Starting an Indie Record Label

Starting an Indie Record Label
A Guide to the Basics for Musicians & Producers

What's Required?

Lots of musicians and producers have dreams of forming their own record company and taking on the music biz the indie way. However, much confusion exists as to what is actually required to start a label. This guide gives the basics you'll need to start your own record company. Disclaimer - we aren't lawyers, we're musicians.

What form of business is your label?

This is where you decide what form of business you will use for accounting and taxes. Each method has its plusses and minuses. For the single person who wants to form a label to release music (their own and others'), a sole proprietorship is easy and simple to form. You simply "decide" you're a label, name yourself, and then obtain the required business licenses in your town. Anyone can form a label as a sole proprietor. Other times, partnerships and more complex business entities may be necessary to bring a number of people together legally

Here is a short basic description of business types:

· Sole Proprietor - sole owner of a business. All profit and loss from the label is filed on the individual's personal income tax return.

· Partnership - these are legal agreements between two or more people, and can take many forms. The profits and losses from the company are divided proportionally between the partners' personal income tax returns.

· Corporation - a legal entity that is formed by individuals to do business. Different forms of corporations exist, and though the scope is beyond this article, in general a corporation has its own tax returns and liabilities, and money is not taxed through the officers' personal tax returns.

In this article, we are going to deal with the sole proprietor option the most, though much of the advice will also be useful to partnerships or corporations. If you do plan to form a partnership or corporation, make an appointment with a lawyer. Legal advice will help you decide the best option for your business form, plus make sure everything is done properly in the eyes of the law and government.

Familiarize yourself with the new tax forms and laws which you will be subjected to once you begin your business. Hire an accountant to help you if you can afford one, and go to the IRS website to learn as much as possible. The IRS has printed, web, and telephone help for almost all tax topics, and it's free.

What is the Name of your Label?

Figure this out beforehand, and do some research. If you are planning to grow into a large label, it's going to be important to have your label name trademarked. Don't neglect to check this! The last thing you want to find out after you release your first record is that ANOTHER label called New Original Records has issued a "cease and desist" order to you - requiring you to stop using the name, since they have trademarked it.

To begin, you can check out our trademark links for helpful info. Eventually, you will need a lawyer to handle your trademark process, and it can cost between $500-$5000 to complete. You need not pay this all at once in the beginning, but do keep it in mind for the future.

What does your label do?

Duh! Releases records, right? But consider some of the finer points -

· Will you also publish songs? (You need to have a publishing company branch)

· Will you be paying for the recording, the manufacturing, both, or neither?

· Will you be responsible for promotion as well as distribution?

· Will you have artists other than yourself?

· What kind of contract will you sign your artists' to?

· Will you be releasing compilations?

You should have a basic idea of these things if you plan on releasing other artists' work. Things are simpler if you only want to release your own music on your label. You don't have to worry about all the contractual stuff in the beginning. But it's important to have an idea of which direction you're going in. You're going to be learning a LOT of new things to run a successful label, so make sure you maximize your time.

What to Do First?

Once you know your label's name, call your local and county offices, and ask if you will need any business licenses to operate. Try calling your county clerk first. This office can usually inform you which licenses are required, or direct you to the office that can help. You can usually find the number in the yellow pages near the water company, hospital, police station, and fire department phone numbers in your town or county.

Licensing requirements vary in each community. Most cities require you to obtain a "Retail Merchant" License. This allows you to buy and sell goods, and also to collect and pay sales tax to the state.

Many towns also require you to file a "Fictitious Name Certificate", which allows you to do business under a name other than your personal name. Some towns even require you to publish the "DBA" (doing business as) name in a local publication as a public notice.

Don't neglect this step of calling your local authorities. Make sure your legal ducks are all in a row. It's not that hard, and is absolutely essential to getting started right.

Then What??

Several things -

1. Order some letterhead, envelopes, and business cards for your label. (Or make them on your computer.) You will need to communicate in writing, and will be meeting many people to trade business cards with, so design something cool and stock up!

2. Look over some sample music business contracts. See our downloadable contract forms to start. Begin thinking about what kind of deals and contracts you want to have with your artists. Most traditional record contracts are not artist friendly, so a lot of indie labels come up with new contracts that are more equitable to both artist and label. Some grassroots labels operate successfully with contracts written on brown paper bags, and some operate without ANY contracts (not recommended, but it is being done.)

3. Jump in and learn as much as you can about the music business. One unique thing about this business is that you usually need to get your hands dirty and get a street education. Here are some of the things you're going to need to know about:

· Distribution - the success of any label depends on the distributor relationships they have set up

· Rights and Royalties - mechanical rights, publishing, sales royalties - all of these are important in operating a label.

· Production and Manufacturing - you'll need to know about great studios, mastering, graphics, and CD manufacturing.

· Promotions - radio and print promotions, appearances, and other chances to get the label's bands in front of the public.

· Accounting - you'll need to keep good records, so get started early. Consider buying an accounting software like QuikBooks. It is the label's responsibility to keep track of record sales and pay the artist royalties, so keep your records squeaky clean.

4. Consider getting a UPC Barcode - these cost $500 now (See http://www.uc-council.org/), but you can release up to 10,000 different records with one number. If you only have one artist, the barcode may not be an absolute necessity, but with two or more, it will be worth it to have your own UPC code. Barcodes are a way of tracking your label's sales electronically, so if you use a "rented" barcode from your CD manufacturing company, there is more effort involved in getting your sales credited to your label. (See "Do You Need A Barcode?")

5. Set up a separate bank account for your business. Depending on the type of business, you may even be able to use a low cost personal account to do this. It will be MUCH easier to keep records for your business with separate accounts.

6. Get a website for the label and setup online sales ability. It is the cheapest way to distribute. You will probably want to accept credit cards. For that, you need a Merchant Account. Try calling your bank first, as they usually have better deals for credit card processing. Some banks, though, won't give merchant accounts to home-based businesses. There are many new options online to accept credit cards that are more friendly to small business.

Obviously, this is far from all you'll need to know to start your new label. But it does map out the first things you'll have to do. So start basic now, and learn as you go. Part of the beauty of this business is that ANYONE can learn, and anyone can start a label. It just requires a lot of creativity and dedication, along with a healthy love of the music.