So you’ve reached the point of making money from your band’s music and merchandise. Most likely a majority of this money will be poured back into your gas tank or will be put toward new merch items. An initial reaction would be to entrust a member of the band to hold on to any extra money in a personal bank account or in a merch booth money drawer. This method of accounting lacks transparency and can easily cause tension among band members. Even if you don’t have extra funds floating around it’s a good idea to create a bank account that keeps all band money separate of personal funds.
Opening a band bank account can be a sure-fire method of keeping money safe, well accounted for, and organized, but can still cause headaches if not managed properly. Poor organization and money management skills will almost always lead to uncomfortable conversations and cause tension within most bands. To provide some advice to get you started we’ve put together this list of tips for anyone interested in setting up and managing a band bank account.
Choose a Bank
We’re not going to tell you which bank to choose, but go with a bank that makes sense for the band. Start by doing some research. Some banks will carry a minimum for business accounts. This is usually relatively high around the $500 – $2,000 mark. Find a bank that suits the needs of your band. If you tour the country it may make sense to go with a bigger bank that has a nationwide footprint for convenience and accessibility. If you need cash fast and don’t want to pay ATM fees it helps to have your bank with you on every corner. If you’re touring locally or are a studio band you may choose to go with a smaller bank or type of account that doesn’t have a high minimum balance requirement. When making a decision it helps to come up with a list of banks and sit down with a customer service rep at each one to answer questions about fees and other reservations you may have, as well as the member benefits that come with a business account. This will allow you to weigh the pros and cons of each and make an informed decision.
Setup an Account
A big factor that goes into setting up your band account is how you file your band as a business. There are several options when setting up your band as a business and assigning it a bank account. The easiest and cheapest way is to set up a DBA/Sole Proprietorship allowing you to create a personal, joint bank account which minimizes fees that are associated with business accounts. If you go this route money is tied to an individual’s social security number and requires them to file and pay taxes for those monies. While a lot of band related expenses can be written off it can also cause additional stress if you’re making enough money. Another option is to file your band as an LLC or Corporation and create a small business account to consolidate all transactions for tax and liability purposes. It’s best to consult a professional when deciding which entity suits your needs. A good resource to weigh your filing options is legalzoom.com, but consulting a small business attorney will provide the most guidance. Some even offer free consultations so a little research can go a long way when choosing who to talk to.
Regardless of the account you set up you should be able to fully trust a minimum of two people and give them access to the account. Putting two members on the account with check signing ability is mainly for your band’s security and protection. If one of them is out of town and an emergency purchase needs to be made for the band, the other member has the ability to make that purchase. As a rule of thumb, if there are 2 people responsible for the account there should be a written document that shows all in the band are in agreement that the specified 2 people are authorized to make withdrawals. A bank may want to see this. In a corporation this is done through a document called a “corporate resolution’.
Break it Down
Come to an agreement with the band on how money will be divided. This can vary depending on live, merch and recorded music sales and can get even more complicated when managers and agents are in the mix, but for the sake of simplicity in this example, if there are 4 members of the band and they split all monies equally, you will divide the money into 5 parts – 20% to each member and 20% to a band account. This way everyone gets paid evenly and you will be able to accumulate band funds for practice space rent, merchandise and vehicle maintenance or payments.
Band Use Only
Only keep band funds in the account. Be sure to pay each member their portion from gigs and sales. Once one member is allowed to dip into the account for extra personal money, everyone will feel entitled. When traveling to gigs, studio sessions, or anywhere in general with the band, don’t keep too much extra cash on you. A good way around this is to have a check book or debit card. It’s much easier to account for purchases once the debit transaction posts or a check clears.
Keeping Good Records
Keep all members of the band informed on any action taken with the account. Your band members’ trust in you as the administrator of the account is very important. People can get funny around money issues so always have records available to back you up. One member of the band should be in charge of keeping track of every transaction. Whether you choose to use your bank’s online banking tools or you have a spreadsheet in google docs it’s important to keep track of each and every purchase. Adding a note to why certain purchases were made is helpful as well. Have bank statements organized and at the ready to avoid any disagreements over purchases with band funds. While it isn’t necessary to have them with you 24/7, it’s important that you have easy access to a copy in order to prevent arguments on certain purchases. Stick to the facts and no one should question your accounting.
Many successful bands have done just fine without having a joint account. It’s similar to any business. The more names on the account, the more points of view there will be on what to do with the money. Here’s another run down on the steps of creating your band bank account that you may find useful. If you’re still unsure whether a band account is for you talk to friends in other bands and see what has worked for them. In the end it’s your band and your money so do what you’re most comfortable with!
Joe Mahoney & Chris Cave contributed to this article.
Disclaimer: The information provided in this article is not legal or financial advice, but general information on issues commonly encountered. Indie Ambassador is not a law firm and is not a substitute for an attorney or law firm.