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MANAGER--A CLOSER LOOK

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Managers, especially those just starting out, must understand how their managerial duties are viewed in the eyes of the law--in reference to civil, criminal, and tax law especially. For example, it is important for the manager to know if he is acting as a partner, an employer, an employee, an unlicensed (independent contractor) agent, or a licensed (independent contractor) agent! For instance, if a manager acts as an employer while being an agent it could have highly undesirable consequences. Or, if he acts as a licensed agent while being an unlicensed agent it could have an even more disastrous outcome.

In light of the complications that may evolve, an astute manager would seek competent legal advice at the outset of his career. Or, if he has been managing in ignorance of the many laws that are applicable to his profession, getting legal help now could save him many future hardships.

Please be aware, this discussion is not written with the intent or purpose of offering legal advice. It is only written to encourage all managers and aspiring managers to seek a competent professional to get the facts straight before they find themselves in trouble.

Functioning Capacities

Here are the general (inexhaustive) definitions for the four capacities in which a manager may function:

1) Partner,
2) Employee,
3) Employer, and
4) Agent.

Partner

A partner is a co-owner of a business partnership. A partnership is a business association that is not a corporation. It is created through oral or written contractual agreement. The agreement must be made between two or more persons that have the capacity to enter into a contractual situation. If agreements are not in writing, the law would usually declare that an association is a partnership if the parties involved are sharing in profits and management.

The associates are co-owners and combine money, property, education, experience, skills, etc., to form a profit oriented business. Each partner is an agent of the company and assumes full personal liability for all debts and actions of the organization and/or its partners.

A partnership may be formed via a written agreement called "articles of partnership," or "partnership agreement." This instrument may include:

a) Partner's names,
b) Name of the firm,
c) Address of the business,
d) Kind of business engaged in,
e) Duration of partnership,
f) Duties of each partner,
g) Each partner's capital investment,
h) Percentage shares of profit (or loss),
i) Bookkeeping procedures, and
j) Termination provisions.

See Cross-links: CONTRACT, CONTRACT-A CLOSER LOOK.

The ownership of property used in a partnership would be established at the outset of the venture. Each member of a partnership has an equal right to use property owned by the partnership as long as it is used for purposes of that partnership. This is true regardless of the percentage of investment held by each partner.

Management control of the business is equal for each partner regardless of the investment unless other contractual agreements are made. Where the artist manager acts in the management capacity but is not considered an equal partner, his responsibilities would be defined by contract.

Partners usually receive draws against expected business profits. This may, however, be arranged differently through contractual agreement. Partnership profits and losses are divided equally, in proportion to each partner's invested share, or however defined by contract.

Partnerships must maintain accounting records. These records must be available for inspection by the IRS or other authority.

See Cross-links: PARTNERSHIP under "General Partnership," Limited Partnership," and "Termination of Partnership."

As an artist manager who is acting in partnership with the artist he must be aware of his legal responsibilities and liabilities.

Employee

An employee is:

a) Any person employed under any contract of hire,
b) A person, below the executive level, employed by an employer and paid a salary or hourly wage, or
c) For tax purposes, any person who receives a salary or hourly wage.

Employer

An employer is a person (or business) who has one or more employees working for him.

An employer pays the employee a salary or wage. He hires and fires employees. An employer must comply with federal and state laws.

An employer must withhold from his employee's wages, taxes levied on employees such as employee income tax and social security tax, unemployment or disability insurance, and other amounts where required by law.

Employers must pay these taxes to the proper government agency, in the amounts and according to the time schedules directed by law.

An employer must also pay the tax levied on employers for social security to the proper government agency.

Employers must pay employers workmen's compensation insurance.

Employers must pay unemployment tax levied on the employer himself.

Employers must comply with federal and state labor laws. They must maintain records on each employee recording hours worked and wages paid.

An employer must keep tax records and file the proper federal and state tax returns.

Employers must comply with an obscene number of city, county, state, and federal laws that regulate businesses in general.

It can go on seemingly forever! New laws that regulate employers are enacted almost daily.

Agent

In short, an agent is a person who acts for, or represents another (who is called the principal), by implied or express permission. The principal is held liable for acts performed by the authorized agent if the agent has not previously agreed to accept certain liabilities or unless the agent is legally licensed and by law is held liable himself.

Under tax law, an agent is…

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