Business Structure and Forms of Ownership

Part of the Recording Studio Business Plan needs to include how your business will be structured, in other words, what form of ownership will your business will take; Sole Proprietorship, Partnership, Corporation, SubChapter S Corporation and Limited Liability Corporation (LLC).

Sole Proprietorships Most businesses start out as sole proprietorships. This means that the business is owned and operated by one person, usually the person who has the day-to-day responsibility of running the business. Sole proprietors own all of the assets of the business, all of the profits and are also responsible for all of the liabilities and/or debts. In the eyes of the law, the sole proprietor and the business are one and the same.

The Pros of sole proprietorship are:

It is the easiest and least expensive form of ownership

The owner is in complete control to make decisions as they see fit, as long as they stay     within the parameters of law.

Owners receive all of the income generated by the business to keep or reinvest.

Profits are handled (with a Schedule C) on the owner’s tax return.

The business is easy to dissolve.

The Cons of sole proprietorship:

Owners have unlimited liability and are legally responsible for all debts against the business. Business and personal assets are at risk.

Owners have a hard time raising funds and are often limited to using funds from personal savings or consumer loans.

Some employee benefits, such as medical insurance premiums are only partially deductible as an adjustment to income.


In a partnership, two or more people share ownership of the business. Just like the sole proprietorship, the law does not distinguish between the business and its owners. Partners should have a legal agreement that establishes the parameters of the business; how decisions will be made, how profits will be shared, disputes resolved, how future partners may be admitted into the partnership, and what steps will be taken when the partnership needs to be dissolved. Partners must also decide up-front how much time and capital each will contribute, etc.

The Pros of Partnership are:

Partnerships are fairly easy to establish, however time should be invested in developing a Partnership Agreement.

When more than one owner, the ability to raise funds is increased.

The profits from the business flow directly through the partners’ personal tax returns.

The business will benefit from partners with complementary skills.

The Cons of Partnership are:

Partners are jointly and individually liable for the actions of the other partners.

Profits are shared by all partners.

Shared decisions cause disagreements and in-fighting.

The partnership may have a limited live and may end upon the withdrawal or dearth of a partner.

Types of Partnership to be considered:

General Partnership means partners divide responsibility for management and liability as well as the shares of profit or loss according to the partnership agreement. Equal shares are assumed unless the partnership agreement states differently.

Limited Partnership & Partnership with limited liability means that most of the partners have limited liability (to the extent of their investment) as well as limited input regarding management decisions. This form of ownership is not often used for operating retail or service businesses. Forming this type of partnership is more complex and formal than that of a general partnership.

Joint Venture, this type of agreement acts like a general partnership, but is clearly for a limited period of time or a single project. If the partners in a joint venture repeat the activity, they will be recognized as an ongoing partnership and will have to file as such as well as distributed accumulated partnership assets upon dissolution of the entity.

Corporations A corporation is chartered by a state in which it is headquartered and is considered by law to be a separate entity, apart from those who own it. A corporation can be taxed, it can be sued and it can enter into contract agreements. The owners of a corporation are its shareholders. The shareholders elect a board of directors to oversee the major policies and decisions. A corporation has a life of its own and does not dissolve when the ownership changes.

The Pros of a Corporation are:

The shareholders have limited liability for the corporation’s debts and/or judgments.

Generally shareholders can only be held accountable for their investment in the stock of the company.

Corporations can raise additional funds through the sale of stock.

A corporations may deduct the cost of benefits it provides officers and employees.

The Cons of a Corporation are:

The process of incorporation requires more time and money than other forms of organization.

Corporations are monitored by federal, state and some local agencies, and as a result may have more paperwork to comply with regulations.

Incorporating may result in higher taxes. Dividends paid to shareholders are not deductible from business income, and can be taxed twice.

Subchapter S Corporations This type of corporation is a tax election only. An S Corporation enables the shareholder to treat the earnings and profits and distributions and have them pass through directly to their personal tax return. The catch here is that the shareholder must pay yourself what you would have to pay someone to do your job, as long as there is enough profit. If you do not do this, the IRS can reclassify all of the earnings and profit as wages and you will be liable for all the payroll taxes on the total amount.

Limited Liability Company (LLC) An LLC is designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. Formation of an LLC is more complex and formal than that of a general partnership. The owners are members, and the duration of the LLC is usually determined when the organization papers are filed. The time limit can be continued by a vote of the members at the time of expiration.

LLC’s must not have more than two of the four characteristics that define corporations:

Limited liability to the extent of assets

Continuity of life

Centralization of management

Free transferability of ownership interests

Deciding the business structure is a decision that will have long-term implications, so consult with an accountant and attorney to help you select the form of ownership that is right for you. Remember to take into account;

Your vision of the size and goals you have for your studio.

