First- sorry I took so long- I've been completely offline since last Friday. My DSL connection was mysteriously dead for nearly a week while Earthlink/Verizon took their sweet time, and my Dad's office lost all of THEIR computer power when their main computer decided it didn't know what any of the hard drives in the RAID array were.
WHEW!
Structure
Depending on your specific needs, S-Corps, Limited partnerships, LLPs or even a straight partnership or corporation may be your best business model. Unfortuneately, you're talking about something that is extremely fact specific. You'll have to consider how you want to deal with liability, taxation issues, and in the case of corporations, in which state you wish to incorporate. It DOES matter. That said, normal Corporations & partnerships, as well as S-Corps, Limited partnerships, and LLPs are pretty common for small businesses in the industry.
Royalties
I understand the drive to give the artists a bigger piece of the pie, but my advice is to keep it at the standard 5% until your business and/or your artists prove themselves. From your side, you're talking about a startup company with an uncertain future and a lot of challenges. And, of course, there is the age-old practice of cross-subsidy. Some of the profits your company earns from its artists can be used to discover & develop other artists- if you give all of the company profits to the current stable of artists, the curren stable of artists won't grow very rapidly. That could affect company stability.
From their side, if you make an increasing royalty% a contractual clause ("You sell more, you earn more" it incentivises the artists. Example: if the royalty rate is 5% on the first 50K units, with a .5% boost every additional 50k units sold, you'll encourage your artists to put only their best stuff on albums, self-promote, etc., without eating company profits right out of the gate.
Kids & Contracts
This is a tough area, but I'd advise 2 things: make sure the kids are represented (INDIVIDUALLY is best) when they sign those contracts, and structure their contracts a little differently.
I've been talking with Prof. Walt Champion about an idea I've been trying to put into practice, and he likes it. Based on the experiences of past atheletes & entertainers who deplete their wealth and die empoverished, I advise that when dealing with entertainers of whatever kind, try to structure their contracts so that a certain large-ish % of the money owed to them under the contract goes into a trust fund that can't be touched without jumping through hurdles. This is doubly true of underage performers.
There is a specific kind of trust fund, called a "Health, Education, and Welfare Trust" (HEW) that really helps when you're dealing with kids. A HEW trust sequesters funds away from the kid & creditors of all kind- funds can only be disbursed for the "health, education, or welfare" of the kid in question. Dad's bankruptcy creditor can't get to it, but the kid's doctor can. The Lambourghini dealer can't get to it, but the kid's private school can.
Yes, its a hard sell to the performer who has visions of Escalades and Crystal dancing in their heads. But if you tell them this contract structure is to ensure that instead of 5 years of Escalades and Crystal followed by a job working security and years of "Where are they now" specials on VH-1, that the performer will have a lifetime of income that may prevent them from ever working a job they don't like, always having a house, and always having a car- for the rest of their life- you may be able to do right by your younger performers.
WHEW!
Structure
Depending on your specific needs, S-Corps, Limited partnerships, LLPs or even a straight partnership or corporation may be your best business model. Unfortuneately, you're talking about something that is extremely fact specific. You'll have to consider how you want to deal with liability, taxation issues, and in the case of corporations, in which state you wish to incorporate. It DOES matter. That said, normal Corporations & partnerships, as well as S-Corps, Limited partnerships, and LLPs are pretty common for small businesses in the industry.
Royalties
I understand the drive to give the artists a bigger piece of the pie, but my advice is to keep it at the standard 5% until your business and/or your artists prove themselves. From your side, you're talking about a startup company with an uncertain future and a lot of challenges. And, of course, there is the age-old practice of cross-subsidy. Some of the profits your company earns from its artists can be used to discover & develop other artists- if you give all of the company profits to the current stable of artists, the curren stable of artists won't grow very rapidly. That could affect company stability.
From their side, if you make an increasing royalty% a contractual clause ("You sell more, you earn more" it incentivises the artists. Example: if the royalty rate is 5% on the first 50K units, with a .5% boost every additional 50k units sold, you'll encourage your artists to put only their best stuff on albums, self-promote, etc., without eating company profits right out of the gate.
Kids & Contracts
This is a tough area, but I'd advise 2 things: make sure the kids are represented (INDIVIDUALLY is best) when they sign those contracts, and structure their contracts a little differently.
I've been talking with Prof. Walt Champion about an idea I've been trying to put into practice, and he likes it. Based on the experiences of past atheletes & entertainers who deplete their wealth and die empoverished, I advise that when dealing with entertainers of whatever kind, try to structure their contracts so that a certain large-ish % of the money owed to them under the contract goes into a trust fund that can't be touched without jumping through hurdles. This is doubly true of underage performers.
There is a specific kind of trust fund, called a "Health, Education, and Welfare Trust" (HEW) that really helps when you're dealing with kids. A HEW trust sequesters funds away from the kid & creditors of all kind- funds can only be disbursed for the "health, education, or welfare" of the kid in question. Dad's bankruptcy creditor can't get to it, but the kid's doctor can. The Lambourghini dealer can't get to it, but the kid's private school can.
Yes, its a hard sell to the performer who has visions of Escalades and Crystal dancing in their heads. But if you tell them this contract structure is to ensure that instead of 5 years of Escalades and Crystal followed by a job working security and years of "Where are they now" specials on VH-1, that the performer will have a lifetime of income that may prevent them from ever working a job they don't like, always having a house, and always having a car- for the rest of their life- you may be able to do right by your younger performers.
