Avoid Legal Trouble; Get a Business License

With all of the excitement of building a recording studio, many people overlook an important task; obtaining a business license. Failure to obtain this document may mean legal trouble down the road. But first, you need to make sure that all of your “I’s” are dotted and your “T’s” crossed.

Zoning laws regulate how you do business at a chosen location. It is important to know that you will be allowed to conduct business in your chosen location, whether that be a store front in town, a converted garage, or new construction on your property. So first, contact your local zoning board and make sure you can do what you want to do—where you want to do it.

In a residential area you may be limited to doing business by phone, fax, internet or snail mail. If you have chosen a storefront, the zoning laws may prohibit you from conducting business after or before certain hours.

Are planning on hiring employees? If the answer is yes, you need to apply for an Employer Identification Number, or EIN, check out this web page at the IRS Employer ID Number. And, don’t forget to check out state employer regulations, you may need a state Tax ID.

Do you plan on selling services or products? Check with local jurisdictions, you may need a city and/or state sellers permit. Depending on your city or state you may be paying taxes at both the city and state levels.

Will you be using your legal name or an invented name? An invented name, or DBA, a.k.a., or Doing Business As, is an official business registration of a business name with either state or local jurisdictions.  Without a DBA, the law requires you to do business in your personal name, or names of your partners.

Finally, once all of your paperwork is in order, it is time to apply for a local business license. Be prepared to describe your business activities, include your EIN, your state tax ID, your sellers permit number and identify other owners or officers (if applicable). After you have completed your application and filed it along with the appropriate fee you may legally operate your business.

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Write a Business Plan, It’s Important

Success in business is the result of planning. A written plan details your ultimate goal, the reasons for that goal and each milestone that must be passed in order to reach that goal.

The business plan is a road map to guide your business to the goal you’ve set for it. The plan details the what, why, where, how and when, of your business.

Business plans are necessary because they help you clarify how you see your business. And, forces you to think through every aspect of your business and put it down in writing.

The following is a simple-format business plan:

  1. Executive Summary – this is an overview and summarizes the entire contents of the business plan.
  2. Company Overview – this includes a mission statement (in 50 words), goals (things your company wants to achieve) and objectives (how you plan to get there).
  3. Business Environment – in this section you research not only your competition, but also your potential customer. Get to know your competitors and how you will differ from them, and also, get to know what makes your customers tick.
  4. Company Description – here is where you go into detail about your business structure, who are your customers, what resources will you use, what types of employees will you need, etc. And you need to include your company’s Unique Positioning Statement (one sentence that describes what sets you apart from all of your competitors).
  5. Action Plan – this section outlines the steps you need to take now in order to make your plan work.

However, if you are in need of financing, you need to start writing a comprehensive business plan, at least 25-30 pages.

Writing and putting together a ‘winning’ business plan takes study, research and time, it cannot be written in a couple of days. For some help with that process, take a look at these:OfficeReady Business Plans software gives you a business plan template document, an eBook guide, sample business plans and an entire tool set that helps you create a ‘winning’ business plan that helps you get the loan you need.

For a very affordable price (under $100.00) you also get a OfficeReady Marketing Plans and the Ultimate Marketing Calculator.

For a Business Plan Kit, take a look at Business Plans Kit for Dummies by Steven D. Peterson, PhD. (retails for less than $25.00) The ‘for Dummies’ books are always well organized and easy to follow and I recommend them. If you take a look at the New and Used Books at Amazon, you may be able to get this book delivered to your home for about $10.00 in less than a week.

Take a look at The Studio Business Book by Mitch Gallagher and Jim Mandell. This book is a step-by-step guide to operating and managing a professional recording studio; from formulating a business plan and estimating start-up costs, to scheduling sessions, dealing with clients, and maintaining or upgrading equipment.

We’ve got this book in our library and we highly recommend this book to anyone thinking of building a recording studio. This book retails for $35.00 but if you buy it from the New and Used Books at Amazon you can get it for about half price.

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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.

Partnerships

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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Preamplifiers

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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