The level of control you wish to have.

The level of business structure you are willing to deal with.

The recording studio’s vulnerability to lawsuits.

Tax implications of the different ownership structures.

Expected profit (or loss) of the recording studio.

Whether or not you need to reinvest earnings into the business

Your need for access to cash out of the business for yourself.

NOTE: Information from SBA Small Business Planner

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A preamp, short for preamplifier, is an electronic device used in the first stage of amplification to boost the low-level signal to about line level.  Basically, the preamp takes a low-level signal from a microphone, turntable or other transducer and provides voltage gain, but no significant current gain.  Then the power amplifier provides the higher current necessary.

Preamps may be:

Mounted with or near the signal source in a microphone, as in mic preamps. Mounted with or near the signal source of an instrument, as in guitar and bass preamps. Incorporated into the housing or chassis of the amplifier they feed In a separate housing, a stand alone unit for use in live music and the recording studio. Part of a stand alone channel strip or channel strip built into a sound console or audio mixing board.

Preamps often set the tone of how a device or system will sound and preamp designs often have their own signature “sound”.  There are two types of preamps; vacuum tubes and transistors.  Both types of preamps add coloration to the mix. The sound of tube preamps is often described by presence, warmth and clarity.

However the transistor has a better low frequency performance.  It all comes down to a matter of preference, and in recent years the quality of both kinds of preamps has improved.

Preamps are very useful during recording.  Since the output signals of most microphones and guitars are at levels far too low to drive the line level input, a preamp must be used to boost its signal to acceptable levels.

Preamps are needed for both analog and digital recording systems.  The DAW requires a quality preamp, or set of preamps, for plugging audio signals directly into the sound card.

Whether the preamp is integrated into the amplifier, mounted near the signal source, or built into the audio mixing board, the function it performs is critical. Important considerations when choosing a preamp are:

Is it a tube or transistor style?

Is it quiet or noisy?

Is it designed with quality components?

The sonic contribution of the preamplifier in the recording process is significant and should not be ignored or left to chance.

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Dynamic Microphones

Dynamic Microphones are definitely the best microphone for sound and music reproduction. It works like a loudspeaker, but reversed. These microphones handle high volume levels from musical instruments and amplifiers and are best suited for guitar amplifiers, drums and vocals.

Furthermore, dynamic microphones do not require any external power (battery or phantom). They are also extremely durable, even moisture resistant and can stand not only high pressure, but also accidental misuse.     Shure SM57’s have been around a long time, in fact you might say they are a fixture in the music business.

You see them in live performances as well as professional recording studios around the world. This unidirectional dynamic mic has set the industry standard by defining the way instruments should sound.

Most studios use more than one Shure SM57 for many different applications; guitar amplifiers, drums, snares, etc.

For the price (retails around $146), this cardioid microphone is a work horse, it isolates the main sound source and minimizes the background noise.Then there is the Shure SM58 (retails around $188), another great work horse in the music industry. The Shure SM58 does one thing really well–vocals. It is consistently the first choice of performers around the world. In fact, this unidirectional dynamic vocal microphone is designed for professional use in live performances and studio recording.

Besides the grill, the differences between the two mics is subtle, however, the Shure SM58 is designed for vocals and the Shure SM57 is designed more for instruments. And, built into the Shure SM58 is a spherical filter that minimizes the wind and breath ‘pop’ noise.

There are a few high end mics that sound better, sometimes they are even priced cheaper, but there are no other mics that have the durability of the Shure SM57 and Shure SM58. It has been said that you can drop one of these mics off of a 50ft stage and you might break the grill, but the microphone will keep on working.

For a classic looking cardioid microphone, check out the Shure 55SH II (retails at about $285.00). This style of microphone was prominent in the 50’s and 60’s, however, today the design is coupled with modern acoustic components to meet today’s performance standards.

The Shure 55SH II has a cardioid, unidirectional polar pickup patter which minimizes pickup from the rear of the mix. This allows close proximity to loudspeakers without creating feedback problems. The frequency response is tailored not only for speech and vocals, but also for instrumental music.

The shock-mounted cartridge ensures quiet operation. The rugged die cast and mechanical design allows for reliability under rigorous conditions. And the self-tensioning swivel mount of the Shure 55SHII permits tilting through 45 degrees forward and 80 degrees backward.

How about a 3-pack of Sennheiser e835 cardioid microphones for less than 1/2 price (retails at about $479.99, now available for less than $200)?. The Sennheiser e835 dynamic vocal mic utilizes a cardioid pick-up pattern that provides good signal isolation and feedback rejection, enabling higher sound levels. With metal construction and an internal shock-mount system, this mic minimizes handling noise.

