Musicians - Treat Your Band Like a Business

From the 5th Beatle to Sting and the Police, the oftentimes tumultuous relationship between band mates lead to emotional and costly breakups. The media picks up on the break ups and, depending on the notoriety of a band, inside fighting and conflicts between bands can be great fodder for tabloids. Embarrassing exploitations on Inside Edition aside, a band member leaving a band can have a long standing and sometimes devastating effect on an artist's career and future in the music business.

A majority of bands form when friends or acquaintances get together and discover that they sound better with an additional instrument or vocal than they do on their own. An informal understanding of togetherness is usually solidified when the buddies pick a unique name for what is now a newly formed band. If a band has a good sound and is well organized a fast and furious progression of events is likely to occur.

A parent's garage then becomes a high school dance which may lead to an opening act at the local pub. Pretty soon, if things continue to go well, a band may start lining up gigs out of town that could possibly cover more than gas and beer money. Newspapers, magazines and blogs may pick up on the band's growing popularity and influence. A record label may even start snooping around and asking for the band's manager. Its imperative for a band with any sort of buzz to capitalize on it as the music industry's window of opportunity is quick to slam shut.

At this point the structure of the band must be in place; a manager should be on board, a lawyer retained and a business plan and tour schedule set. Questions which may have seemed ridiculous to the band members three months ago are now pressing problems. Such important issues as who owns the master recordings, which musicians are really in the band and which are simply hired hands or independent contractors, and how will the money be split up must be answered if a band has any hope of surviving, let alone succeeding.

If a corporate or limited liability entity has not yet been formed by the band, it is now time to do so. A limited liability company ("LLC") generally offers the greatest flexibility for a multi-member band while still protecting the individual owners ("Members") personal liability protection. Organizing a band as an LLC is a necessary beginning, but an operating agreement, oftentimes referred to as a Band Member Agreement, is also a must. The Band Member Agreement will set out many points on the road map of the band's business future as a legal business. It will identify which Members own what percentage of the band, which Member has the authority to make important business decisions for the band, when and how the Members are compensated, who owns the music and what happens if one of the Members leaves the band or is replaced.

Copyright registration is also an important step that a band must take in order to protect its rights in the lyrics of a song and the actual sound recording itself. Every band is different, but if a band is owned equally but only one Member wrote the music or the lyrics, should copyrights be in the name of the band's LLC? Depending on the dynamics of a band, a musician who actually wrote a song may assign his copyright to the LLC thereby transferring the publishing rights of that song to the LLC.

Determining the ownership percentages, identifying decision makers and how the band will operate as a business may appear daunting, but either waiting to do so or simply "winging" it can be devastating to a band, just like any other business.

For example, imagine that a band hires a violinist to play on a song for the band's new album. The band has not signed or even discussed a Band Member Agreement nor does it insist that the violinist execute a Guest Artist Agreement. There is no money paid to the violinist and the band thinks that the violinist is recording with the band out of the goodness of his heart. Two months later, the recording is a huge hit and the violinist shows up looking for his cut, not just from the one song that he recorded with the band but from the entire album. It is not out of the question that the violinist may argue that he is a band member just like your drummer and guitarist. The lack of proper documentation and agreements may result in costly and time consuming arguments and even litigation.

A clear and concise agreement with a third party musician will define that musician's role, how much he will be paid (if at all), what rights to any publishing income received by the band he may have and identify that his performance was made as a "work for hire" with all ownership of such work remaining in the name of the band. Even if the guest musician is a friend or a relative, an agreement must be signed to avoid any uncertainty down the road.

The music business can be confusing and moves at a rapid pace. If the structure of a band is put into place at the onset of the band's career, it will save the band valuable time and money. If a band and the musicians in that band treat it like a business rather than a hobby, the band can make great strides without the set back of in- fighting and lawsuits.