The Musician's Guide to Band Partnerships & Legal Issues | Jason Allen | Skillshare

The Musician's Guide to Band Partnerships & Legal Issues

Jason Allen, PhD, Ableton Certified Trainer

The Musician's Guide to Band Partnerships & Legal Issues

Jason Allen, PhD, Ableton Certified Trainer

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32 Lessons (1h 54m)
    • 1. Introduction

      2:09
    • 2. What We are Covering Here

      2:15
    • 3. Tools You Will Need for This Class

      1:32
    • 4. Disclaimer: I Am Not A Lawyer

      1:21
    • 5. What Bands Have

      6:07
    • 6. What Can Go Wrong

      4:27
    • 7. The Band as a Business

      6:24
    • 8. Operating Agreements

      4:32
    • 9. Example Template

      4:41
    • 10. Real Property Issues

      4:41
    • 11. Intellectual Property Issues

      4:30
    • 12. Outside Collaborations

      3:39
    • 13. Right to Use the Band Identity

      4:59
    • 14. Publishing

      5:32
    • 15. Email Lists, Social Media Accounts, and Contacts

      3:19
    • 16. Firing a Band Member

      4:19
    • 17. What They Are Entitled To

      4:28
    • 18. Adding a Band Member

      2:58
    • 19. Valuation of the Band

      5:23
    • 20. Obligation to Record

      3:27
    • 21. Bootstrapping Finances

      2:34
    • 22. Money from Members

      5:31
    • 23. Outside Financing: Investors

      3:37
    • 24. Outside Financing: Loans

      5:37
    • 25. Accounting, Accounts, and Audits

      2:33
    • 26. Profits and Losses

      3:19
    • 27. Meeting and Voting

      1:59
    • 28. Breaking Up The Band

      2:38
    • 29. Arbitration

      1:52
    • 30. The Answer Is In The Agreement

      2:06
    • 31. What Comes Next?

      1:00
    • 32. Bonus Lecture

      0:36
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About This Class

Welcome to the "Musician's Guide" Series!

This series is pulled directly from the courses I've created for my university position in Music Business. All of these courses are designed for the everyday musician - amateur or professional - who has little or no knowledge on the topic, but wants to master it.

This class is all about Band Partnerships and Legal Issues. In other words: How bands (and any musical collaboration) work together. In this class, I'll give you a template for a typical agreement between band members, and walk you through what everything means.

100% Answer Rate!
Every single question posted to this class is answered within 24 hours by the instructor.

It is ideal for anyone who is in a band or wants to start a band. Especially:

  • Musicians: If you are making music with other people, you need to understand your rights and come to some understandings.

  • Producers: If you are producing for other musicians, you should have them under contract. In this class, I'll walk you through the entire contract, and give you a template to use.

  • Curious Minds: Anyone interested in how bands operate is invited to be a part of this class.

We will start by talking through what bands "have." That is more than just the PA that they bought together - it is also all their intellectual property - like songs, albums, any recordings, the band name, logos, flyers, and more. Then we will look at a typical band agreement (I'll give you a copy to use with your own band), and I'll walk you through every step of the agreement so you fully understand what is being asked.

The goal of this class is for you to understand how bands work together, and how to keep from suing each other once you start making money!


Software:
This course is NOT specific to any DAW program.

Genre:
The recording studio has no genre - so all are welcome here.

Topics Covered: 

  • Band Agreements (Contracts)

  • Real Property Bands Own

  • Intellectual Property Bands Own

  • Copyrights and Trademarks

  • Operating Agreements

  • Right to Use the Band Identity

  • Publishing

  • Email Lists, Social Media Accounts, and Contacts

  • Firing a Band Member

  • Adding a Band Member

  • Valuation of a Band

  • Financing a Band

  • Taking Out Loans

  • Investors and Bands

  • Splitting Profits

  • Splitting Losses

  • Breaking Up The Band

  • And much, much more!

Dr. Allen is a university music professor and is a top-rated instructor - with nearly 100 courses and over 200,000 students.

In 2017 Star Tribune Business featured him as a "Mover and a Shaker," and he is recognized by the Grammy Foundation for his music education classes. 

Meet Your Teacher

Teacher Profile Image

Jason Allen

PhD, Ableton Certified Trainer

Teacher

J. Anthony Allen has worn the hats of composer, producer, songwriter, engineer, sound designer, DJ, remix artist, multi-media artist, performer, inventor, and entrepreneur. Allen is a versatile creator whose diverse project experience ranges from works written for the Minnesota Orchestra to pieces developed for film, TV, and radio. An innovator in the field of electronic performance, Allen performs on a set of “glove” controllers, which he has designed, built, and programmed by himself. When he’s not working as a solo artist, Allen is a serial collaborator. His primary collaborative vehicle is the group Ballet Mech, for which Allen is one of three producers.

