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Business Entity for Touring
Regardless of which business form an artist selects to handle general music business matters, the touring artist should consider forming a separate business entity under which to conduct touring activities. For the aspiring artist, and indeed even for most national touring acts, revenue generated from live performances may be significantly less than the revenues generated by mechanical royalties, performance royalties, record sales, publishing income, synchronization and other license fee income, and advances against amounts from such sources. Protecting revenue from those sources, as well as other assets held by an artist, against the potentially substantial liability for a single incident that may occur during the course of a tour is the primary goal of establishing a separate business entity for touring purposes.
Formation of a limited liability company (LLC) for touring is the best choice for achieving this goal. The members of an LLC enjoy limited personal liability for the debts and acts of the company, while retaining the ability to take advantage of the pass-through tax treatment afforded general partners in partnership; alternatively, the members may choose to have the LLC treated as a corporation for tax purposes.
When an artist has established a LLC for general business activity, the operating agreement of the business LLC can often serve as the operating agreement for the touring LLC. When an act functions as a partnership for general business purposes, the partnership agreement can provide a starting point for addressing the formation and governance issues related to establishing a touring LLC.
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