This site describes the main bits of the UK music business—the formal legal and commercial structure of the traditional industry. It’s complicated. If you want to go deeper, follow-up the recommended Books. How much detail you need depends on your circumstances—you might need a lot, or you might not.
But don’t panic—a self-contained DIY label and publisher can be very easy to set up and run. There should be enough here to get you started whatever you decide to do.
You don’t have to start a company to run a music business. Anyone can operate a label or publishing, or both. The tax man will impose conditions when you’re making a profit, but there’s a fairly clear distinction between a business that’s likely to make a profit and one that isn’t.
A music or business partnership might need to be contractual but an artist / writer, self-publishing on their own label doesn’t need complicated legal or financial arrangements. You only need to protect your assets (house, car, etc.) to the extent that you get into debt, and as the most expensive thing you’ll ever buy is a run of CDs (probably £500 to £1,000) that shouldn’t be a problem.
You can run a small web site comfortably for a few pounds a week, although you may want extras. You don’t need everything from day one, and staggering the start helps to spread out renewal charges.
Here’s some background on partnerships, tax, trademarks, credit cards and other distractions.
The main royalty systems are fully described in Royalties and licenses and Collection societies. Writers get income from songs performed, records played and records pressed. Recording owners get income from records played. Musicians get income from records played and licensed. If you don’t know how it works you could lose out, there are millions of pounds in record label, music publisher and royalty collection society black boxes.
If you don’t know about advances, recoupment and deductions, or how money is shared between band members you could lose out there too.
Who gets what—and who they’re acting for—can be confusing. Step one is understanding the different rights, and step two is understanding who owns them. It isn’t always the obvious person: the writer, performer or artist.
The law says all members of a group are entitled to equal shares of band income unless there’s an agreement to the contrary. Record labels normally deal with the group members they think most important (e.g. Morrissey The Smiths, Andy Partridge XTC) and others may get a smaller cut from record sales, touring and merchandising. This can also happen when managers have a closer relationship with some of the group, but it’s often challenged when groups break up.
The outcome of any dispute depends on partnership agreements and band, management, record label or music publishing contracts. Ownership of the band name, other assets, distribution of songwriting income and what happens when members join and leave should all be covered.
Signed artists and other performers are paid differently. The role of featured artists might seem unfair, but in some circumstances the other performers are better off (escaping a bad deal for example) but each case is different.
Performers and writers are always entitled to their own royalties unless they sign their rights away in a management, recording or publishing contract.
Labels earn money from record sales, licensing and performance royalties. Publishers get royalties from the same sources as writers. Other contributors can be paid in a number of ways:
For example, session musicians are normally paid:
But not:
Contributors include musicians, programmers, arrangers, producers, pluggers, and many others. Sometimes they’re paid up front and get points too. In the USA even music attorneys get points.
You might want formal trading status, or you might not depending on your circumstances. HM Revenue and Customs (was Inland Revenue) make the decisions (although you can appeal) but here are the basics as I understand them. Obviously you’ll consult your accountant and the tax man.
The tax man wants:
Trading status, recognised by the tax man, allows you to claim relevant business costs against tax. So trading status may be denied where costs are:
Things that support a case (either by you or the tax man) for trading status include:
There are other conditions (e.g. gifts are excluded) and these factors are known to professionals as "badges of trade". The idea is to separate hobbyists and others who aren’t going to be overall tax contributors from claiming tax back.
It isn’t black and white, it’s a question of judgement and can go to the courts to decide. The situation is complex because both sides will want the status that benefits themselves the most. Obviously the two are going to disagree. But, there are two things you should always do:
If you need to set up a formal legal entity for you business it will be one of these:
These are all described on the Business Link site.
There are three main kinds of tax relief for formal traders:
Remember to keep invoices, a record of VAT on stuff you buy, expenses, CD serial numbers and sales. You might have transactions other than CD sales: writer or performer royalties, merchandise, and so on. Consider using a music business savvy accountant if you get out of your depth—you don’t want to get a surprise tax bill you can’t cover. If you need to register for VAT you’ll be able to afford an accountant.
These are the main UK government bodies relevant to small businesses. Many Departments also have their own new business start-up pages which you can find through Google.
