Music Law: How to Run Your Band's Business

CHAPTER

1

Yes, Your Band Is a Business!

Your Band Is a Business

Apathy Is Not the Answer

The I Don’t Know Excuse

The I Don’t Care Excuse

Common Band Issues

Written Agreements: Your First Line of Defense

It’s very easy in this business to find people who are willing to put their arm around you and tell you how great you are. Unfortunately, their other hand is in your pocket.

—Paul Stanley of KISS

Give me an issue and I’ll give you a tissue.

—Lou Reed

All businesses are opportunistic. If there is an opportunity to get ahead, then you can bet someone will take advantage of it. The problem in the music industry is that getting ahead often means taking advantage of musicians who aren’t experienced in the business side of music. But if a musician learns the basics about business and law, there is less of an opportunity for that type of abuse. That’s what this book is about: protecting yourself and minimizing your damages.

This isn’t to say that you can always avoid setbacks. In this chapter, we’ll ease you into the different aspects of your band’s business, and we’ll try to help you decide on the business form that is best for your band. Even if your band can afford accountants, business managers, and lawyers to help you with problems, you’ll still save considerable time and money by making your band as self-sufficient as possible.

Your Band Is a Business

The first and most important step in running your band’s business is to accept the fact that it is a business. Producing music is your band’s creative work, and selling that music is a business venture. As long as your band is interested in profiting from its music, business knowledge is as essential to your success as musical creativity!

In fact, your band may well enjoy the power that comes with understanding how to successfully run a business. As your band develops, you will delegate power and responsibilities. But, especially at the beginning, it’s important for you to understand basic contract and accounting principles to make smart decisions and avoid the many pitfalls that often trap bands and their members.

Apathy Is Not the Answer

There is a joke that asks for the definition of apathy. The answer: I don’t know and I don’t care. Unfortunately, many musicians take this attitude toward the business dealings of their band. Don’t be one of them.

The I Don’t Know Excuse

Some musicians believe that they are unable to understand business principles. This is not a valid excuse. Studies have shown that many of the same cognitive skills used in music are also used in accounting and in mathematics. As Albert Einstein once said, I often think in music. I live my daydreams in music. I see my life in terms of music. So, if you can mix eighth and sixteenth notes and still land on the downbeat, then you probably possess the skills necessary to understand a spreadsheet.

The I Don’t Care Excuse

It only takes getting burned once before a musician realizes, "I do care about business." Most musical careers are relatively short, and the only way to make a career last longer is to devote equal time to music and business. Without business knowledge, you may soon find that the glory days have ended and you’re broke.

Cutting Through the Legal Jargon

Sometimes, failing to understand business principles is really nothing more than not knowing the language. As in many other industries, the music industry often uses a smokescreen of strange terms (such as compulsory license and mechanical royalties) and legalese (such as the band hereby indemnifies) that can make otherwise simple concepts incomprehensible. In this book, we’ll discuss business and legal issues without relying on jargon, plus we’ll introduce you to the terms you need to know.

Common Band Issues

Performing in a band can be so much fun that sometimes you can’t believe you get paid to do it. Then, unfortunately, sometimes you don’t get paid … and it’s not so much fun. Suddenly, you’re anxious about your relationship with a club owner, a manager, or maybe even your own bandmates.

Having been in a few bands myself, I can feel your pain. Hopefully this book can steer you through some of the common crises experienced by most musicians. And even if you must hire a lawyer (sorry!), this book should save you time and money by educating you as to your options. Below are some of the problems addressed in Music Law.

Disputes among band members. Sometimes the only harmony within a band is provided by the backup singers. Sure, confrontations may spark the band creatively, but most of the time, they distract you from making great music. This book includes a simple band agreement that can prevent some disputes over money, ownership of the band name, and ownership of band equipment. We also have suggestions for avoiding disputes in the recording studio, over song ownership, and about division of song income.

Management issues. A good manager can be an excellent buffer between your band and the business. A bad manager can be a major disaster. Within this book, you will learn about common ways that managers harm bands and how to avoid them.

Lawyers. There are occasions when your band must hire an attorney—for example, to negotiate a major contract, or to sue or to defend your band in a lawsuit. This book provides detailed discussions about when a lawyer might be necessary, suggestions on how to choose the right lawyer, and tips on how to avoid being overbilled.