Users of the Sennheiser e835 microphone say that the construction of this microphone screams quality. And, they are very pleased with the sound; “As long as you (are) between 1-4 inches from the mic you will get amazing quality sound, (and) everything outside that (all noise) will be ignored.” From an Amazon Customer.

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Human Ear Sensitivity

If you are preparing to record sound in a studio, you need to understand the basics of human hearing. The ear picks up sound vibrations and translates them into a form that your brain can understand. To hear sound, you ear performs the following functions:

The pinna, the outer part of your ear, catches the sound waves. The structure of the outer ear has a number of curves and is pointed forward. The way the sound reflects off of the pinna helps you hear where the sound is coming from.

Next the sound waves travel down the ear canal and vibrate the eardrum. The eardrum is a stretched drum-like membrane where the sound waves are changed into mechanical vibrations.

These vibrations are transferred to the inner ear by way of three of the tiniest bones in the body; the hammer, anvil and stirrup.  These bones act both as an amplifier and a limiting device.

Then the vibrations are applied to a tubular, fluid-filled, shell-like device called a cochlea. The cochlea takes these vibrations caused by the sound wave and translates them into electrical information the brain can recognize as distinct sound.

The Threshold of Hearing refers to the minimum sound pressure-level, or SPL, that produces the fact of sound in most people.  It is equal to a 0.00002 microbar, or 0dB SPL. When you understand that one microbar equals one-millionth of normal atmospheric pressure, then you begin to understand how sensitive the human ear is.

The Threshold of Feeling is the SPL that causes discomfort in the listener 50% of the time. It occurs at a level of 118 dB, between the frequencies of 200 Hz and 10kHz.

The Threshold of Pain is the SPL that causes pain in a listener 50% of the time and corresponds to an SPL of 140 dB in the frequency between 200 Hz and 10 kHz.

Psycho-acoustics refers to the how and why the brain interprets a sound in a certain way. The primary device in psycho-acoustics is the human brain, and the way the brain works is still elusive in science today.

Understanding human ear sensitivity helps you realize how important it is to take care and protect yourself, and others, from long-term exposure to extreme sound levels in the recording studio.

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Digital Audio Processing

The goal of digital audio processing is to convert an analog signal into a sequence of numbers which can be stored and played back for reproduction.

The analog to digital process starts with an analog signal, usually a microphone preamp. The analog signal is run through an analog-to-digital converter, ADC, which takes measurements of the instantaneous voltage from the analog signal, or amplitude, at regular intervals, known as sampling.

At each sampling point, the signal is assigned a sequence of binary numbers, which is called the quantization value. Through a process called channel coding, the signal is then further encoded to eliminate any errors that might have occurred in the storage or transmission of the signal.

If the analog signal was not already band limited, an anti-aliasing filter is applied before conversion. Aliasing occurs when digitalizing a signal whose frequency is greater than the Nyquist frequency.

Once the signal has been sampled in the ADC, the digital signal may be altered in a process called digital signal processing. This is where the signal may be filtered or have special effects applied, such as; reverb, delay, chorusing and flanging.

The digital audio signal may then be stored or transmitted. Storage for digital audio comes in several forms:

  • A hard drive
  • USB flash drive
  • Compact Flash
  • Compact Disk, or CD
  • MP3 player
  • Or, any other data storage device

Digital audio can also be streamed to other devices.

analogue digital conversion, building a recording studio

An overview of the digital to analogue conversion process


Since the goal of digital audio processing is to recreate sound, the digital signal has to be converted back to an analog signal by means of a digital-to-analog converter, DAC. The new analog signal is then amplified and converted into a sound wave by a loud speaker.

NOTE: Sometimes, the audio signals originate in the digital domain like those created by digital synthesis. In that case, the analog to digital conversion does not take place.

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Ribbon Microphone

Ribbon microphones were the first commercially successful directional microphones. This type of microphone (also referred to as ‘velocity’ microphone) uses a thin metal ribbon placed between the poles of a magnet and generates voltages by electromagnetic induction. Ribbon mics are known for their ability to capture fine high-frequency detail.

The Royer R-121 (retails at about $1400) is smooth and clear with many of the attributes of condenser mics and has the ability to reproduce a wide dynamic range without pads and clipping. The figure-8 bi-directional pattern offers excellent rejection at the sides and the ribbon is lengthwise providing a side-address type microphone.

The Royer R-121 is great for any instrument or vocals. It exhibits a warm, realistic tone and flat frequency response. Recording Magazine says “the Royer R-121 is destined to become one of the classic microphones of the 21st century”.

