Thread: US Dancers, What is your business model for your troupe? LLC? Non-Profit? Sole Proprietorship? Corp of some sort?

I'm looking at moving into a new business model for my performing troupe, probably an LLC, but I was wondering if any of you might be willing to share your experiences with me in how you've run the business side of your troupe, what has worked or what hasn't and what you've learned.

If you'd like to reply off list or on, I'd really appreciate any advice you have to give. My pms are working, or you can email me at shemsdance at gmail dot com.

<3

Shems

I studied business administration and, aside from really basic accounting and research skills, all I ever really learned was "LLCs are rad." I like the limited liability and I like that it's relatively simple compared to corporations.

But! I've seen a lot of recommendations all over for LLCs because "you could get sued, and LLCs save your behind." It's not really accurate and it kind of exploits the fact that the US is full of people who love (and fear) litigation.

Limited liability is designed for debt. If you're taking on loans, like to open a studio or whathaveyou, by all means. But as a general rule, if somebody sues you for anything (with or without merit) and your only defense is your business structure, kiss your assets goodbye. That's what insurance is for.

It's relevant, and it's been bothering me.

Also, if you are relying on limited liability, you absolutely must know what you're doing. Don't personally guarantee contracts, don't mix your personal finances with those of your business, and do keep the ridiculous amount of records in order.

...I actually love this business model. I just think it's really easy to misunderstand.

Originally Posted by briceashta

Limited liability is designed for debt. If you're taking on loans, like to open a studio or whathaveyou, by all means. But as a general rule, if somebody sues you for anything (with or without merit) and your only defense is your business structure, kiss your assets goodbye. That's what insurance is for.

I'm not sure I understand. I've certainly heard from pretty much everywhere that Limited Liability means that your liability is limited, that if somebody decides to sue your business they can't go after your personal assets.

I've gotten insurance when I was renting a studio to teach weekly classes and when putting on a show in a theater, but what about all the other things we dancers do performing at a wedding or other event. Are we expected to carry insurance in those situations as well? If I'm not currently carrying studio insurance, should I get special insurance for my dance troupe?

Thank you for your response,

I think I'm also going to start a new thread.

Right now my troupe is an extension of my studio, which is a sole proprietorship. At least, that's its legal status... in reality it is completely separate financial entity and the sooner I can get that fixed the better! (for one thing, I can't even open a separate checking account for it right now and that's making my bookkeeping hell).

I don't get paid as the 'owner' of the troupe. I get paid as a performer, just like the others. The troupe takes a cut from our gigs to cover expenses, and anything that's left over is spent on the troupe (props, equipment, travel expenses, etc). There is no intention of the troupe ever making a profit for me.



I'm having one of our members look into creating a non-profit arts organization for us. I think it would better reflect our goals & our ideals as a group.

The dancers would still be paid for our performances, probably as contractors to the nonprofit.

We may be eligible for some grants as a nonprofit, but I'm not counting on that. We would be eligible for lower rental rates on several local theaters that I know of, so that's a nice plus! We would also be able to accept donations, which could be useful at some point. I think as a nonprofit arts organization we might have a bit of an edge with some gigs, and it's *possible* (though I haven't researched it yet) that groups who book us could deduct our pay as a donation?? (just thinking out loud, though don't quote me on any of this material!)


Part of my intention is for my troupe to be able to continue if I retire or move away. My troupe is definitely NOT "Lauren and the Lotus Arts Dancers" any more, it's a committee of equals. I'm still the artistic director and guide things, but I'm working on handing off more and more of the responsibility. So this kind of business model would suit my group really well. YMMV of course!

found some backup on what briceashta said about LLCs.
Can I Set Up An LLC To Avoid Personal Liability In A Lawsuit? | Automobile Accidents, For Non-Lawyers, The Law


It still looks like a good structure with a lot of flexibility if you want multiple owners, though.

I've been a corporation before and choose to run my current business as a sole proprietorship. Any kind of corporation requires lots of paperwork and is much more complex. And when I was a corporation, I learned that EVERYONE who loaned me money, from my bank to my OfficeMax credit card to the phone company, wanted my personal guarantee on everything ANYWAY!!! So when the corporation eventually dissolved, I spent 5 years paying off its debts. All those legal fees and filing of meeting notes turned out to be a TOTAL waste of my time and money.

That sounds like a painful lesson. Ouch.

Originally Posted by Lauren_

found some backup on what briceashta said about LLCs.
Can I Set Up An LLC To Avoid Personal Liability In A Lawsuit? | Automobile Accidents, For Non-Lawyers, The Law


It still looks like a good structure with a lot of flexibility if you want multiple owners, though.

I've been a corporation before and choose to run my current business as a sole proprietorship. Any kind of corporation requires lots of paperwork and is much more complex. And when I was a corporation, I learned that EVERYONE who loaned me money, from my bank to my OfficeMax credit card to the phone company, wanted my personal guarantee on everything ANYWAY!!! So when the corporation eventually dissolved, I spent 5 years paying off its debts. All those legal fees and filing of meeting notes turned out to be a TOTAL waste of my time and money.

Yes, a million times yes.

And the same exact thing happens to a lot of LLC members who hear limited liability or even the 'explanation' shared in the intro of the article and don't look any further.

I'm so sorry you had to learn that lesson the hard way...

Thank you everyone, this is helpful information.

<3

Shems

Originally Posted by shems

I'm not sure I understand. I've certainly heard from pretty much everywhere that Limited Liability means that your liability is limited, that if somebody decides to sue your business they can't go after your personal assets.

I've gotten insurance when I was renting a studio to teach weekly classes and when putting on a show in a theater, but what about all the other things we dancers do performing at a wedding or other event. Are we expected to carry insurance in those situations as well? If I'm not currently carrying studio insurance, should I get special insurance for my dance troupe?

When you form an LLC or Corporation, you are creating a new entity (sole proprietorships are usually the automatic default for states--you don't need to file anything, unless you securing a trade name). This separate entity can now be liable for its own debits and liabilities. If you are taking on business debt, or are in the situation where you could be exposing yourself to additional liabilities, it can be a good idea. For example, if you have a partner who could be taking out business debt without your knowledge or if you have employees working for you that could cause injuries/damages, it's one way of insulating yourself.

On the other hand, if you are the only member of the business, some of the benefits may disappear. For example, if you are teaching and a student is injured, the student will likely sue your business and also you individually, thus covering all their bases. Also remember that, in the event of a lawsuit, the entity will need legal representation and, unless you are also an attorney, that means hiring one (or your state laws may allow for a business member to represent it in limited circumstances, such as small claims court).

So, it really all depends upon what your business actually is (teaching? performing? etc.), what risks you are exposing yourself to, and the costs of mitigating them vs. your own risk-adversion level.

You can find lots of business resources at your local library and your local law library will probably have more detailed information (the reference librarians at my state law school were really helpful when I was a student). If you are seriously considering going into business, an hour with an entertainment or business lawyer could be a good investment.