Song ownership and music publishing. Ownership and publishing of songs results in substantial music business revenue. For that reason, it is potentially explosive territory for bands, and often members can’t seem to agree on who wrote a song or how to split the revenue. You’ll find plenty of information on these issues and some practical alternatives on how bands can divide songwriting income.

The making and selling of your band’s recordings. Some bands make a comfortable living without ever signing with a label. They perform for years, surviving on the sale of their own recordings. It’s not that hard to grasp the business of making and selling band recordings. You will find recording tips and methods of distributing and selling your music online and off. In addition, we have included a chapter on licensing your band’s music for use in film, TV, and advertisements.

Record companies and distribution. Many bands are surprised to find that their troubles really begin once they get signed to a record company. (As Kurt Neuman of the BoDeans put it, We had it made and then we got a record deal.) This book addresses most of the important issues for an independent record deal, and explains the principles of independent distribution.

CAUTION

Major label agreements are outside the scope of this book. If your band has been offered a major label recording contract—that is, an agreement with Universal, Sony, Warner, or EMI—you’ll need an attorney or an experienced manager to help you negotiate the deal.

Taking your band online. It’s easy to bring your band to a global audience without leaving home. This book explains the issues involved with taking your band online.

Band names. In this book, you will find plenty of information on trademarks and other band name issues, as well as an explanation of how to research and register your band’s name with the federal government.

Written Agreements: Your First Line of Defense

A contract sets up rules for doing business and makes it easier for your band to go after people who have ripped you off (or to defend yourself if you’re unfairly accused of not following the deal). This book provides samples of several common agreements, such as partnership agreements, compulsory licenses, and independent record contracts. Whenever a sample agreement is provided, we explain how to fill it out and modify it to fit your needs.

Below are some of the agreements you’ll find in this book:

Partnership agreement: for all band members; covers how to divide expenses and profits, rights to songs, rights to the band name, and related issues.

Management agreement: for your band and your manager; covers commissions, length of representation, and post-termination issues.

Label-shopping agreement: for your band and your attorney (or whoever is shopping your band to record companies); covers issues such as the extent and length of payment for the representation.

Performance agreement: for your band and the venue that is booking your band; covers the payment and other performance details.

Model release agreement: for your band and any person whose image is used on band artwork or merchandise; covers the extent of the use and the payment.

Artwork agreement: for your band and those providing artwork for recordings or merchandise; covers the extent of the artwork use and payment.

Musician release agreement: for your band and any nonband musician providing a performance for recordings; covers the extent of the musical use and payment.

Compulsory license agreement: for your band and any nonband songwriter or copyright holder; deals with the right to cover that person’s song on your band’s recording.

Simple master/sync license: for basic licensing of music for use in a film or video and when the songs and recordings are owned by the same entity.

Sync license: for licensing songs for use in films or TV; this can be modified for other sync rights—for example, for use in advertisements.

Master use license: for licensing sound recordings for use in films or TV.

Independent label recording and license agreements: for your band and an independent record label; covers the details of ownership and making of recordings.

By the way, if you have a question that’s not addressed in the book, you may want to consult my blog (www.dearrichblog.com).

CHAPTER

2

Band Partnerships and Beyond

Who Needs a Band Partnership Agreement?

Using a BPA to Avoid Problems

Abbreviated Band Partnership Agreement

Names of Partners

Partnership Name

Band Name and Ownership

Profits and Losses

Partnership Voting

Tie-Breaker

Addition of Band Partner

Leaving Members

Mediation and Arbitration

Signatures

Full-Length Band Partnership Agreement

The Band Partnership

Band Partner Services

Non–Band Partnership Activities

Band Name, Domain Name, and Logo

Warranties

Profits and Losses

Ownership of Recorded Compositions

Division of Publishing Revenue

Publishing Administration

Meetings and Voting

Books of Account and Records

Ending the Partnership

Distribution of Band Assets After Termination

Addition of a Band Partner

Members Who Leave

Determination of Net Worth

Band Partnership Bank Account

Mediation and Arbitration

General Provisions

Signatures

What’s the Right Business Entity for Your Band?

Personal Liability: Can They Take My Amplifier?

Real Property and Personal Property Insurance

Liability Insurance

Car Insurance

Business Interruption Coverage

Package Deals

Expense and Difficulty of Forming Your Band Business

What’s Right for Your Band?

Converting From a Partnership to an LLC

Should You Convert?

