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Starting a record label is a lot like starting any other business, though some specific knowledge of the music industry is typically required. The first thing to do when starting a record label is to decide on how the business will be structured and to apply for the necessary license. Some of the next steps can include the securing of financing, locating new talent, and either outfitting a recording studio or making arrangements to use an existing one. It can be a good idea to retain legal counsel to help draw up the necessary record label contracts, and making contacts with distributors can be very important as well.
The most important part in starting a record label is to choose the right business structure. Anything from a sole proprietorship to a corporation can be used to start a label, but the right one needs to be chosen for the particular situation. Some types of businesses, such as limited liability companies (LLCs) and corporations, provide some protections to the owners. Corporations typically require a more rigid business structure but may be the right choice if looking for outside financing.
Money is another factor to consider when starting a record label, since producing and selling albums can be an expensive undertaking. It is usually a good idea to determine how much it will cost to record the first couple albums, then figure in production and distribution costs. These figures can be added to any other overhead costs, such as office space, utilities, and salaries for any employees, to determine how much the new label will need to get off the ground. Financing may come from personal resources, friends and family, or even angel investors. A strong business plan and an understanding of the industry can help convince potential investors.
Record labels can be started by a band or a collective of artists to release their own music or by a savvy businessperson with a good ear. In either case, it is important to have a good working knowledge of the music industry. Starting a record label to release an album for a single band is fine, but it is important to know and understand the potential audience first. This can help in marketing efforts and also in fine tuning the record production. It can also be helpful when looking for additional acts to sign.
After all of the business concerns have been handled and the creative end is taken care of, some thought can be given to promotion and distribution. The Internet can be an excellent tool for both unsigned acts and independent labels to connect directly with potential fans. It can also provide a number of different distribution channels, which may prove more economical for a brand new label than going through a traditional distributor.