Inside Story: Making music with entrepreneurs

We help businesses and individuals make their money work. Inside Story reveals what we do behind the scenes to enrich the lives of our clients. 

90% income reduction created a new business opportunity

Live music has taken a pummelling during the coronavirus pandemic. When live performances were cancelled because of pandemic restrictions, talent agent, Jess Davis, saw a 90% drop in her income and knew she had to act. 

Jess represents a talented stable of musicians. If she sat and waited things out, she’d be left with nothing when the world returned to “normal”. Instead, she joined forces with a friend who was also in the music business.  

Specialising in music management, Jess’s new partner, Mark, had seen far less disruption to business since artists were still recording music. 

Joining forces made sense for both parties and all but one of the acts Jess represents followed her to the new agency.  

Make the right contacts

Jess and Mark set up the new company. They had the talent and needed to hire people to help.  

They were good to go. But there was some back-office business admin they knew mattered, but had no clue what was needed, or where to begin. 

Following an initial meeting, I set to work and introduced Jess and Mark to an accountant and a solicitor. 

The solicitor advised that the structure of the company needed to be reorganised to make each side of the business entirely separate. Turns out, in the music world, you can’t have the same person or organisation responsible for live acts and general management of any performer, as it can be viewed that you are skimming from both sides.  

For the business to scale it needed to be structured correctly, and the best time for that to happen was right away. 

One business with two halves

With the business properly structured and divided into two separate entities, I looked at all the business needs from scratch. 

Each side of the company needed employers and public liability insurance, director’s liability insurance and professional indemnity. This required another introduction to an insurance broker who could get them the right deal at the best price.  

Fortunately, we know some of the best brokers in the business, so a quick phone call got the ball rolling and put the two parties in contact. 

Pension set up for both company directors and employee scheme

Jess and Mark needed to hire employees on both sides of the business, so I set up an employee pension scheme and helped inform their staff about it. 

I also arranged pensions for Jess and Mark. Because they are both company directors, we set up contributions to be paid from cash in the business. 

Securing the future of the business

Since the business was up and running so fast, the company had already started generating income and had value.  

The solicitor we introduced Jess and Mark to help establish shareholder agreement policies to protect both Jess and Mark. The agreement ensures the management of the company, ownership of the shares, and governs how each company is run. 

A second important aspect of ensuring the future of any business is to make sure you know what will happen to the shares if a shareholder dies.  

So, I also put shareholder protection policies in place.  

In effect, this means that if, for example, Jess died and her husband inherited her half of the business, Mark could use the insurance to buy the shares from Jess’s husband. The business would suffer from losing one of its major shareholders, but Mark would be able to buy the shares without putting the company in financial jeopardy. This, alongside a cross option agreement, means the business can continue to operate should the worst happen. 

Finally, we set up relevant life insurance, which can go through the business. This is an extremely effective way of providing life insurance for each director. The premiums are payable by the company and free of Income Tax, Corporation Tax and National Insurance contributions. This avoids adding unnecessary personal costs to Jess and Mark.  

Now Jess and Mark have everything well positioned for the business to scale and know their staff is being looked after. 

The setup is complete, but the relationship is ongoing. I’m looking forward to continuing to work with them and helping to make sure that the business they generate and the money they make works hard well into the future. 

Find out more about the work we do with entrepreneurs and practical ways a financial planner can help business owners. 

If you’d like to discuss your business needs or find out more about how we can help you, get in touch. Email hello@firstwealth.co.uk or call 020 7467 2700. 

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