What’s Involved in Converting From a Partnership to an LLC?

Resources for Forming an LLC

Okay, you’ve accepted the fact that your band is a business. But what kind of business is it? Every business has a legal structure, which we refer to as a business form. You’ve probably heard of most of the common ones:

Sole proprietorship. In a sole proprietorship, you own and operate the band by yourself and are personally liable for business debts. You pay the other band members, either as employees or as independent contractors. You don’t file a separate business tax return. You report business income on your individual tax return. (This type of arrangement is referred to as a pass-through entity, because the income passes through the business to the owners before it is taxed.)

Partnership. If you form a partnership, your band splits the profits and losses among the band members, and each member is personally liable for all partnership debts. The partnership is also a pass-through tax entity (see above).

Limited liability company (LLC). To form an LLC, your band must file papers with the state government. The LLC operates like a partnership—profits and losses are shared, and income is reported on each partner’s individual tax return. But, unlike a partnership, each band member is shielded from personal liability for many business debts—a legal theory known as limited liability.

Corporation. To create a corporation, the band must file papers with the state government. Your band will have to file a corporate tax return (and pay taxes at corporate tax rates—a corporation isn’t a pass-through entity). The band members (who are shareholders in the corporation) have limited liability for band-related debts.

That’s a snapshot of the various business entities. Later in this chapter, more information is provided on each entity’s advantages and disadvantages. By default, most bands qualify as partnerships—an informal business entity that’s easy to form and manage.

Because your band is likely to be a partnership, most of this chapter is geared toward creating a band partnership agreement (a BPA). A BPA defines the rights and obligations of the band members. Think of it as the band’s business rule book.

In this chapter, you’ll find two types of band partnership agreements (BPAs): a short-form agreement that establishes some basic rules, and a long-form partnership agreement that is more comprehensive and deals with more contingencies. A bare-bones agreement might be fine in the beginning, but as the stakes grow, so should your BPA.

It’s also possible that your band business has progressed beyond the partnership stage. Perhaps you are touring regularly or have experienced a substantial increase in band income. As a result, band members might be concerned about personal liability. We will help you analyze which business form is best for your band. In the event your band wants to limit personal liability, the most common approach is to convert the band partnership to a band limited liability company (LLC). The conversion process is discussed at the end of this chapter.

Who Needs a Band Partnership Agreement?

There’s no requirement that your band must have a written BPA, (and it’s our experience that most bands don’t formalize their rules in a written document). Many bands get along fine without a written BPA, especially small bands that play just as much for fun as for business. They have adopted commonsense principles and work out business deals as they go along. Some bands wait until they have a record deal before formalizing their arrangements with a written BPA.

But while winging it might work for a while, forging ahead without an agreement can be risky. Countless bands have been unpleasantly surprised at how an unforeseen conflict can suddenly swoop in and cause chaos, or even destroy a band. Putting your agreement in writing sooner rather than later helps to avoid such disputes, because it forces you to deal with issues before they become threatening problems. Having a BPA also guarantees that everyone understands and agrees to certain terms, such as shares of ownership, shares of profit distribution, and rules for joining or leaving the partnership. A BPA is simply a partnership agreement that is tailored to the needs of a band. Typically, a BPA:

provides a method for resolving disputes

sets standards for firing and hiring band members

creates a system for dividing band income and expenses, including future royalties

establishes guidelines for when members depart or the band breaks up, and

defines who may use the band name and songs.

CAUTION

BPAs are used only for bands that operate as partnerships. If your band is operating as a sole proprietorship, corporation, or limited liability company (LLC), you shouldn’t use a BPA.

Besides the common wisdom that a written agreement is always a good idea among business partners, another reason to enter into a BPA with your bandmates is that if you don’t, the laws of your state will have the final word on how your partnership is run. All states except Louisiana have adopted the Uniform Partnership Act (UPA) in some form, which provides standard, default rules for partnerships that haven’t executed their own agreements. In the absence of your own agreement, for example, the UPA says that profits must be shared equally and that each member has an equal voice in running the business. If that’s not the arrangement you and your bandmates want, you won’t want to be caught without a written agreement.

Aren’t Oral Agreements Valid?

