own record label. How much will it cost? It varies but should cost anywhere between $50 and $500 dollars for the various filing fees. A sole proprietorship is the cheapest and a corporation the most expensive.

The Benefits of Starting Your Own Record Label

Congratulations! You are now the proud owner of your own record label. Some of the advantages you now have are:

A unique identity – this is also called a brand name. It gives you a more professional appearance and helps you establish the necessary business contacts to promote your music.

Business bank account – this will allow you to accept checks and for an additional fee, you can set up a merchant account and accept credit cards as well. An individual cannot accept credit cards.

Registered business – you can now produce other artists’ works under your label.

Enter into contracts – your business can now enter into contracts to lease equipments, hire a hall, etc.

Join industry organizations – you may want to join one of the publishers’ organizations like the ASCAP or BMI to learn how to protect the copyrights and royalties for your label.

Some Final Things to Do

Logo – design and copyright a logo for your label. The easiest way to do that is to publish your new logo on a website with the proper copyright notices.

Set up a Website – you really need to do this to promote your label.

Stationary – get business cards and stationary printed up.

Now, go forth and promote your new record label.

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