Why record labels should establish a company in the United States

The music industry landscape continues to show accelerated growth. In 2023, global revenues reached $28.6 billion, a 10% increase compared to the previous year. The United States, being one of the main drivers of this market, saw a 7.7% increase in its revenues during the same period, reaching a record high of $17.1 billion. Within this figure, both paid and free streaming dominated the market with $14.4 billion, representing 84% of the total. Additionally, the number of paid subscribers on streaming platforms reached a record 96.8 million.

Although streaming has gained enormous popularity, physical sales still hold relevance in the market. In the United States, physical album sales generated $1.91 billion in 2023. Vinyl records, in particular, continue to gain traction with $1.35 billion in revenue from 43.2 million units sold, while CDs generated $537 million from 37 million units sold.

In addition to direct music sales, other income sources were also significant in 2023. Payments to the industry from services like Sirius XM (digital radio) and SoundExchange (digital performance royalties) amounted to $1.3 billion. Synchronization income from music used in films, TV commercials, and radio reached $411 million, and downloads, though declining, still generated $434 million in revenue.

The United States has long been a global epicenter of the music industry. With a well-developed infrastructure, a robust legal system, and a large and diverse market, establishing a company in this country offers significant opportunities for record labels. Additionally, tax benefits and operational advantages can make this decision even more attractive.

Establishing a company in the United States can offer record labels numerous advantages, from tax benefits to access to one of the world's largest and most advanced markets. In this article, we will explore why record labels should consider establishing a company in the United States and how this decision can drive their growth and long-term success.

Benefits of Establishing a Company in the United States

Access to a Large and Diverse Market

The United States is home to one of the largest and most diverse music audiences in the world. Having a base of operations in this country allows record labels to access a vast consumer market that spans all genres and musical styles. This access facilitates artist promotion and music distribution to a global audience.

Advanced Infrastructure and Technology

The United States boasts advanced technological infrastructure supporting all aspects of the music industry, from production and recording to distribution and promotion. Record labels can leverage these technologies to improve the quality of their productions, optimize their operations, and reach a broader audience efficiently.

Tax Benefits

Establishing a company in the United States offers several tax advantages that can significantly benefit record labels. These advantages include:

• Expense Deductions: Record labels can deduct a wide range of expenses related to music production, promotion, tours, and more. This can significantly reduce the taxable base and, therefore, the amount of taxes paid.
• International Tax Treaties: The United States has tax treaties with many countries, which can help avoid double taxation on income generated abroad. This is especially beneficial for record labels operating globally.
• Flexible Business Structures: The United States offers several business structure options, such as LLCs (Limited Liability Companies) and corporations, allowing record labels to choose the best organizational form for their specific needs. These structures can provide asset protection and facilitate tax planning.

Copyright and Intellectual Property Protection

The U.S. legal system offers strong protection for copyright and intellectual property rights. This is crucial for record labels that rely on exploiting copyrighted works. Establishing a company in the United States ensures that record labels can effectively defend their rights and those of their artists.

Access to Financial Resources

The United States has one of the most developed financial markets in the world, offering record labels access to a wide range of financial resources, including investors, loans, and grants. This can be essential for financing large-scale projects, developing new talent, and expanding operations.

Collaborations and Business Opportunities

Having a base in the United States facilitates collaborations with other key players in the music industry, including other record labels, producers, songwriters, and artists. These collaborations can open new business opportunities and foster growth and innovation.

How to Establish a Company in the United States

Choosing the Business Structure

The first step to establishing a company in the United States is choosing the appropriate business structure. Common options include:

• LLC (Limited Liability Company): Offers flexibility and personal asset protection.
• Corporation (C-Corp or S-Corp): Can be beneficial for large operations and provides opportunities to issue shares.

Registering the Company

Register the company in the state where you wish to operate. Each state has its own regulations and requirements, so it’s important to research and comply with all local laws.

Obtaining Licenses and Permits

Ensure you obtain all necessary licenses and permits to operate legally. This may include business licenses, zoning permits, and copyright registrations.

Opening Business Bank Accounts

Opening business bank accounts in the United States facilitates the management of income and expenses and helps establish a financial presence in the country.

Establishing a company in the United States can offer record labels numerous advantages, from access to a large and diverse market to tax benefits and copyright protection. By establishing a base of operations in one of the world’s music industry centers, record labels can maximize their growth potential, ensure financial sustainability, and protect their artists' interests.

At Prodezk, we offer personalized service at every stage of the process, ensuring a hassle-free experience and successful registration for your company in the U.S.