Oral contracts and agreements—including oral BPAs—are legally binding. But without a written document, band members may have different recollections of the terms of the oral agreement. Especially in the heat of a dispute, different memories and misunderstandings among band members will leave an oral agreement meaningless and unenforceable. Keep in mind the old saying that an oral agreement isn’t worth the paper it’s written on.

What If You’re Not a Typical Band?

What if you’re not a typical band? For example, what if you are a vocalist and a DJ, or what if your group consists of two people behind computers who swap files until they’ve produced the ideal dance tracks? Should you still use the band partnership agreement?

Assuming that you all contribute and work regularly toward a joint goal of success, the agreement will be beneficial. In other words, it’s not important whether you think of yourselves as a traditional band with drums, bass, guitars, and vocals; what matters is that you think of yourselves as partners in a musical venture.

So, regardless of your style or method of collaboration, use the BPA to establish the important rules for revenue and responsibilities, as well as to determine the ownership of property. If you don’t consider yourself a traditional band, feel free to change the wording of the agreement to reflect your group’s status. For example, you can strike the word band throughout the agreement and instead substitute another term for your relationship—perhaps the name of your musical collaboration. Also, not only will the partnership agreement work for various types of musical collaborations, the advice in this chapter regarding forming an LLC or other business form also applies to most musical collaborations.

The first type, the abbreviated short-form agreement is quite simple and easy to complete. If your band is just starting out, or is undecided on whether to use a BPA, take a look at the short-form agreement. It’s not very complex and will provide a minimal, but significant, level of protection for band members. Even if you decide not use it, your band should at least discuss some of the issues raised in it, such as who owns the band name or what type of vote is necessary to kick out a band member.

The second (or full-length) agreement is more complex and covers a wider range of potential problems. If your band is growing as a business—such as earning regular income of more than $3,000 a month—you should consider adopting the long BPA. The long BPA is designed so that as your revenues increase, it preserves each band member’s rights. You should also use the long BPA if your band is preparing to sign a record deal, because the agreement will safeguard each member’s right to royalties, even after a member leaves the group. (See Chapter 14 on independent record deals.)

CAUTION

Get professional help with major-label record deals. Signing a record deal with a major label is beyond the scope of this book. If you’re being offered a deal with a major label (Sony, Universal, Warner, and EMI), you’ll need a lawyer or sophisticated manager to negotiate the contract. See Chapter 4 for information on hiring and working with lawyers, and Chapter 14 for information on independent record deals versus major-label deals.

Using a BPA to Avoid Problems

Most of the chapters in this book describe how a band can be harmed by forces outside the band such as a record company, manager, retail store, or music publisher. In this chapter, however, we deal with situations in which the band can be harmed by internal forces—that is, by a band member or ex-member. The following situations are unfortunately all too common:

An ex–band member claims a right to use the band name or band logo.

The band breaks up and there is a dispute about dividing the assets.

A dispute between the band and an ex-member results in a costly lawsuit.

Thankfully, you can help avoid these and most other ugly situations by covering them in your BPA.

Situation #1:

An ex–band member claims a right to use the band name or logo when ex-members begin using the band’s name or a substantially similar name.

The similarly named band confuses fans, dilutes the strength of the original band’s drawing power, and can generate merchandise sales that aren’t shared with other members of the original band. For example, ex-members of Creedence Clearwater Revival used the name Creedence Clearwater Revisited—without the consent or participation of founder John Fogerty. He sued to prevent the band’s use of the name but lost the case on appeal. Other bands such as Ratt, Queensryche, Talking Heads, Megadeth, and the Doors have run into similar problems. If these bands had agreed on ownership of the name, a great deal of litigation (and aggravation) could have been avoided.

How to avoid the problem:

Dealing with this issue in your BPA will help to avoid disputes over who owns the name and will help prevent unauthorized—and potentially damaging—use of the name by former band members. In your BPA, be sure to cover two things concerning your band’s name:

whether the band as a whole owns the name, or whether specific individuals in the band own it, and

which band members (if any) can continue to use the name of the band in the event that the band splits up or members leave the band.

Situation #2:

The band breaks up and there is a dispute about dividing the assets or debts.

Bands have a notoriously difficult time staying together. But common as they are, band breakups can be complex. The band may be earning record royalties or have outstanding debts. When there is no BPA and the band members can’t agree how to divide the assets and debts, an ugly breakup can quickly go from bad to worse. If the band has assets, they may be held by the courts until the matter is resolved—which sometimes can take months or years.

