Are you in a band or thinking about starting one? Consider formalizing the arrangement with your fellow musicians by creating a band member agreement.
WHAT’S GENERALLY COVERED IN A BAND MEMBER AGREEMENT.
The short answer to what’s covered in a band member agreement is: it depends! However, there are some general terms that are almost always covered.
Band Ownership: Band member agreements typically discuss who owns the band, the band name (Trademark), sound recordings, and other assets the band may create. For example, do all the members own equal shares of the business? Are there different types of members (i.e., managers vs. non-managers)? Are some of the players simply “work for hires” and not entitled to any ownership?
It’s important to define the roles of each member and create a written record of the relationships. A part-time or paid musician might be an independent contractor and require a separate work-for-hire agreement because he or she might not be considered a member of the group, the individual would not be required to sign the band member agreement.
Profit Splits: Band member agreements outline the percentages of profits and losses shared by the band members. For example, when your band makes a million bucks from selling out an arena tour, how are the profits divided among the members?
Band Loans and Investments: If band members contribute gear, or money, how are they compensated? Does the band own the gear or cash? Or is it just a loan? It’s common that some band members are better situated than others, so there may be one member of the band that fronts the cash for gear or recording an album. Will that member be paid back out of the profits first?
Leaving Members: What happens when a member leaves? How much notice must they give? Do they still own part of the business, or do they get bought out? These are some of the important issues that are usually easier to sort out ahead of time. It is also important to define the extent to which a departing member has rights to the band name because without a written agreement in place, a leaving member may be able to use the name for their own promotion, or even create their own band with the same name competing with yours.
Songwriting and Publishing: Assuming your band writes its own songs, band member agreements sometimes deal with composition rights, too. For example, what are the composition splits (i.e., the ownership percentages and administration rights)? Who is the publisher?
SHOULD THE BAND CONSIDER FORMING AN LLC OR CORPORATION?
Although there is absolutely no requirement for a band to form an LLC or Corporation, it’s worth considering and whether or not it’s a good idea depends on many factors.
Some Entity Advantages
Forming an entity such as an LLC or Corporation offers numerous advantages for band members. For example, an LLC or Corporation is treated as a separate entity for liability purposes, and owners are generally limited to losing only what they’ve invested in the business if the band is sued and found liable. Without this protection, band members are potentially risking their personal assets like their homes, cars, and other property. Forming an entity also establishes a sense of legitimacy and certain entity types also make it easier to raise money from potential investors (i.e., sell shares). Another advantage is that much of what’s typically found in a band member agreement can be included in the operating agreement or bylaws of the new entity. The operating agreement or bylaws are documents required by law to be created when an LLC or Corporation is formed governing the owner’s management of the business and their relationships with each other.
Some Entity Disadvantages
Generally, LLCs and Corporations are more expensive to form and maintain, requiring both filings and fees paid to the government on a regular basis. You will likely need an attorney to form the entity and may need an attorney and/or CPA to help maintain it. Similarly, to avail yourself of the protections they offer, you need to follow the formal requirements: this means treating the Corporation or LLC as a separate entity, maintaining separate bank accounts, not using the band assets for personal use, etc. If you don’t follow the rules, the Corporation or LLC will not protect you from liability in the event the band gets sued and is found liable.
There’s a lot more to it than what’s covered in the two brief paragraphs above. Whether or not an LLC or Corporation is right for you depends on your specific situation, thus it’s important you consult with both an attorney and CPA familiar with the music business prior to making the decision.
While many notable acts have had long and successful careers on just a handshake and good intentions, many more have had serious disputes or imploded because of issues that could have been avoided had there been an agreement in place. Before the band achieves massive success, it’s a good idea to establish the ground rules for your relationship with your bandmates because things change once there’s money involved. Often it is the case that by the time you realize you need a band member agreement it’s too late, so there’s no better time than now to create one.
About Brian Witkin
Brian Witkin runs a boutique entertainment law firm in San Diego, California. He is also an award-winning musician, producer, and CEO of Pacific Records. Brian has spent nearly two decades in the record business and is a Grammy® Voting Member of the Recording Academy. Brian’s father, Joe Witkin, was the original keyboard player of Sha Na Na, who performed at the iconic Woodstock Festival in 1969.
Note: This article is for general informational purposes only and does not establish an attorney-client relationship. The information is deemed reliable but not guaranteed. Every situation is different, and the general information contained in this article may not apply to your specific situation. The author and publisher assume no responsibility for actions taken based upon the contents of this article. Seek the advice of counsel for your specific situation.
© Law Offices of Brian A. Witkin 2023.