| What | Note | Cost | Link |
|---|---|---|---|
| Business Link | Starting a business (including employing staff). Get a free guide by post. | — | www.businesslink.gov.uk |
| DTI | Department of Trade and Industry—UK government for business | — | www.dti.gov.uk |
| DCMS | Department of Culture, Media and Sport—UK government for music | — | www.culture.gov.uk |
| DPA | Information Commissioner—data protection (keeping personal data) | £35 p.a. | www.informationcommissioner.gov.uk |
| IPR | Intellectual property rights—copyright, patents, trademarks, … | — | www.intellectual-property.gov.uk |
| Trademark | A Trademark protects a trading name in a particular trade sector for 10 years (renewable for the same fee). | £200 | www.patent.gov.uk |
| Income Tax | You need to declare your income and/or your Company income. | 20% to 50% | www.hmrc.gov.uk was Inland Revenue |
| National Insurance | You need to pay National Insurance for employees. | depends on pay | www.hmrc.gov.uk/nic/ was Inland Revenue |
| Company | You might need to start a Company if you want to open a bank account that’s not in your name, if you want the business to be taxed separately or if you want to transfer liability from yourself personally. Otherwise income can be taxed as normal, although Inland Revenue may ask you to set up as a Sole Trader. | cost varies | www.companieshouse.gov.uk |
| VAT | You need to register for VAT if your turnover is more than £61,000 p.a. (2007) or if you want to reclaim the VAT you pay on stuff you use. | 20% retail | www.hmrc.gov.uk was HM Customs and Excise |
Besides a straightforward bank loan there are other sources of funding:
There are many general business start-up schemes and even music specific funding such as the New Deal for Musicians. The Music Tank—Funding page has more specific leads and links to follow-up. You may get further advice through local government small business organisations or your Chamber of Commerce.
If you start a Company or register for VAT think about using an accountant to advise you and look after the books. Accountant charges vary but when you need one you will be earning enough to cover it. You’ll need an experienced music business accountant and AMIA (Association of Music Industry Accountants) should be able to provide suitable names. Search Yellow Pages, music directories and research—get a personal recommendation if possible.
It’s advisable to get bar-codes for all but the most informal CD applications these days. They can be used to track the disc at many points other than the retail counter and bar-code numbers are used to identify products in digital distribution. There are two main ways to get a bar-code.
If you earn enough you can join GS1 UK (formerly e-centre) to get your own UK EAN bar-codes. I can’t find up-to-date costs but membership was £85 plus £85 each year for turnover under £500,000. USA UPC bar-codes are issued by UCC.
A Post Office Box (£56.15 a year, 2007) can be a useful business address for your web site or mail order. Various additional services such as forwarding are available from Royal Mail.
You can’t buy a name for your band, record label, business, web site or anything else. It’s unrealistic to expect permanent exclusive use of a particular English word or phrase, even a made-up one. Legal protection of names is more concerned with passing off, misuse of the business asset or confusing potential customers.
You can register a Trademark but that doesn’t give you exclusive ownership of the name. Someone else with a longer trading history or an established claim to the name might still beat you in court. A Trademark is limited to trade use and wouldn’t necessarily give you the right to use the name for, say, a band or a web site.
There are other name registers (e.g. www.bandname.com) but they have no legal force and are not like a Trademark.
Registering a web site is not a legal or permanent claim to the name (Madonna evicted her cyber-squatters but Sting was refused). Even registering a Company name gives no exclusive right to use it, except where it legally identifies the Company.
You’re most likely (but still not guaranteed) to have a claim to names you use formally and regularly over a period of time. Before you spend money on a Trademark or any other registration, think through the circumstances in which you might have to defend it (say EMI launch a band with your name). Would it really be a problem if you don’t have exclusive rights? It’s unlikely anyone could force you to give up a name, unless you choose one that’s already established in that territory, or continue to use the name of a band you’ve left.
It’s unlikely any English name will be unique. To establish your claim to a name it helps if you:
And if you’re suing for the right to keep using a name for a particular purpose it helps if:
Bear in mind your text and art-work are copyright. This doesn’t mean the names you use on your CDs are protected, but it does mean your whole image isn’t up for grabs. The easiest way to see if your name is already taken is to search Google and the UK Trademark database (look at The Beatles entries out of interest, and work out how much they cost Apple: £200 for each sector every 10 years).
Single word names are unlikely to be available nowadays but many two-word phrases (and made-up single words) still are. Early publicly recorded use of your name is the first step to making it yours. Ann Harrison (Books) covers the question of names in more detail.
| A note about names online |
|---|
There are several different places you might want to register online depending on how you intend to work…
As well as your own use you might consider stopping possible malicious use (like the Bemuso imposters on Flickr and YouTube). It won’t be possible to reserve your name on every site but it’s worth keeping an eye on the latest fads just in case. |
Also bear in mind that trade bodies and societies (BPI, AIM, MPA, MCPS, PRS, PPL, etc.) may require members to have unique trading names, such as record label or publishing names, but these names don’t have to be the same as your Company or Trademark name (if you have either).
Depending on how you work you may find organisations such as AIM or the MPA useful. There’s a comprehensive list on the Music organisations links page.
British Academy of Songwriters, Composers and Authors BASCA has 3,000 members and offers a range of useful services for UK writers.
Association of Independent Music AIM is the industry body for independent record labels. They represent the interests of smaller labels and offer a range of resources.
The Musicians’ Union MU (founded in 1881 and with over 30,000 members in the UK) can be useful for independent artists. They give basic legal advice, support musicians, and look out for their interests in UK law. Fees depend on your music income.
The Music Managers Forum MMF (founded in 1992) is also useful because they are employed by artists and campaign on many of the same issues as the MU. They have excellent resources.