How to set up your own label as an independent artist?

Recent years have seen a move away from the traditional major label model and, now more than ever, a growing number of independent artists are taking their careers into their own hands by embarking on the difficult but rewarding adventure of setting up their own record label.

However setting up a label involves a number of steps, from drawing up a business plan to choosing the legal structure and registering with the relevant authorities. With so much to think about, here’s a general guide to help you get started and make sure you don’t forget anything when setting up your own label.

1. Do some market research and draw up a business plan

One of the most important things in setting up a business is knowing your market. With this in mind, before setting up your label, it’s important to start by carrying out market research to understand the music industry and identify your target audience.

This will help you to develop a solid business plan that will serve as a roadmap for your label and in which you can describe your objectives, target audience, marketing strategies, and financial projections.

It’s also important to have some knowledge of the business side of the music industry so you know what you’re getting into. The major record companies such as Universal Music Group, Sony Music, and Warner Music Group dominate the music industry and are even known as the “Big Three”. Subsidiary labels, also known as sub-labels, are record labels that operate within the framework of a larger parent label. These sub-labels operate as separate entities, with their own brand, their own roster of artists, and sometimes a particular focus on specific markets or genres, such as punk, hip-hop, rap, folk, or even electronic music. And then you have the independent record companies or indie labels which operate on a smaller scale in the music scene and where creative control generally remains largely with the artist.

2. Choose the legal structure of your company

The second step is to decide on a legal structure for your label. As soon as your music project starts generating income, it’s a good idea to establish a formal structure for your business.

The most common options are sole proprietorship, partnership, limited liability company (LLC) or corporation. Now, each structure has its advantages and disadvantages in terms of liability, taxation, and formalities.

For a music label, a limited company may be preferable, as it offers a more formal structure and also allows you to protect your personal assets as you separate yourself from your business. On top of that, it can also enhance your credibility in the industry.

Don’t forget that there are financial considerations involved in setting up a label, including recording costs or studio time, music distribution, music licensing, and music marketing, so you need to think about these from the outset.

This can be a particularly daunting stage, especially for someone who doesn’t know much about business and company law. But if you look around, there are a few places where you can find help, such as the US Small Business Administration (SBA) and the US Chamber of Commerce, as well as some online resources that can provide valuable information and advice throughout the process.

3. Choose a memorable name for your company

While it is important to choose a unique and memorable name for your record company, you must ensure that the name you have chosen is available and that it complies with trademark regulations. You can check the availability of your trade name and trademark on the website of the United States Patent and Trademark Office (USPTO).

4. Register your company with the Secretary of State

The next step is to register your label with the relevant local and state authorities. Specific procedures and requirements can vary from state to state, so it’s important to check the guidelines provided by the Secretary of State’s office in the state in which you plan to operate.

In general, you will need to file Articles of Organization (for an LLC) or Articles of Incorporation (for a corporation) with the Secretary of State. You will need to fill in the information required in the formation documents, which usually include details of the name, address, registered agent, members or directors of the company, and the purpose of the company.

Submitting the formation documents to the Secretary of State’s office can often be done online, by post, or in person, but whichever method you choose, be prepared to pay the required filing fee, which varies by state and company structure.

The Secretary of State’s office will review your documents and, once approved, issue a Certificate of Formation (for an LLC) or a Certificate of Incorporation (for a corporation).

Once you’ve registered, it’s important to comply with state law to keep your business in good standing. So pay attention to ongoing requirements, such as filing annual reports, renewing registrations, or updating company information.

5. Obtain an EIN and choose your tax status

After registering your business with the Secretary of State, you must obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS).

An EIN is a federal tax identifier that is used for tax purposes and is mandatory for most business structures, with the exception of sole proprietorships with no employees.

Next, you can register your business for state taxes with the appropriate state agency. These may include sales tax, income tax withholding, and other state-specific taxes.

Depending on the structure you choose, you will need to select a tax status.

In the case of a sole proprietorship, business income and expenses are reported on the owner’s personal tax return (form 1040). There is no separate tax return for the business.

In the case of a partnership, the situation is similar to that of a sole proprietorship, with income and expenses being “transferred” to the partners, who declare their share on their individual tax returns. The partnership itself pays no income tax.

An LLC can choose how it is taxed. By default, a single-member LLC is taxed as a sole proprietorship, and a multi-member LLC is taxed as a partnership. An LLC can also choose to be taxed as a corporation (either a C corporation or an S corporation).

A C corporation is a legal entity separate from its owners and pays tax on its profits. Shareholders also pay tax on the dividends they receive. This is often referred to as ‘double taxation’. As with a partnership, the income, deductions, and credits of an S corporation are passed on to the shareholders, who report them on their individual tax returns. Under the S corporation, the corporation itself does not pay federal income tax.

It is important to note that tax laws can change, and you should consult tax professionals to determine the most appropriate structure for your particular situation.

6. Open a business bank account

When you own a business, it’s crucial to keep your business finances separate from your personal finances for accounting purposes. That’s why you need to open a business bank account in the name of your label.

