Registering Your Music Studio Business
If you’re taking your music studio seriously as a business, you’ll want to make sure you’re setting it up professionally from a legal and tax position. This means choosing the appropriate legal structure, getting tax id numbers, and registering your studio name.
There are a few steps to this process, so stay with me as I break it down.
(Note: This information applies to starting a business in the United States. I’m not a lawyer and this post shouldn’t be taken as advice for your particular situation. I’m just sharing my experience. It’s up to you to make the decisions for your business!)
1. Structuring Your Business
The first step is to register your studio as a business. To do that, you’ll need to choose a business structure. Here’s a rundown of some of the options:
Sole Proprietorship
If you run a teaching studio but don’t take any steps to register it as a specific type of business, you’re considered a sole proprietor by default.
This is a completely legal way to run a business, but it may expose you to some risks.
Because a sole proprietorship is not considered a separate entity, you will be personally responsible for any financial obligations of the business.
Limited Liability Company (LLC)
This is probably the most common choice for music studios.
Specific requirements for setting up an LLC vary by state, but it usually just involves filing some paperwork and paying a nominal fee.
Registering your business as an LLC puts a layer of protection between your personal assets and the business assets. If the business faces bankruptcy or a lawsuit, your personal assets are more protected.
Corporations
Incorporating as a C Corp or S Corp establishes the business as its own entity, completely separate from the owner(s).
This puts an even stronger hedge of protection between your business assets and personal assets, but it also carries more tax obligations and day-to-day management requirements.
Filing the Paperwork
Registering a business probably isn’t as complicated as you might expect. You might even be able to file the paperwork yourself.
I suggest getting in touch with your local Small Business Administration (SBA) to find out what is required for your state and consulting further with an attorney or accountant if you still have questions.
Local Music Studio Licensing Requirements
States, counties, and cities play by their own rules and they may require a special license or permit to run a home-based business. The local SBA can probably answer this question for you, too. (Put that number on speed dial!)
2. Getting Tax Identification Numbers
Federal Tax Identification Number
An Employer Identification Number (or “EIN” to the cool kids) is like a social security number for your business. It’s issued by the IRS and is used for federal tax identification.
Once you’ve registered your business entity, you’ll want to apply for an EIN. It’s really easy to submit an EIN application on the IRS website.
EINs for Sole-Proprietors and Independent Contractors
Even if you haven’t officially registered your business (i.e. you’re operating, by default, as a sole-proprietor or independent contractor) you can still get an EIN. I recommend doing this for a couple of reasons:
1) Security – If you have an EIN, you won’t have to use your personal social security number on business documents.
2) You may need it – Some banks require an EIN in order to open a business bank account. (Which you’ll want to keep your business and personal finances separate.)
State Tax Identification Number
Because one ID number is never enough… you may also need to get a state tax ID number. Contact your state government or tax division to make sure you you’ve covered your bases.
3. Registering a Trade Name
State Level
The last step for registering your music studio business is to register your trade name. This is the name you use to conduct business and it’s sometimes called a fictitious name or “DBA” (or “Doing Business As”). You might register this name at the state, county, or city level.
In many cases, this registration will keep someone else from using the same business name within your state or locality. However, each state has different guidelines, so be sure to investigate.
National Level
A trademark can protect your business name at the national level, but registering a trademark is a much more involved and costly process. I suggest getting in touch with a trademark lawyer if you want to go this route.
Although it doesn’t offer any legal guarantees, registering the domain name for your business’s website certainly makes it less attractive for someone else to try to use the same name since they won’t be able to get the domain name for themselves.
This was a whopper of a post, but don’t let it scare you away. These steps might have some unfamiliar language, but the process really isn’t as daunting as it may sound.
P.S. If you’ve been getting my weekly emails, you already know that I’m forming a group of music teachers who want to launch or grow their studios this summer. Business registration is one of the steps we’ll walk through together! Submit your name here if you want to get updates about this group:
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