Making pension on your gig just got a lot easier. The AFM pension fund is now allowing limited liability companies to make pension contributions. Even though this may seem like an obscure ruling, it could be a very good thing for business-minded musicians who want to build up their pension.
Usually there is only one way to earn pension on a gig. The gig has to be union and your employer has to agree to pay pension contributions on your scale wages.
If you yourself are the employer — for instance, if you are the bandleader — you can’t pay pension contributions on your own behalf, with a few exceptions. One exception is the AFM’s LS-1 form, which allows you to act as a payroll agent. Another way is to form a personal service corporation and have the corporation itself be the employer. Unfortunately, forming a corporation is a tricky thing to do and requires careful attention, especially at tax time.
However, since 1994 a different kind of corporation has been on the scene in New York: a limited liability company, or LLC.
Unlike a corporation, instead of being taxed as a separate entity, an LLC can be taxed through your normal tax return as personal income. But like a corporation, the owners of the LLC are sheltered from the debts and obligations of the company.
To put it bluntly, forming an LLC is much easier than forming a corporation, and figuring out the taxes is easier, too.
Now that the pension fund will accept contributions from LLC’s, how could this new policy affect musicians?
- Bandleaders who want to pay pension contributions on their own behalf can form an LLC, sign a union agreement between their LLC and Local 802, and have the LLC be the employer at their gigs. Then, the LLC itself can make pension contributions for both the bandleader and sidemusicians (if any).
- Sidemusicians can form an LLC and sign a union agreement between their LLC and Local 802. Then, when playing a gig, sidemusicians can ask their bandleaders to make out their check to the name of their LLC. This will allow the LLC to pay pension contributions on behalf of the sidemusician. (This can effectively convert a nonunion gig into a union gig — but only for the individual sidemusician who owns the LLC.)
The pension fund is modifying its contracts and participation agreements to allow LLC’s to use them. If you already own an LLC, you need to make sure you have signed the forms with the necessary addendum.
There are a few restrictions and not all bandleaders will be eligible. For more information, contact Will Luebking at the pension fund, at (212) 284-1314.
For more information on setting up an LLC in New York, see this Web site: www.dos.state.ny.us/corp/llcguide.html.