Helping Nephew with DJ business

[Space Mountain]

Hey Everybody:

My nephew who is a junior in high school wants to start a DJ business.

Some background:

Nephew has already done about 6 gigs which include school dances and sweet 16 parties. (no weddings or anything of serious nature to this point) He spent $1,000 for his own equipment. He has had great reviews from parents/faculty.

So far, nephew is accepting basically the minimum from folks because he wants to get his feet wet, gain some experience and recognition.

Here is where the UNCLE comes in at Nephew's request:

Create a website with a company name with Uncle being "acting" owner who receives all incoming calls and negotiates with prospects. This will give the "company" a more serious presence and allow us to charge a higher hourly rate. We want to be an ALL cash business, hence the somewhat discounted rates.

FYI- I will never actually DJ any gigs, myself. Simply be the boss who "sends one of his guys out" for each event. Nephew plans on doing all events.

My concerns are as follows:

1. Liability Insurance- if an accident occurs during a gig, can or will somebody come after me or my nephew?

2. Payments from customers- if we ask for cash or check, should checks be made out to me or nephew? I would prefer not to claim this money on my taxes especially if things take off.

3. My nephew wants to create a contract for all events. I do not. I want things not to be so formal. My belief is if we create a contract, customers may want to make payments to a company name, which again, we want CASH.

Lastly, all profits from biz will go to Nephew for future compounding interest...............or as he claims, a new, used car........

My nephew is quite eager to get this rolling but I told him I would consult this forum BEFORE we proceed forward.

Any suggestions or opinions would be greatly appreciated.

Thanks, all.

 

[Sarah in SC]

Couple of things off the top of my head:
Make it an LLC, for liability purposes. He can't be a partner, too young. It will have to be a gentleman's agreement between the two of you. When he turns 18 you can change it.
I found this site that looks like it has some good basic info for him:
DJ Training Tips | Start A DJ Business 101

Just doing a google search on DJ business gave me some good links that you should share with him. I think it is a great thing and you will certainly be the cool uncle!

 

[Sarah in SC]

Here's more:
Q: What type of insurance is required for a Mobile DJ? –Linda

A: In a broad sense, none is actually required, as of right now. That said, some facilities do require a DJ to carry general liability insurance. This covers damages to the facility that you might cause.

I would suggest that you join a DJ association that offers discounted insurance to its members. You can also check out independent brokers in your area.

You definitely want to have liability insurance. This covers you against slips and falls, fire, gear falling on a guest, and the like. It doesn’t matter if you’re actually at fault—if somebody gets hurt, everybody gets sued. Make sure that you get coverage from a triple A-rated company and that the policy is solid.

Next, I would suggest that you have gear coverage. This is important. Could you replace all your gear and your music library at your own expense if you had to—and stay in business? This is another advantage of DJ associations. They have the coverage you need at a price you can afford.

From: Starting a DJ Business - Questions and Answers

 

[brewer12345]

As suggested, I would form an LLC. I would also drop any notions of getting "cash" as you put it. You need the protections an llc and an insurance policy will provide. You will therefore have to be a legitimate business and declare taxable income, etc. You might also consider the ethical example you are setting for your nephew in helping him become a tax cheat at such an early age.

 

[Martha]

By acting as "owner" you risk personal liability. If you have an LLC with yourself as owner you have tax issues. A quick visit with a lawyer to discuss ways to protect yourself would be advisable.

 

[Gumby]

..

 

[aaronc879]

Does he have plans to bring in additional djs? It's very unlikely he'll earn enough by himself to make both of you a worthwhile amount of money. A good friend of mine started a dj company a few years ago. He has 4 other djs that work for him on a "per event" basis. He makes about $50k/yr after 5 years of building contacts.

 

[TromboneAl]

Why not let the nephew do it all, and you just give advice? Yes, he'll probably make less, but learn more. Probably better for family harmony. Might be better in terms of liability

Definitely do it by the book in terms of taxes. He'll want to deduct the $1,000 equipment and driving costs.

Sad that liability is the main stumbling block, but that's how things are.

 

[aaronc879]

If he's serious he really should go the LLC route. I'd also reccomend using contract. My friend requires a 25% non-refundable deposit with signed contract. You'd have too many people canceling otherwise.

My friends site(use as example):

Beat Crazy Entertainment, LLC - Fond du Lac, Milwaukee, Madison, Wisconsin Wedding DJ Service

 

[Bestwifeever]

That's nice of you to want to help your nephew, but it will be great experience for him to run his own business imho. If he doesn't mind as a hs junior getting a minimum amount, that's his call, right? He can learn from the experience of finding out how much others get paid, the joy of asking the customer for more money, etc. And the fact that he wants contracts to me is a very good thing.

 

[samclem]

My two cents:
-- Let him know you are available to help, explain your areas of interest/expertise, tell him some ideas you have, then let him decide how much help he wants. Nothing will sap the fun and learning from this as fast as somebody moving in to take over. Most people, but especially kids, will work twice as hard--and with real dedication--to make their own idea "fly" than they will for an idea spawned by someone else.
-- He's young, and if he's like most kids his interests will change. You don't want him to stick with this because it means a lot to you.
-- The lessons he learns are WAY more important than the money. Things like keeping his word to his customers, giving good value, getting referrals, dealing honestly with people, the importance of being organized, etc. Teaching him to cheat on his taxes undermines all of this. Plus--how much is he really going to have to pay in taxes? Cheap tuition in the school of life. "Okay, you are now earning money--great! You'll be paying taxes--you'll be helping to pay for the things the government does. Let me tell you what you'll need at tax time . . ."

I once had a boss who was very enthusiastic. When someone proposed a new idea for their division, she would get very excited and give the person lots of praise. She would also offer suggestions for making the idea even better. She'd make it a point to ask for updates weekly, to see how the idea was maturing, and typically offer more suggestions and advice. As you might guess, people stopped doing anything innovative (or at least stopped telling her they were doing it). Her involvement de-empowered the person who had come up with the idea, and left him/her with just another dreaded item on a to-do list. It was terrible for the staff. Her intentions were very good.

 

[socca]

If your nephew is already halfway through his junior year, then he's only 1.5 years away from leaving the nest. Setting up a formal business structure for an enterprise that is going to fold relatively soon seems like a waste of time. I'm not familiar with the rules regarding a minor operating a sole proprietorship, but one alternative would be for your nephew to contract your website development services for a nominal fee. As far as answering the phone / scheduling gigs, I don't have an opinion except that this isn't the kind of contribution I'd like to make if I were in your shoes. Good luck!

 

[aaronc879]

If your nephew is already halfway through his junior year, then he's only 1.5 years away from leaving the nest. Setting up a formal business structure for an enterprise that is going to fold relatively soon seems like a waste of time. I'm not familiar with the rules regarding a minor operating a sole proprietorship, but one alternative would be for your nephew to contract your website development services for a nominal fee. As far as answering the phone / scheduling gigs, I don't have an opinion except that this isn't the kind of contribution I'd like to make if I were in your shoes. Good luck!

Why do you assume it's going to fold soon. Maybe that's what he wants to do for a career. I know several people who make their living soley off djing.

 

[socca]

Why do you assume it's going to fold soon. Maybe that's what he wants to do for a career.

I'll let the OP decide the extent to which he wants to encourage/discourage his nephew from furthering his education beyond high school.