MUC 109 LEC 3 Employment Arrangements & Unions

Music Business Essentials

Employment
Arrangements
in the Music Business

© 2006 musicbizclasses.com

Financial Literacy in the Music Industry

• Two Certainties: Death and Taxes

• It is not what you make, but what you keep

• Your number one expense in life: TAXES

• Long-Lasting, wealth is determined
by both revenue generation and tax
management strategies

• Business Ownership offers the most tax
advantaged income and tax position

In the Music Industry,
Industry
there are different
employment arrangements:

–E l
Employee-- F ll or P t Ti
Full Part-Time
or Contract

– Independent contractor

– Small Business Owner


Full or Part-Time Employees

• Long-term, continual work; paid
wages or salary

• At Will; employer or employee may
terminate at any time

• Conditions set by employer

• Tax withholding by employer

• Unemployment benefits Worker’s Comp
benefits, Worker s
& Disability

Examples-
Examples Regular jobs at a
recording studio, record label, etc.

Contract Employees:

• Mid to Long term continual work;
Mid-to Long-term,
paid wages or salary

• Contract period pre determined and
pre-determined
mutually agreed upon by employer and employee

• C diti
Conditions set b signed contract
t by i d t t

• Employment may end when contract
p y y
period is expired

• Tax withholding by employer
g y p y

• Unemployment benefits; Worker’s Comp

Examples: Regular jobs on Broadway,
in TV shows; employee band member

Independent Contractor

• Sh t t
Short-term, sporadic work; paid f
di k id fees

• Self-Employed; freelance

• At Will

• Conditions set by mutual agreement;
may or may not have a formal contract

• Taxes managed by employee

• N unemployment b
No l t benefits, W k ’
fit Worker’s
Comp or State disability

Examples: Session gigs, short-term
projects as engineers, arrangers,
music instructors, etc. © 2006 musicbizclasses.com

(Small) Business Owner:

• Not hired for employment; rather hired
to provide services via own business;
paid fees and/or sales income

• Conditions set by mutual agreement;
may or may not have a formal contract

• Tax withholding & benefits handled
by business entity

• Examples: Owners of recording studios, record
labels,
labels record/music stores artist management
stores,
companies.


Business vs. Hobby
• The IRS differentiates between
Businesses and H bbi
B i d Hobbies

• Tax status is different for both

• Both require income tax reporting

• Business= Profit Motive
• Hobby= For Fun

• 3 out of 5 tax years profitable? Business.
• Not profitable? Hobby.

• Tax advantaged status for Businesses
– Deduction of expenses
against business income
– This REDUCES your income tax bill

A Band/Group as a business:

• Separate business entity:
Typically a Limited Partnership
yp y p
(Band Partnership) or LLC

• Paid fees, royalties and
fees
sales percentages

• Band/Group Members own equal
shares in profits and losses of
the business

• LLC and Limited Partnerships offer
p
greater protection against personal
liability

Paying Your Taxes:

• IRS- Internal Revenue Service
1040.Com
1040 Com

• Federal, State, Local taxes may be due

• Annual Income taxes on Earned Income-
Due April 15th each year

• Self-Employment Taxes on self-employed
Self Employment self employed
income- Estimated payments due
throughout the year


General Tax Filing Info:
• All eligible U S citizens pay annual
U.S.
earned income taxes
• Regardless of age
• Filing amount is determined by several
factors: filing status income amount
status, amount.
• Example: Single, Under 65, Earned
income of $8950 (2208) or more
must pay annual earned income taxes
• Example: Dependent children under 19
children-
(up to 24, if full-time student); earned
annual income $5450 (2008) or more
( )
must pay annual earned income taxes

General Tax Filing Info:

• All eligible U.S. citizens who earn income
from any self-employment activities pay
additional self-employment taxes
dditi l lf l tt
• Regardless of age
• Earned income from self-employment of
$400 or more must pay annual self-
p y
employment taxes.