In 2014, Allen was a semi-finalist for the Grammy Foundation’s Music Educator of the Year.

... See full profile

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Transcripts

1. Introduction: Hey everyone, welcome to the musicians guide to band partnerships, funding, and legal issues. So what is a band partnership you might be asking, well, it's any band. Every band is a partnership and in fact, every band is a business. And as a business, there are certain agreements that have to be made between all the members. What happens when your band buys a PA? Who owns that PA? What happens when you need to go into the recording studio and you borrow money from the guitar players mom, who owes that money back, if at all. What happens if you want to fire someone in your band or bring on a new person in the band and you don't all agree. And then the most important thing, perhaps, what happens when you start making money? Who gets that money? Where does it go? And who gets to decide all of these things will be covered in this class. And I'm even going to give you some template documents to use so that you can fill those out with your band and get a lot of the ugliness taken care of before anybody has a problem with anything. Teaching this stuff is what I do every day in my normal job as a university professor. So I really love talking about it. I hope you'll indulge me while I get a little nerdy on a couple of topics, but there's a lot to cover. So let's dive in. 2. What We are Covering Here: All right, let's dive in. So what are we going to be covering here? In this class? We're going to be talking about band partnerships, funding and legal issues. So let's pick that apart a little bit behind partnerships. Let's break that down even further. Band, what I'm talking about when I'm talking about a band through this whole class, is any musical collaboration. It can be for people in a band. It can be ten people in a band. It can be a rapper and a producer, just two people collaborating. All of these things apply to any combination of those people. So it's really just more than one person collaborating. And the issues that come up, such as who owns your copyright to things that you make collaboratively. That's an important, important thing that you need to figure out. Who gets money, who gets paid, and how do they get paid? Even something as simple as the band plays a gig, it's a band walks away with a 100 bucks. What do you do with that? A 100 bucks, where does it go? Who gets it? Another important thing is who has to pay taxes on it? And do you have to pay taxes at all on it? What about the band? Doesn't have any money, but needs to go into the studio to record a demo so that they can get some gigs to make money. Who pays for that studio session? And if no one's got money laying around, how can you find money to get someone else to pay for that studio session? There are solutions to all of these problems and that's what we'll be talking about in this class. So without further ado, let's dive in. There's a couple other little things that I, you know, little housekeeping things we need to do real quick. But then we're going to dive in to ban partnerships. 3. Tools You Will Need for This Class: Okay, tools you're going to need for this class. Nothing out of the ordinary. Takes notes, do all that good stuff. I am probably going to give you at least one contract to pick apart for to use as a template for a partnership agreement. That'll probably come in a Word format, although I'll probably post it also as a PDF. Or the Word format will actually be better because then you can fill it in with your own info. So if you have access to Microsoft Word, that's great. If not, you can deal with the PDF version as well. That's just fine. Other than that, I don't think there's anything out of the ordinary that you need. It be good to have a band or a collaborator. A lot of what we're going to be talking about in this class is kind of tricky issues to talk to band mates about. But there's things that the earlier you get them out of the way, the better it is. So I guess I would list as a tool that would be good for this class is some kind of psychological fortitude to have some direct conversations with your collaborators or band mates. So I don't know what you wanna do with that, but there it is. Okay. Let's move on to my disclaimer and then we're into the class. 4. Disclaimer: I Am Not A Lawyer: Okay, quick little disclaimer, same one I've been putting on all of these musician guide classes. We're going to be talking in this class about contracts and law and the law and legal issues between people. So just a quick little note that I am not a lawyer. So if you find yourself in any kind of legal trouble or you need to understand something deeper. Get a lawyer and do what your lawyer tells you. If you're a lawyer contradicts what I'm telling you here, do what your lawyer says. Always. Whenever you're dealing with contracts, which we will be doing in this class, It's always good to hire a lawyer just to sit down and read through it with you and make sure you understand all of it. Anyone who tries to get you to sign a contract without fully understanding it is not being honest with you about something. So be sure you understand everything that you're signing. And so having a lawyer on on call someone you can reach out to is a really great idea. But I am not a lawyer and music dork who's been through all this stuff few times. So I know a bit about it. Times seconds. 