How to avoid the problem:

Establish a system in your BPA for dividing assets and debts. The most common arrangement is for a band to split the band’s assets (usually equipment) after paying off people to whom the band owes money (referred to as creditors). The sample long BPA at the end of this chapter provides a common asset and debt division system for your band to adopt.

Situation #3:

An ex–band member sues the band.

An ex–band member might sue the band for a variety of reasons. Take the case of Guns N’ Roses drummer Steven Adler. The band asked Adler to sign an agreement terminating his partnership interest in the band and agreeing to a lump sum as settlement for leaving. Slash, the guitarist for Guns N’ Roses, later testified that Adler was strung out on heroin when Adler signed the termination agreement. Adler sued, claiming that the termination agreement was invalid because he wasn’t mentally capable at the time he signed it. He claimed that the band owed him money and drum equipment. To avoid a court judgment, the band settled with Adler, agreeing to pay him $2.5 million. The band also had to pay its own legal costs.

Whatever the dispute, fighting it out in court is the most expensive and time-consuming way to resolve disputes. Paying legal fees, even for a relatively short case, can quickly put a band into bankruptcy. The Guns N’ Roses dispute might have been avoided, for example, had the band established a system for distributing income to terminated members in their BPA.

How to avoid the problem:

A BPA can avoid disputes in the first place by establishing the rules of the band at the outset. A thorough, written agreement is often enough to resolve a conflict before it gets ugly and ends up in court. Even if a dispute does arise, a BPA can help the band avoid a lawsuit by establishing a method for resolving disputes, such as mediation or arbitration.

What About Songwriting?

Under our model BPA, each songwriter owns their own songs. However, many bands decide to share songwriting income in some way. The long-form BPA below includes two optional provisions that can be inserted if your band wants to share songwriting income. We provide more information about dividing songwriting income in Chapter 7.

Abbreviated Band Partnership Agreement

If your band is just starting out or not earning much income (say, less than $3,000 a month), or if you’re just not ready to deal with a long agreement, we recommend you execute at least a basic BPA covering the essentials. In this section, we’ll walk you through the simple task of putting together a short BPA. A sample form appears below. You can modify the form to fit your needs, though if many modifications are necessary, you might want to use the long form that is covered in the next section.

FORMS

You can download this form (and all other forms in this book) from Nolo.com; for details, see Get Forms at This Book’s Companion Page, in the appendix.

Names of Partners

Enter the names of the band members who will be included in your partnership. You should include the names of only those members who will actually be full partners, who will share band profits and debts. Other musicians who may sometimes play with your band, but to whom you don’t intend to give an ownership interest in your band, shouldn’t be included.

Partnership Name

You will need to create a name for your band partnership. Most bands usually use the band name and add the word partnership at the end (for example, The Imagine Dragons Partnership).

Band Name and Ownership

Enter the name of your band as you will use it in public. If you haven’t already discussed ownership of the band name, now is the time. See instructions for the long BPA later in this chapter, or refer to Chapter 9 on protecting your band name. Depending on how your band wants to deal with name ownership, choose one or more of the alternative provisions, or create your own. If one person owns the name, enter that person’s name.

Profits and Losses

This clause establishes that band members will share all profits equally. If you want a different arrangement, you should use the long BPA, below.

Partnership Voting

Indicate whether a unanimous vote or just a majority vote is required to expel a band partner, to add a new band partner, and to enter the band into an agreement that will last longer than one year.

Tie-Breaker

This is an optional provision in which you can name one band member whose vote will have the power to break a tie. (In essence, that member’s vote would count twice.) If you don’t want to name a tie-breaker, enter none.

Addition of Band Partner

This clause simply states that any new band members will be bound by the terms of this agreement.

Leaving Members

This clause establishes that the partnership will stay in effect when a member leaves. It also says that a band member may voluntarily quit the band, and that a leaving member is entitled to their share of the net worth of the partnership, as well as their share of royalties. Any payments will be made only after the band has actually received the income and deducted expenses.

Mediation and Arbitration

Under this clause, if a dispute arises, the band members agree to try to resolve it through mediation or, if that fails, binding arbitration, rather than going to court. On the one hand, mediation and arbitration can be expensive, because you must pay for the mediator or arbitrator. On the other hand, these methods can save thousands of dollars in legal fees and can resolve the dispute with a less contentious method. (For more information on these methods, see the discussion of mediation and arbitration later in this chapter, with the explanation of the full-length partnership agreement.) Enter the location where you agree to mediate, most likely the city where you all live. If you don’t want this provision, delete it.