• Talk to your CPA- Certified Public
Accountant for more information


Unions and Guilds
for the Musical Arts
and Trades


Brief History of Labor Unions
• G ild d t b k t th Middl A
Guilds date back to the Middle Ages-
a confraternity of tradesmen

• Historical Guilds are predecessors to many
of today’s Unions and Guilds
y

• Modern unions in America first
emerged during the industrial
revolution of the mid-to-late 1800’s

• Their primary mission was to protect
workers against the abuses of the
powerful industrialists

Musician’s Unions:
Overview
O i

• Today there are several unions
and guilds that serve the interests
of professional performing artists
f f i l f i ti t
and supporting trades-people.

• They are membership organizations
and charge j i i and annual f
d h joining d l fees

• Operating on a Federal
and Local Level © 2006 musicbizclasses.com

Unions for Musical Artists:
• AFM= the American Federation
of Musicians of The United States
and Canada

• AFM is the oldest and largest
professional musicians union

• AFM f focuses on supporting
ti
practicing musicians in live
performances venues touring and
venues,
recording sessions and TV taping

Unions for Musical Artists:
AFTRA=
American Federation of Television
and Radio Artists

• Primarily concerned with
vocal talent-
Background singers,
announcers, etc.


Guilds for Musical Artists:
SGA=
Songwriter s
Songwriter’s Guild of America

• Primarily concerned with
Songwriters, published and
unpublished

• Offers multiple benefits- provides a
standardized contract template for
songwriters


Benefits
• The primary mission of a union is
to protect musicians, performers,
artists in terms of fair wages and
appropriate working conditions
i t ki diti

• Their primary services are:
collective bargaining
g g
employment benefits


Benefits
• Collective Bargaining uses
g g
the power of many members
to gain workers benefits
for individual workers.

• Unions use Collective
Bargaining with:
– Record companies
– Broadcasting companies
– Large Live Music Venues
– Symphonies © 2006 musicbizclasses.com

Union Contracts
• Companies that sign contracts
with unions become union “signatories”

• They agree to honor union rules

• Contracts govern:
– Wages
– Royalties
– Working Hours & Breaks
– Cartage
– Travel Arrangements & Accommodations
– Pension funding


Benefits
• Unions allow members
“employee”-type benefits
“ l ”t b fit

• Including:
– Health benefits
– Insurance
– Retirement
– Other-- job referrals, mediation
services, discounts
,
– Assistance with tax filing

Requirements
• Requirements:
– One time joining fee-
g
generally $100-$1000
y
– Annual dues- generally
$100 $200
$100-$200
– Work dues- a percentage of
every gig you play
play-
generally 1%-2%
–M b
Members must only work
t l k
union gigs

Pros and Cons
PROS-
– Off Protection and benefits
Offer P t ti db fit
– Larger venues and Record Labels require
union contracts,
contracts

CONS
CONS-
– Can be expensive for younger,
unestablished artists
– smaller, local venues are not
union affiliated- will not pay
union scale wages
i l


Key Take-Aways:
• Unions and Guilds are meant to
protect workers from poor working
conditions and abuse by employers

• There are MANY organizations that provide
protection for musicians performing
musicians,
artists, and tradespeople, etc.
AFM, AFTRA, SAG,
SGA, AGMA, AGVA, AEA, IATSE

• Th most well-known unions f
The t ll k i for
performing artists in the Musical field are:
• AFM
• AFTRA

Key Take-Aways:
• Unions are membership organizations
and require members to pay joining fees,
annual membership fees and dues

• Musical artists should consider the
Pros and Cons before joining a union

• Unions can offer professional,
self-employed or contract musical
artists and t d
ti t d tradespeople many of the
l f th
same benefits enjoyed by a
full-time employee in a traditional setting-
p y g
i.e. health, retirement, insurance
benefits, etc. © 2006 musicbizclasses.com

For Educational Use Only

This slide presentation is part
of the Music Business Essentials
series.

Contact
info@musicbizclasses.com
for
f more information
f

MUC 109 LEC 3 Employment Arrangements & Unions

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