Anthony Clark

Definition

A band agreement is a signed, binding contract between you and your bandmates that lays out the ground rules and clarifies what to do when there is a disagreement.

 

Introduction

Most musicians are reluctant to mix art with business (understandably so), and may not want to get involved in business matters at all. In these cases, it is critical to team up with an attorney or business person who knows what to do. It would be foolish to ignore the business and legal implications of starting a band or having people work with/for you.

Most states automatically view a band as a business, so don’t you think you should too?

 

Inside Your Head

You may be thinking:

“Leave me alone, legal people. I just want to make music and play in a band.” 

“Legal stuff doesn’t apply to my situation, we are just starting out.” 

“I’ll worry about legal stuff and contracts once I get big.”

“I’m too busy rocking out to waste time on formalities.”

Many bands ignore band agreements altogether, and that gets them in trouble down the line. Conflicts are inevitable; you want to be prepared to deal with them professionally, otherwise your dream can sink.

 

Real-World Application

The problem with not having a band agreement is that bad stuff can happen that you cannot predict, and those things can break up your band, delay your goals, and/or ruin you financially.

Do any of these scenarios seem remotely possible?:

 

·       You wrote a song but someone else “kind of” helped and wants rights ($)

·       Your stage collapses and injures someone (or you throw your guitar pick at someone’s eye)

·       You get paid (yes!) and Uncle Sam wants halfsies (aw.)

·       Arrogant Lead Singer gets a big head and wants to go solo, leaving everyone else high/dry

·       You and your bandmates have a disagreement. About anything.

 

Starting to see why a band agreement might be a snazzy idea?

 

Conflicts of Interest

Just by virtue of working together, band members’ rights constantly come into play. Right now you may think that you and your gang are always on the same page and that your interests will always align (i.e., we all like making music and getting paid for it)

The reality, however, is that your band members’ interests will not always align. Conflicts will arise, and if the parties involved draft a band agreement detailing the rights and responsibilities of each person, it will be your go-to solution when future problems occur.  

 

What A Band Agreement Does For You

A band agreement is not about distrust or suspicion or greed. It is about having documentation to “C.Y.A.” (if you don’t know what that stands for, ask your mom). 

Without further ado, here is the dealio with band agreements (and why you definitely need one regardless of your band’s status):

 

A band agreement answers important questions.

·       What is your organizational structure? (why you care: liability, taxes)

·       Who owns the band name?

·       Who owns the songs?

·       Who owns the recordings?

·       Who collects the money and how is it divided?

·       Who is responsible for what?

·       How do you buy and sell equipment?

·       How do you get rid of somebody? 

·       How do you hire somebody?

·       What happens if somebody dies?

·       Who is a “keyman” for record company purposes?

·       What effect does the presence of a manager or agent have?

·       What are the rights of the individuals in the band?’

·       What happens if the band breaks up? 

 

A band agreement document covers big issues.

·       Parties involved (who is in the band?)

·       Business structure (will you be an LLC to limit your personal liability?)

·       Who owns what (self explanatory)

·       Life term of band (how long will band last? Can people go solo? Does band automatically break up if someone dies?)

·       Money (how expenses are handled, who gets what when)

·       Obligations (is everyone required to keep their hair long?)

·       Changes (when you vote to make decisions, does majority rule? Equal voting rights?)

 

Drafting the Band Agreement

It is crucial to hire an outside neutral third party to draft the band agreement at the start of the band relationship in order to mitigate any potential conflicts. An entertainment or business attorney licensed in the band’s state can work with the band members to make sure that none of the provisions contained in the band agreement conflict with that state’s laws

If you retain an attorney, below are some issues the band should think through and discuss before working with the attorney to draft the band agreement. Hint: you will save time and money by going in with a game plan.

 

Important Contract Clauses to Consider

 

The membership provision.

