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LLC for DJ Businesses
Do you love music? Hyping up crowds? Music plays a vital role in creating a lively and entertaining atmosphere at any event, and DJs are instrumental in achieving this. In fact, the industry is so profitable that full-time DJs can earn an annual salary of up to $60,000, depending on factors such as experience and gigs.
Are you ready to take your music career to the next level? Starting a Limited Liability Company (LLC) is an excellent way to legitimize your DJ business and protect yourself from liabilities. If you’re a DJ looking to form an LLC, this guide will provide information on the steps you need to take.
Definition
What Is An LLC?
A Limited Liability Company (LLC) is a business structure that combines a corporation’s benefits with a partnership’s flexibility and simplicity. It protects your personal assets from creditors, lawsuits, and other liabilities while allowing you to take advantage of tax savings provided by the government. This type of business structure is popular among DJs because it allows them to keep the structure of their business flexible, pay lower taxes, and maximize profits.
Advantages
What Are The Advantages Of A DJ LLC?
There are a lot of benefits that an LLC can provide your DJ business, especially if you are operating solo. Below are some of them.
Asset protection
Since the LLC turns your DJ business into a separate legal entity, your personal assets are protected from creditors and lawsuits. For example, if you go into debt or a client sues for defamation or something similar, it is only your business’ name and assets that can be solicited by the court.
Tax savings
LLCs are eligible for several tax advantages that can help you save money. For instance, the business income of an LLC is not subject to double taxation like corporations. Some states also offer tax benefits solely for LLCs, so be sure to check with your local authorities if you have anything similar.
Flexibility and simplicity
An LLC can be organized in various ways, allowing you to choose the structure that suits your needs. You can customize your business’ structure based on factors such as the number of owners or members, their roles and responsibilities, and the distribution of profits and losses. You can even choose the way your LLC is taxed, with some offering more or fewer benefits depending on your current profits and the number of people involved in the business.
Disadvantages
What Are The Disadvantages Of A DJ LLC?
Much like any type of business structure, there are a couple of things you need to consider before you form an LLC. Below are the important ones for DJ businesses.
Cost
Forming an LLC requires filing fees and paperwork, which can be costly depending on your state (some states cost more, especially if they are a known business hub), services that you are hiring, and budget. Additionally, you may need to hire a lawyer to help with the formation process.
Tax requirements
Some DJs might consider tax filing a disadvantage, especially since you have to do it yourself when you start your own business. You might need to hire an accountant or tax professional to ensure that you are in compliance with all regulations.
Transferability restrictions
LLCs have restrictions on transferability and ownership, making it difficult to transfer the business. If you want family or friends to someday inherit the business, you need to make sure you have all the necessary paperwork in place. There are also additional fees involved.
LLC Formation
How To Create A DJ LLC
Fortunately, LLCs are one of the—if not the most—easiest businesses to set up. You only need to take note of the following steps:
- Choose a unique name
- Hire a Registered Agent
- File an Article of Organization
- Create an Operating Agreement
- Get an EIN
Choose a unique name
Your DJ LLC name needs to be distinct and catchy and should make an impression. Reflect on your vision and mission and try to develop something apt for your plans.
It should also adhere to the following guidelines:
- Some states mandate that LLCs include the words “Limited Liability Company” or the abbreviation “LLC” included somewhere in it. Check if yours does.
- Avoid words like Trust, Bank, Corporation, and insurance, as these are generally reserved for other types of businesses.
- Make sure your name is not a duplicate of another business’ name in the state, even if it is unintentional. Your Secretary of State will not approve the formation of your business.
Once you have found the right match, you are good to go.
Hire a Registered Agent
Next, make sure you hire a registered agent. A registered agent is an individual or entity who submits and receives all legal documents that involve your DJ LLC. The only requirement is that they must have a registered address in the state you are operating in, but do check their credentials if they have helped establish similar businesses before.
File an Article of Organization
An Article of Organization is a document that includes all important information about your DJ business, such as its name, address, the registered agent’s identity and address, and who will manage it. This could be the most expensive part of the process, depending on where you are located. Still, it is the single most important part of forming an LLC, as it is what establishes the identity of your business.
Create an Operating Agreement
An Operating Agreement defines all rights and responsibilities of your businesses, as well as any rules, regulations, management details, and distribution of profits. It is not required in most states, but it does help set expectations for everyone involved. For example, you can write down all required capital contributions, the decision-making authority of each member, dispute resolution procedure, profit/loss distributions, and more. It will help prevent a lot of conflict from occurring down the line.
Get an EIN
An Employer Identification Number (EIN) is typically used by most businesses to file their taxes to the IRS. But if you are a solo owner (and member), you can file your taxes using your own Social Security Number.
In fact, if you are not going to hire employees or open a separate bank account for your DJ LLC, you do not need an Employer Identification Number (EIN). However, we recommend that you get one anyway. This is so that if you do decide to do all of the above down the line, you already have all the necessary paperwork filed. Plus, it is free to apply for one.
LLC Taxes
How Are DJ LLCs Taxed?
You have to pay different kinds of taxes depending on how you want to tax your business during formation and where they are located.
Franchise tax
One of the taxes you need to be aware of is the franchise tax. The franchise tax is a fee that all businesses must pay to register their business in the state where they operate. It is also called “corporate income tax” or “corporate privilege taxes,” and it applies to corporations and LLCs. Not all states have this, but it can range from 0% to 12% of your annual profits.
Sales tax
A sales tax is a consumption tax levied on products and services sold within a particular jurisdiction. It applies to all businesses regardless of their legal structure and can vary from state to state, ranging from 0% to 10%. But do not worry—much like any service, it is your customers who will be shouldering this. Just do your research on local laws to determine how much sales tax you need to charge.
Self-employment tax
Unless you choose to tax your business like a corporation, which we do not recommend for DJ LLCs, you will be subject to self-employment tax. This tax is calculated based on your personal income and is filed annually.
Costs
What Are The Costs Of Starting A DJ LLC?
Forming a DJ LLC involves both registration and filing fees, which vary based on state regulations. Expect to pay anywhere from $100 to $500 in registration fees, plus additional costs for services such as obtaining a registered agent and preparing adequate documentation.
LLC Costs
State filing fee
$50+
Registered agent service
$100+
LLC formation service
$50+
Operating agreement
$200+
Business license and permits
$50+
Employer Identification Number (EIN)
Varies
Initial legal and accounting fees
$200+
Equipment and supplies
$1,500+
Marketing and advertising
$500+
Understanding the cost required to form a DJ LLC is an important initial step in getting your music career off the ground. The best course of action really is to research the regulations for the state where you intend to form the LLC.
Forming an LLC is a great way to protect yourself from liabilities and make your music career more successful. Just make sure that you understand your state’s regulations, as laws can vary by jurisdiction. With the right planning and preparation, you can quickly form your DJ LLC and start taking advantage of all the benefits that come with it.
For a more detailed overview of forming LLCs in various states, check one of our guides below:
Comparisons
Is LLC The Best Entity For Me?
Maybe, LLC isn’t the right entity for you. Maybe it is a C-Corp. Only way to find out is to directly compare them all.
LLC vs Corporation (C-Corp)
Sole proprietorships and Limited Liability Companies (LLCs) are two of the most common business entities for individuals and small businesses. Learn what differentiates the two today.
LLC vs S-Corp
Not sure what business structure to choose? Learn about the key differences between LLC and S-Corp today.