Signatures

Have all band members sign and date the agreement, and enter their personal addresses and Social Security numbers.

CANADIAN RULES

If you are a Canadian resident, any reference to state or county in the model agreement should be changed to province. Occasionally, Canadian contract and partnership laws differ from American law, and when that occurs, we provide an explanation for the difference.

[Abbreviated] Band Partnership Agreement

Band Partners

Names of band members (Band Partners): _______________________

Partnership Name

The Band Partners establish themselves as a general partnership (the Band Partnership) known as the _______________________

Band Name

The Band Partnership will do business under the name ______________________ (the Band Name). Each Band Partner acknowledges that (check appropriate box):

Band Partners who leave the band will have no interest in the Band Name.

No individual member will have a right to use the Band Name in the event the band breaks up.

The Band Name is the exclusive property of ______________________________________________.

Profits and Losses

The Band Partners will share equally in all payments that are paid to the Band Partnership or to any Band Partner as a result of Band Partnership activities. After deducting Band Partnership expenses (for example, reasonable salaries, rent, promotional costs, travel costs, office expenditures, telephone costs, and accounting and legal fees), these payments will be distributed in cash to the Band Partners.

Partnership Voting

Check either unanimous vote or majority vote for each issue.

Tie-Breaker (optional)

In the event that a majority cannot be achieved, the decision of ____________________________________________ will prevail.

Addition of a Band Partner

Each new Band Partner must agree to be bound by all of the provisions in this Agreement. The addition of a new Band Partner will not end the Partnership, which will remain in full force.

Leaving Members

A Band Partner may leave the Band Partnership (a Leaving Member) voluntarily (by resignation) or involuntarily (by reason of death, disability, or being expelled). A Leaving Member is entitled to a proportionate share of the net worth of the Band Partnership as of the date of leaving, and to the Leaving Member’s share of any future royalties or fees earned from sound recordings that include the Leaving Member’s performance. These payments will be made when actually received by the Band Partnership and after subtracting a proportionate deduction of expenses. If a member leaves, the Band Partnership will remain in full force among the remaining members.

Mediation and Arbitration

If a dispute arises under this Agreement, the parties agree to first try to resolve the dispute with the help of a mutually agreed-on mediator in ______________________. Any costs and fees other than attorneys’ fees will be shared equally by the parties. If it proves impossible to arrive at a mutually satisfactory solution, the parties agree to submit the dispute to binding arbitration in the same city or region, conducted on a confidential basis under the Commercial Arbitration Rules of the American Arbitration Association, or the rules of ________.

Amendments

This agreement may not be amended except in writing signed by all Band Partners.

Full-Length Band Partnership Agreement

Use the long-form BPA if your band income is growing or if your band has signed a publishing or record company deal and the members are comfortable discussing and negotiating the details. The following instructions explain how to fill out the BPA and what the various clauses mean. Many clauses have alternative provisions for you to choose from, which are explained in the instructions. Some clauses, as noted in the instructions, are optional altogether. A sample appears below. You can modify the form agreement to fit your needs.

FORMS

You can download this form (and all other forms in this book) from Nolo.com; for details, see Get Forms at This Book’s Companion Page, in the appendix.

In the Introduction clause, fill in the names of the band members who will be included in the partnership. Don’t include any musicians to whom you don’t want to give an ownership interest in the band.

The Band Partnership

You will need to create a name for your band partnership. Most bands usually use the band name and add the word partnership (for example, The Radiohead Partnership). You also need to insert the state or province in which the band resides. If members live in different areas, choose the state or province in which the band meets to practice. Finally, insert the location for the band’s headquarters (usually an address where the band gets its mail).

Band Partner Services

This provision explains what types of services are expected from the band members. The merchandising rights section refers to the band partnership’s right to use the band member’s name and picture on products such as T-shirts.

Non–Band Partnership Activities

Under this provision, band members can participate in side projects such as solo recordings or playing in other bands, provided that these activities don’t interfere with the band. The obligations of being in this band must take priority over all other activities. Without this essential commitment, it will be difficult to coordinate touring and recording.