This section details who owns the company.  It should have the names and addresses of each member. Different states have different requirements about notifying owners about meetings, etc., so it is important to have correct addresses in the agreement. This provision could also detail how band members are added or removed from the company and what happens if a band member leaves the band or dies.  

 

The income distribution provision.

This provision can be a little tricky for bands, so the band and retained attorney need to discuss this provision in great detail. There are many different kinds of income and rarely do all band members share in all of the income. 

 

Bands need to think about who writes the songs, who owns the copyright on the each song composition, and how that money should be shared. Unless the band knows up front which members write the songs, I advise bands to split up song-writing credit (and thus income) at the time the song is written.  Therefore, in this provision I will draft something that directs the band to write up an agreement about who owns each song as it is written.  

 

If your band agrees that your income from merchandise, touring and artist royalty provisions in record contracts are shared equally amongst the members, then the band should detail that in this provision. However, if your band does not know the distribution at the time the band agreement is drafted, then there needs to be language that directs the band to draft an agreement when this issue arises.  

 

Other things to consider in this provision:

      1. What to do with publishing income

      2. What to do with income derived from the sound recording copyright (assuming the band owns the sound recording copyright)

      3. How sponsorship dollars should be distributed

 

Thinking through these issues up front will help minimize any potential disputes going forward.  

 

The property distribution provision.

When you form your band into a legal company there are various (and many times technical) reasons as to why it is beneficial for the band members to transfer personal property into the company.  For example, a guitarist may “transfer” his or her guitar and amp into the company name to help ensure that the company is properly capitalized.  

 

In exchange for limited personal liability for the company owners, most states require that the owners put enough assets (capital) into the company to cover any potential liabilities that may arise.  The purpose is to protect third parties who could be harmed by the company.  If the band harms someone, the courts will make sure the company has a fair amount of assets to cover the cost of that harm.  If the court finds that the band members did not put enough assets into the company, the court could hold the individual band members personally liable. This would be bad news and could ruin you financially (not to mention end the band).  

 

In addition to liability protection, band members may want to transfer personal property into the company for tax purposes.  For instance, a band member might transfer the tour van into the company’s name so that the band can write off the depreciation of the van against any income that the band might earn.  Again, this is a highly technical area and the band should consult with their attorney and accountant to determine which property (and how much) each band member should transfer.

 

This provision should detail who gives what property and what each piece of property is worth. For entities like Limited Liability Companies (LLCs), the agreement will have a “capital account.”  The capital account will have a running tally of how much money, or the monetary value of property, that each band member transfers or contributes to the company. Why do this? In case the company ends, each band member will receive the value of his/her capital account before splitting the money as stated in the income distribution provision. Therefore, if one member contributed more money/property than the others, he/she will get repaid before the others see any money.  

 

This provision also allows the band members to reclaim any specific property if the company ends.  For example, if a band member transfers his guitar amp into the company, then this provision allows him to reclaim that amp if the company ends, rather than the company selling the asset and distributing the money.  

 

This provision should also detail how the company values each asset at the time of distribution (i.e., whether the company will reduce the band member’s capital account by the fair market value at the time of distribution, the depreciated value of the asset, or by some other method).  

 

Band name ownership provision.

Once a band becomes successful the band name can become very valuable.  This provision should detail who owns the band name and what rights to the band name departing members will have.  

 

Conclusion

Creating a band agreement is time-consuming and may involve retaining an attorney to draft it, but doing so will save you trouble and money in the long run. The provisions in a band agreement should be discussed at length between members of the band so that everyone is in agreement as to its terms. Changes can be made to the band agreement at any time with the agreement of the parties involved.

 

Do not view a band agreement as an added difficulty; see it as protection, clarification, and a professional means of dealing with inevitable conflicts that will occur within your band. Whether you want to admit it or not, your band is a business, and businesses unprepared for reality will fail. Don’t be that band.

 

Lay the foundation for a successful business by forming a band agreement and abiding by its terms.

Sources:

 

www.artistshousemusic.org