What are the advantages of setting up a band as a limited company?

Q – Debbie from Dublin has just joined a band and wants to avoid the mess she got into with her last band, and wonders if there are any advantages and/or disadvantages in setting up as a limited company now or should they wait?

A – Unfortunately professional help never comes cheap, so in my opinion, to incorporate a company before you have a record deal, and therefore before you have the financial clout to pay for this professional help is probably an unnecessary expense at this early stage of your career. Money is tight enough when you are starting out so why would you spend it on accountants and solicitors when you can use it for recording, rehearsing or even buying new equipment?
I would suggest that you start with a partnership and draw up a partnership agreement between all the band members that will cover all aspects of the business of being in your band. When you have got yourselves a recording deal then it would be prudent to revisit the idea of incorporating a company. Your partnership agreement should state where the partnership is being formed (and therefore the law governing it), the name of the partnership (usually that of the band), where is the principal place of business (you need a permanent address), how long the partnership will last, are partners required to contribute an initial stake (could be the value of your personal musical equipment), the circumstances under which a partners stake/capital be withdrawn, how are the profits and losses to be allocated among the partners (ie. who gets what), when are distributions of profits to be made from the partnership, what is the fiscal year of the partnership, what actions of the partnership require a majority or unanimous vote, who is authorised to handle the funds of the partnership, what outside activities can the partners participate in, are partners entitled to a salary, how can an existing partner withdraw/be added/fired, how are disputes between partners to be resolved and so on. This list is not definitive and there are many more issues that need to be addressed but it’ll give you an idea of what you should be looking at. You can draw up the partnership agreement yourselves, although it is always prudent to get legal advice before you sign anything.

Answers supplied by O.J. Kilkenny and Co. Chartered Accountants, specialists in the entertainment industry. Contact: [email protected] or call Alan Duffy (01) 661 1588.