Band Name, Domain Name, and Logo

This provision deals with ownership of the band’s name and, if you have them, your band’s domain name and logo. Enter the band’s name. If you don’t have a domain name or logo, don’t check those sections—leave them blank. If you do have a domain name for your band, enter it. If you have a logo, enter see attached. Then be sure to attach a copy of the logo to the completed agreement. Staple a clean, final version of the logo to the agreement.

If you haven’t already discussed ownership of the band name (see Chapter 9), now is the time. Any logo and domain name should also be considered when determining ownership rights. The person in the band who thought up the name doesn’t get any special ownership rights. As we explain in Chapter 9, the primary issues are whether the band or specific individuals in the band own the name, and which band members (if any) can continue to use the name of the band in the event that the band splits up or if members leave the band. Sometimes (particularly in the event of band names that feature one performer, such as the Jimi Hendrix Experience or Jon Spencer Blues Explosion), the name of the band may be owned and controlled by one member.

TIP

If one person owns the domain name, have that person listed as owner and contact person with the domain name registry. Domain name registries issue domain names and manage domain name renewals. Therefore, if your band agrees that one person is the owner, that person should be listed with the registry. Otherwise, the owner could have difficulty transferring and renewing the domain name.

Depending on your band’s determination, choose one of the alternative provisions or create your own. The three alternatives given are:

The band owns the name even if members leave; if the band breaks up, no member may use the band name.

The band owns the name but only if certain members remain in the band. If the band breaks up, no member may use the band name.

One person in the band owns the name and controls its use.

Warranties

Warranties are contractual promises. If a band member breaks one of these promises (for example, by driving drunk to a gig), that can be the basis for expulsion. You can add other promises if you want. For example, … will appear punctually for all performances, recording sessions, and rehearsals.

The last sentence of this provision (Each Band Partner indemnifies each other Band Partner from all claims …) refers to a legal principle known as indemnification. If a band partner breaks one of the promises—for example, by getting in a fist fight with a club manager—and the band partnership is sued, partnership law says that every partner of the band is liable for any damages awarded. If each band partner indemnifies the other partners, however, then ultimately only the band partner who caused the problem will pay the damages and legal fees by paying back the others. Of course, this clause must be considered in a real-world perspective. A partner may be judgment proof—that is, the band member may not have the ability to pay. In that case, the indemnity clause will fail to shield innocent band members.

Profits and Losses

This provision includes a standard definition of net profits. It provides that before the band members are paid, the band’s debts and other reasonable expenses must be deducted.

Practically, the issue of profits and losses is a matter of maintaining a bank account and making regular accountings of expenses and income. Bands that can afford it hire an accountant to handle these details and to make the payments to the band partners. If you can’t afford an accountant, there are many popular accounting programs (such as Quicken, QuickBooks, and CreditKarma (formerly Mint)) that make managing your band’s money quite easy.

Ownership of Recorded Compositions

If your band wants to create its own publishing company and share songwriting income, check will in this clause to create a band partnership publishing company. If you don’t want to share songwriting income or create a publishing company, check will not or delete the language. This clause and the next two (Division of Publishing Revenue and Publishing Administration) only affect songs written by band members that are recorded and released under the band name.

The issue of whether to share songwriting income is sometimes controversial for band members, and we have devoted Chapter 8 to this issue. You should review that chapter before making a decision. If an agreement on songwriting can’t be reached right now, leave this and the next two provisions blank or remove them from your BPA.

Division of Publishing Revenue

If you didn’t create a publishing company with the previous clause, this provision won’t apply to you. In that case, you can delete the language altogether.

When your band shares song income through a publishing company, you can divide the money in many ways. You can choose from three alternatives, or create your own. Your three alternatives in the agreement are:

all money divided equally

writers split writer share, and band splits publisher share, or

a compromise system in which band members receive one credit for performing a song, and two credits for both writing and performing a song.

We have provided a detailed explanation of dividing song income in Chapter 8.

Publishing Administration

If you didn’t create a publishing company, this provision won’t apply to you. You can delete the language altogether if you use the form on the companion page to this book.

This provision permits the band’s publishing company to administer the songs. Administration is explained in Chapter 8, but generally it means the band has the right to enter into contracts regarding the songs, make decisions about the use of the songs, collect royalties for the songs, and sue infringers of the songs. This provision also guarantees that the band can continue to administer the songs even after a member departs, and establishes the publishing rights for the departing member.