7. Don’t forget to copyright your music

One thing you mustn’t forget to do is protect your music. You need to register your original music with the US Copyright Office. This will protect your intellectual property and establish your ownership rights.

In simple terms, copyright protects original works, including music, once they are fixed in a tangible medium of expression, so your music must be in a fixed form, such as a recording or sheet music.

You must then visit the U.S. Copyright Office website and complete the online application, which may involve uploading your work. Now bear in mind that you will have to pay a registration fee to submit your application. Once your application has been processed, you will receive a certificate of registration from the U.S. Copyright Office.

8. Join a performance rights organization

You may be wondering why you need to join a performing rights organization or what a performing rights organization is.

A performing rights organization (PRO) is a type of entity that collects and distributes performance royalties on behalf of songwriters and publishers.

PROs collect royalties from a variety of sources where music is publicly performed. These include radio and television broadcasts, live performances in concert halls and clubs, background music in businesses, and digital streaming services. After collecting the royalties, PROs distribute the funds to authors, composers, and publishers on a pro-rata basis. The distribution is generally determined by factors such as the frequency of performances, the popularity of the songs, and the terms of individual agreements with the creators. Normally, a record company takes a share of the royalties, but by setting up your own label you eliminate the negotiations and contracts that could cost you a lot of money.

ASCAP (American Society of Composers, Authors, and Publishers) is one of the major PROs in the United States. Like ASCAP, BMI (Broadcast Music, Inc.) is a PRO that helps artists and publishers get paid for the use of their music and finally, you have SESAC which represents songwriters and publishers and provides licensing and royalty distribution services.

9. Put together a reliable and passionate team

This is perhaps the most difficult part of the process. Not surprisingly, setting up and running a music label takes a lot of time and energy. Initially, you’ll be able to handle several responsibilities, but you’ll gradually be able to expand the team to meet the growing demands of the label’s activities.

That’s why you need to surround yourself with people you can trust and who share your passion for music. Now, you first need to think about the key roles within the label and then find the right people.

These might include positions such as :

Finance and administration staff for budgeting.
Production and engineering teams for technical aspects.
A&R (artists and repertoire) specialists for marketing and brand visibility.
Sales and distribution managers for distribution.
PR coordinators for media coverage.
Legal and commercial experts for contract negotiations.

One of the great things about setting up your own business is that you have the freedom to choose the people you work with, so make sure you choose people who align with your artistic vision and career goals.

It is important to draw up clear contracts for any collaborations, artists, or producers involved in your label and it is advisable to consult a lawyer specializing in the entertainment industry to ensure legal clarity.

10. Explore the different distribution platforms

The next step is to choose digital distribution platforms to distribute your independent music.

TuneCore is a digital distribution platform that can help you get your music on the major online shops and streaming services. CD Baby is another digital distribution platform that can help independent musicians distribute and promote their music. DistroKid is a user-friendly platform for distributing music on various online shops and streaming services.

In short, services like TuneCore, DistroKid, or CD Baby can help you make your music available on platforms like Spotify, Apple Music, iTunes, and others.

11. Develop a sound marketing strategy

One of the most important aspects of a new business is marketing and branding.

Most major labels take care of artist management, but one of the benefits of setting up your own label is that you can build a closer relationship with your fan base and listeners.

Now, if you’ve hired someone on your team to help you with this, they can help you develop a good strategy, which may include using social media, creating a website, and engaging with your audience to build a fan base.

You can also do this by creating promotional merchandise such as limited-edition CDs, cassettes, and T-shirts and selling them online or in local record shops, which is great publicity.

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Promote your music! Send it to playlists and curators

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12. Set up a solid financial management system

Good financial management is crucial to success. You need to put in place a solid financial management system to track the income, expenses, and royalties associated with your label.

If you have hired an executive producer, he or she can help you establish the budget needed to finance and promote the album.

13. Build a network in the music industry

Networking is very important when starting out in any sector, and this is particularly true in the music industry. Building relationships with music publishers, record labels and other industry professionals can also help raise your label’s profile and open up new opportunities for collaboration. And collaborations can open new doors, leading to unique opportunities for you.

A good way to do this would be to attend industry events, music festivals, and conferences to keep in touch with the ever-changing music industry.

Touring is another essential aspect of building a successful label, as gigs can help promote your own music, generate buzz around it, and attract a wider audience. What’s more, you can diversify your sources of income through merchandising, which can be a powerful advertising tool. T-shirts, posters, and exclusive items such as cassettes can generate additional income.

Now, once you have established yourself as an independent label, you may receive unsolicited demos from unsigned artists who are hoping to be signed by a label to record their new album and this is still an avenue you can explore later on that will broaden your reach and credibility in the music industry.

Finally, don’t forget that the music industry is fast-paced, and staying on top of trends, regulatory changes, and new opportunities is critical to your label’s success. In addition, seeking professional advice, particularly from entertainment lawyers and accountants, can help you navigate the legal and financial complexities of the music industry.

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Get your music heard! Send it to playlists, radios and curators