Entire law school classes are taught, and entire books are written, on legal battles related to the music business (see, for instance, They Fought The Law: Rock Music Goes To Court, by Stan Soocher). Most of these problems focus on contract disputes. That’s why, next to your attorney, the most important business tool available to you as a record label owner is the written contract. In fact, you can’t make money, sell records, or even exist as a label without contracts. The copyright and trademark laws are clear: whoever creates the vocal and musical sounds on the master recording (e.g., artist, producer, side artist, etc.), owns those sounds.
Traditionally, a music producer or record producer is the person who oversees entire production of the artist’s recording(s). Record producers will participate in the recording, mixing, and mastering process, more or less, depending on their level of experience and skill, and on the skills of the other professionals involved.
With the creation of hip-hop music a new kind of producer has arisen that is referred to as a "producer of tracks". He or she wears two hats: one as the creator of the music and one as the producer of the recording of that music. The “producer of tracks” creates and records the music. After that, the artist records vocals to go with the musical track. Some “producers of tracks” will help the artist to complete production of the vocals, but most will not. Instead, the artist will employ a different producer to mix the vocals with the music to obtain a final version of the song.
One of the most important contracts an artist will sign is an artist management contract. Entering into a written management agreement will make it clear the services a professional artist manager will or will not provide to an artist and make it clear how the manager will get paid. Some of the most important terms of an artist manager's agreement is set forth and explained below:
Usually, a producer is paid by the hour, by the number of master recordings completed, or a flat fee. He or she probably will ask for a royalty from the sale of the record as well. If you agree to such an arrangement, you’ll have to account to the producer and make regular royalty payments, based on record sales. These issues must be agreed upon in advance and laid out in a written contract. As always, it is recommend to consult with an entertainment attorney to provide guidance in drafting and/or negotiating this contract.
You may be starting a label because you love music, but remember, it’s still a business. And as with any business, one goal of a label is to make a profit. Therefore, you should establish good habits and a professional approach from the start. This will make your life much easier and help your label to grow more quickly. It isn’t difficult to set up a label, and you can do some things on your own. However, I recommend hiring an experienced attorney to help. This is a good investment, because even the simple stuff can be confusing if you don’t know how to do it, and any mistakes you make in the beginning will cost more money to correct later.