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Business Structure Exercise

The document discusses the complexities of organizing large-scale music tours, emphasizing the need for effective management and coordination among various entities involved. It outlines different business structures available in Australia, such as Partnerships, Sole Proprietorships, Limited Liability Corporations (LLCs), and Corporations, each with its own risks and benefits. Additionally, it highlights the importance of anticipating risks and having detailed contracts to minimize liability in the music industry.

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17 views

Business Structure Exercise

The document discusses the complexities of organizing large-scale music tours, emphasizing the need for effective management and coordination among various entities involved. It outlines different business structures available in Australia, such as Partnerships, Sole Proprietorships, Limited Liability Corporations (LLCs), and Corporations, each with its own risks and benefits. Additionally, it highlights the importance of anticipating risks and having detailed contracts to minimize liability in the music industry.

Uploaded by

tanmaya_purohit
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Introduction

The modern Music Industry demands elaborate attempts for promotion of


music, and Artists and Music Bands undertake large-scale tours, within their
country and around the world as well, to promote their music. Indubitably,
touring is one way to promote your music, but it cannot be done on a mere
whim. For such large-scale tours to be carried out, the parties involved need
to be aware of the intermediate steps that need to be taken for the tour itself
to be successful. Even more so, the management of the tour needs to be
impeccable - varying from planning to legal clearances. In the instant case,
the Music Promoter needs to incorporate the several entities involved in the
Music Tour, and in a manner such that the process can be rid of as many risks
as possible.

Business Structure
For a musical tour of a large scale, a single person cannot handle everything.
Many entities need to be involved, for several reasons, be it for financing of
the tour from the start to the end, or for management purposes so that the
tour is concluded smoothly without a hitch. In case where these entities are
unable to coordinate effectively and function, the tour would undeniably
collapse. Where a single entity would face troubles, involving different entities
and delegating tasks among them would prevent collapse of the tour.
However, such number of entities need to bound within a business structure
so as to function. There are several prominent business structures in Australia
which can be adopted by the Musical Promoter so as to rope in the entities
and have them working together to ensure the success of the promotional
tour. Some of these business structures have been mentioned below, along
with the potential risks that they carry.

One of the most common and favoured forms of such business structures is
Partnership, where if you are a collective group, every individual is bound
together by means of contracts and the liability of the members is demarcated
within the terms within the agreement. However, in cases where the
partnership is no longer able to function, the partners are held liable for the
repayment of the debt incurred, and repayment also includes personal liability
of the partners. While there do seem to be profits from a taxation perspective,
it is also important to ensure that the partnership stays in business.

Another such structure is a Sole Proprietorship, where the owner of the


business is the sole person raking in the profit, but at the same time, the
responsibilities and the liabilities also befall the sole owner. Without a doubt,
this would be the most dangerous venture, since the mantle of responsibility,
liability, and losses all fall on the single person, and cannot be shared.

Contrary to a General Partnership, if the members wish to avoid personal


liability, then in such cases, a Limited Liability Corporation (LLC) would be
a preferred business structure. Being a member of an LLC helps you enjoy
many benefits of a partnership, and shields you from personal liability as well.
Additionally, even if the members of an LLC were to withdraw, the LLC would
remain in existence and can function - which allows flexibility to the members
of a music band. However, since the members of an LLC cannot be held liable
personally, it becomes hard to obtain financing from banks, since assets
cannot be used as collaterals.

Eventually, other than an LLC, the option of a corporation also exists. Much
like an LLC it also allows you to evade personal liability, but additionally,
impose upon the company a hoard of fiduciary duties and issues related to
legal compliance, not following which could lead to heavy penalties for the
members of the Corporation. Contrary to the other business structure the
operation of a company is complex manifold, and requires acute knowledge of
the legal provisions. Although the personal liability is least, the other factors
require advanced knowledge for being dealt with.

Limiting the Risks


Not just in the music industry, but in the entirety of the corporate world, there
is no business structure which could make you immune to liability in entirety.
Even in the music industry, an immense numbers of variable factors are in
play, which could be greatly affected by the business structure you adopt. One
such example could be of the instance where a copyright infringement is
involved. In such cases, whether you have created a corporation, a
partnership or a sole proprietorship, can greatly affect the outcome which will
be concluded before the Court in resolving the matter. However, anticipation
and compliance is a must when it comes to avoid such risks with any business
structure. In addition, ensuring that every term is detailed and contained
within a contract can help limit ambiguities or contradictions, while a steady
work ethic in the operation of the chosen business structure can ensure that
the liability can be avoided, or at the very least, minimised.

References
Swan, Adam C., (N.D.) Music Industry Business Structures, Music Business
Journal, Berklee College of Music, Available at -
http://www.thembj.org/2008/12/music-industry-business-structures/
(Last Accessed - September 24th, 2020).
PWC, (Internet Document) Doing Business in Australia: An Introductory
Guide, Available at -
https://www.pwc.de/de/internationale-maerkte/assets/doing-business-in-
australia.pdf#page47 (Last Accessed - September 24th, 2020).
Pizza, Mecca, (2012) Finding the Right Business Structure for your Band,
Online Article, Available at - http://futureofmusic.org/blog/2012/06/15/finding-
right-business-structure-your-band (Last Accessed - September 24th, 2020).

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