Meetings and Voting

This provision establishes the type of vote—majority or unanimous—that is required for different band actions. You are free to decide which issues require a majority or unanimous vote. However, we recommend that the first one (expelling a band partner) be done by unanimous vote. A unanimous vote should also be required to dissolve the band partnership. It’s also wise to require at least a majority vote for purchases that are more than a certain amount. Purchases between $200 and $500—depending on your band’s financial situation, of course—typically warrant a majority vote.

Your band is also free to skew the voting. That is, one member may be granted two or three votes for every other member’s one vote. This may be the case, for example, in a band that is centered around one founding individual. This can be accomplished with the optional statement, by filling in the name(s) of who gets extra voting power and how many votes they get. If you don’t want to skew the voting, leave the clause blank or delete the clause.

In addition, in the event that the band partners can’t reach a majority agreement on a band partnership issue, you may choose an individual who acts as the tie-breaker. Often this is a founding member, but it can be any band partner—or it can be a nonpartner such as a manager or advisor. Enter the name of the tie-breaker in the blank, or, if you don’t want to designate one, either leave it blank or delete the clause.

Books of Account and Records

This accounting provision sets out some rules for band bookkeeping. The fiscal year is based on a calendar year. However, you may want to consult with your tax preparer or accountant in case there is an advantage for having a fiscal year that ends on another date (for example, April 15). The accounting statement that must be furnished to band members is just a spreadsheet that details the band’s income minus the band’s expenses during the preceding period.

Ending the Partnership

Without a written BPA, a partnership would end if one of the members quit or died. This clause establishes that your partnership won’t terminate simply because a member leaves (or when a new member joins). The language referring to operation of law simply reaffirms the power of any other partnership laws to terminate your partnership in certain situations (such as a lawsuit being filed), depending on the laws of your state.

If your band is built around a key performer, the partnership can also provide for termination if that member departs. If you wish to use such a provision, fill in this section. Otherwise, leave it blank or delete the language.

Distribution of Band Assets After Termination

This provision explains how the band’s money is used to pay off debts and obligations before repaying band partners. It is divided into three sections, which deal with current assets and debts, band equipment, and future income and royalties. This pay-off system is based on partnership laws that require that creditors get paid before partners. It is standard for all forms of partnerships and shouldn’t be changed. The term capital contributions refers to the contributions that band partners make, usually when they join the band partnership. For example, members may contribute money or equipment.

Addition of a Band Partner

This establishes the obligations of a new band partner. Generally, the new band partner can’t share in previously acquired assets or property and has no share in any recordings (or their royalties) created prior to joining the band.

Members Who Leave

This provision helps to head off problems by providing a system to deal with band members who leave. It provides for a 30-day notice period for leaving members (whether expelled or quitting) and gives the band the option to exclude the leaving member from performances during the notice period.

A leaving member, whether expelled or quitting, is entitled to a payment. If the leaving partner has an interest in song ownership, then you will have to pay the share of the income earned from those songs. The amount you pay depends on the partner’s proportionate share.

If you want to list reasons that justify expelling a member from the band, note them in this optional section. If you don’t want to specify reasons for firing a member, either leave the section blank or remove the language altogether. You can choose one or both of the reasons supplied in the agreement, or you can write your own. The ones we’ve supplied are all financial. Under many state partnership laws, a partner’s personal bankruptcy causes the partnership to dissolve. Therefore, some partnerships like to include a provision that provides for immediate expulsion in the event of financial problems such as bankruptcy or insolvency. If you add your own criteria, be careful not to be too specific, as this may limit your ability to fire someone. We suggest you include general language such as: or for any reason that appears sufficient to the remaining Band Partners.

Determination of Net Worth

This provision provides a method of paying off the ex–band partner. Usually the band partnership can’t afford to pay off large sums at one time, so payments of more than $10,000 are staggered over several years.

Band Partnership Bank Account

Your band will need to decide who has signing power. This is the person with the authority to sign checks, to endorse checks for deposit, and to sign for withdrawals from the partnership account. Insert the name or names of the band partners who will be allowed to sign band partnership checks. Sometimes two signatures are required, either on all checks or only on checks that are more than a certain amount (like $500).

Mediation and Arbitration

This provision gives alternatives to resolving your dispute in court that may be more private and potentially less expensive. (See What Are Mediation and Arbitration?, below.) We recommend you include this provision