This sleek, light and versatile microphone is easy to use, wonderfully musical and sturdy enough for Royer to give it a lifetime warranty! The Blue Woodpecker Ribbon mic (retails at around $1299) is one of the most interesting and beautiful ribbon microphones you’ll ever come across.

The Woodpecker is designed to deliver a wide frequency response, focused mid-range, ultra-smooth top end and outstanding bass response. It also excels at ambient recording, capturing room tone with a warm detail.

Kevin Becka ( says, “If you’ve never owned an active ribbon, now’s the time to make the jump: This Woodpecker rocks.”

Eli Crews (at says, “If it weren’t for the minor noise issue and my problems with the shock mount, the Woodpecker would garner the highest rating possible. It really is an exquisite mic in every other aspect, and it’s quickly becoming one of my favorite all-purpose microphones.”

For a very reasonably priced ribbon mic, check out the Avantone CR-14 (retails for about $259). This one of the least expensive ribbon mics available and the price includes a padded wooden mics, an aluminum carrying case, a spider-style shock mount and a five-year warranty.

According to Avant Electronics, the dual-ribbon design should yield a stronger output, and therefore a better signal-to-noise ratio as compared to a single ribbon design. Rich wells ( says, “the CR-14 is fairly quiet, though I found ir still exhibits the lower output you’d expect from a passive ribbon design.

Rich Wells further states, “To get the most mileage out of the (Avantone) CR-14, you will want to experiment with mic placement and find the most complementary preamp. Overall, the CR-14 is a good value, and having an inexpensive figure-8 mic can be a plus if you’re just starting to put together a mic collection.”

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MIDI Technology

MIDI stands for Musical Instrument Digital Interface. MIDI is a industry standard protocol that enables multiple electronic instruments, performance controllers, computers and other related devices, from different manufacturers, to communicate with each other throughout a connected network.

MIDI messages are essentially instructions that tell the music synthesizer how to play a piece of music. MIDI messages contain individual instructions for playing each individual note of each individual instrument. Every time you make any performance gesture, i.e. play a note, release a note, change patches or move the pitch wheel, a corresponding message is generated.

The MIDI data stream is a unidirectional bit stream with 10 bits transmitted per byte. This data stream is originated in a MIDI controller, such as a musical instrument keyboard, or by a MIDI sequencer, a device which allows data sequences to be captured, stored, edited, combined, and replayed. A MIDI sound module or synthesizer receives the data stream and responds by playing sounds.

The MIDI interface on a MIDI instrument generally includes three MIDI connectors; IN, OUT, and THRU. Information from the OUT connector of the controller is transmitted to the IN connector of a sequencer, then transmitted OUT to a sound module, where it can be daisy-chained THRU to other MIDI devices, and, if you are ready to listen, OUT to the monitors.

NOTE: Many MIDI keyboard instruments include both keyboard controller and sound module functions within the same unit. There is an internal link between these two functions which may be enabled or disabled.

MIDI channels are similar in nature to the channels on your TV in that although all of the channels are available to you at any given time, TV is viewed one channel at a time. However, MIDI channels may be monitored one at a time, or all at the same time.

There are 16 different MIDI channels, numbered 1-16. This means that 16 different parts can be played back over one MIDI cable.

A multi-timbral synthesizer has the ability to play back many different musical parts, such as piano, bass and drums all at the same time. Most can play back all 16 different parts, and some are capable of playing 32 and sometimes 64 different parts. For each set of 16 channels you will need one MIDI IN.

A PC-based MIDI system is equipped with application software and an internal interface card which can send data to an external sound module. MIDI sequencer software packages are available for the PC which enables the user to connect to a MIDI keyboard controller and have the same musical composition capabilities as the separate components listed above. In fact, today it is possible to record multiple tracks, add effects, and edit through your PC or laptop with specialized software.

MIDI enables you to:

Play with a band. Perfect for practicing as well as performing when other human musicians are not available.

Edit your performance. Evaluate and edit your performance; track your progress, correct problems, change speeds, etc.

Play any instrument. With this technology you are not limited to recording just the instruments you know how to play.

Compose, Arrange & Orchestrate. Start with a melody, lp.,add backing chords, bass, rhythm and instrumentation.

Print Sheet Music. After you are done composing your music, you can convert MIDI information into musical notation and print out sheet music.

This is not to say that MIDI replaces the need for acoustic instruments, microphones and traditional performances. It is a powerful production tool that helps musicians create music and audio productions. MIDI technology is all about control, flexibility and cost-effective productions that are innovative and personal.

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