Negotiations, Contracts, Agreements & Support
Business Structures
This page aims to inform artists on some of the business structures commonly used by artists. Each business structure has its pros and cons, so it’s up to the artist to research and choose which suits their needs/practices best. We advise consulting a professional before making a final decision to move forward with any business structure.
Sole proprietorship
In a sole proprietorship, a single individual engages in a business activity without necessity of formal organization. If the business is conducted under an assumed name (a name other than the surname of the individual), then an assumed name certificate (commonly referred to as a DBA) should be filed with the office of the county clerk in the county where a business premise is maintained. If no business premise is maintained, then an assumed name certificate should be filed in all counties where business is conducted under the assumed name. (Source)
Other resources on sole proprietorship:
What is a sole proprietorship? by TRUiC
Sole Proprietor vs. Single-member LLC by Score.org
Fiscal Sponsorship
Fiscal Sponsorship is the practice of non-profit organizations offering their legal and tax-exempt status to groups—typically projects—engaged in activities related to the sponsoring organization’s mission. It typically involves a fee-based contractual arrangement between a project and an established non-profit. There are a few structures to fiscal sponsorship, but here are two related to non-profits.
Model A: The individual who approaches the sponsor becomes the sponsor’s employee or volunteer. Also called “direct” or “comprehensive” fiscal sponsorship. The project becomes the sponsor’s, so the sponsor has complete authority to run the project and spend funds for its purposes. (Source)
Model C: The individual or entity who approaches the sponsor becomes a grantee of the sponsor (but the project activity is not absorbed into the sponsor). Also called “indirect” or “re-grant” fiscal sponsorship. The sponsor receives donations for the project’s purposes, retains discretion and control over the funds, grants them for project purposes, and requires reports to confirm that funds were spent properly. (Source)
Check out Fresh Arts’ Model C structure in a presentation
from the Fresh Arts Summit.
Other resources on fiscal sponsorship structures and/or sponsors:
Fiscal Sponsorship for Nonprofits by National Council of Nonprofits
Fiscal Sponsor Directory by fiscalsponsordirectory.org
Limited Liability Corporations
A limited liability company (LLC) is a corporate structure in the United States whereby the owners are not personally liable for the company’s debts or liabilities. Limited liability companies are hybrid entities that combine the characteristics of a corporation with those of a partnership or sole proprietorship. (Source)
Other resources on LLC formations:
Formation of Texas Entities FAQS by Texas Secretary of State
Download: Form 205—General Information (Certificate of Formation—Limited Liability Company)
501(c)3 Non-Profit Organization
Section 501(c)(3) is the portion of the US Internal Revenue Code that allows for federal tax exemption of nonprofit organizations, specifically those that are considered public charities, private foundations or private operating foundations. It is regulated and administered by the US Department of Treasury through the Internal Revenue Service. (Source)