5. What Bands Have: Okay, let's start off with talking about what bands have. Now remember, I'm talking about, when I say bands, I'm talking about any kind of musical collaboration. There's really two kinds of things that then have, have bands have what we call tangible, tangible things and in tan, shovel things. But those terms are almost synonymous with terms we've already been using and the earlier stuff. And that is for tangible, we can call it real property. And for intangible, we can call it intellectual property. So tangible and intangible, roughly the same as real property and intellectual property. So let's talk about real property for a minute. Because intellectual property is really the big one here, but real property does exist. Bands do mass stuff, right? And a lot of what we need to deal with. I'm in a band is who owns that stuff? So let's say let's say the, oh, here's a, here's a common one. The band has a place to rehearse, but they need to buy a PA, okay. So they don't have a good PA where they rehearse. So they played two or three gigs and they pool all that money together. Nobody takes a cut of that money. They use 100% of that money from those gigs to buy a PA for their rehearsal space. Okay, cool. Now that can rehearse better, and that's awesome. So who owns that PA, right? In theory, all members of the band worked equally as hard at those gigs, made the same amount of money and therefore equally on the PA. So what happens then? So if all members of the band equally own the PA, Then what happens when the bass player quits? Well, the bass players should then be entitled to one-quarter if there are four band members, one-quarter of the PA. So they're gonna take one speaker or you owe that band member, you have to buy that from that band member. If that's how you wanna do it. Now, there are other ways where you can say, If you can basically write a document that says we all own this collaboratively. But if, you know the bass player quits, they forfeit their percentage of the PA. There are ways you can do that, that you don't actually have to chop up the PA. So real properties of thing. What about if you release an album and you have a stack of physical CD is let's say you've decided precedent on vinyl, right? That's becoming very popular to do these days. You press an album on vinyl and you have six boxes of vinyl. And then the band decides to call it quits. Who owns that vinyl and who can sell it and try to make some money from it. All right. So there's, there's a good amount of real property things that happened with bands. But the bigger thing is intellectual property, because bands are always making intellectual property constantly non-stop, essentially. So intellectual property is copyright. It's trade markable stuff. It's any creative output, right? You might think. That means all the Sung's band writes songs together. It's intellectual property, but it's more than that actually. It's also the band name, logos, cover art, the band's bio, the band's website, anything the band posters on social media, any social media platform. So it's a lot of stuff that's constantly being put out and created by bands. So there's a lot of intellectual property at stake here. It's not just the songs. So when we're talking about things that bands have, we're talking about both real property and intellectual property. And intellectual property is more than just songs. It's everything that band creates, including. And this will be a big issue as we get deeper into this, the name of the band. Just to give you a preview of what we're going to talk about with that. Take a band name, let's take, I don't know, Metallica. And what happens if three of the members quit Metallica? Can the one remaining member still call himself Metallica? These are things that you need to figure out ahead of time. So that when that happens, it's all set in stone. And that's what we're going to figure out in this class. We're gonna go through how bands do that. Okay, So let's move on and let's talk about kind of the things that can go wrong in a band. 6. What Can Go Wrong: Okay, what can go wrong in a band? There are a couple of obvious things and then a few less obvious things. The obvious things are the band breaks up. Okay? What happens to all your real property and all your intellectual property if the band breaks up, these are questions we need to answer. Another thing that can go wrong as a member can quit. Okay. What are they owed? What do you owe them? What do they own? What can they take with them? Another thing is a member can be fired. And what do they have? The same questions apply, what do they own, what can they take with them? What do you owe them? So these are kind of the big three that everybody thinks about when you think about what can go wrong in a band. But there are a few more. A member can die. What happens if somebody dies? What happens if the lead singer of your band dies? What happens if the name of your band is Joe Smith and the astronauts? And Joe Smith dies, can you still, can the rest of the band still perform on as Joe Smith and the astronauts? These are things that have to be figured out. What about let's just call them major disagreements, Okay? What if you're in the recording studio and you have some catastrophic disagreement and it doesn't result in a member getting quitting or fired. But it does need to get resolved. What happens then? What if there's four people in the band and two are really adamant about this one thing and two are really adamant about another thing. I know agreement can be made. How do you solve that? Are you even get a function as a democracy in the first place where people equally vote, or is the lead singers vote weighted more heavily than everyone else's? These are decisions you can make. And some bands do it that way. If you're in a band called Joe Smith and the astronauts, maybe Joe Smith gets a bigger vote than everybody else because they're the front person. I can be that way. So major disagreements can result in a big, big issue going forward. What if someone gets arrested? What if someone does a crime and gets arrested? Okay. We can go a little further down that road. What if it's let's say, I accept an acceptable arrest. Meaning they got arrested for something that the band doesn't morally opposed. Okay, So they are arrested for, let's say, I don't know, I'm gonna get myself in trouble no matter what I say here. Navy, they had a bag, a weed. Okay. In the music world, that's not going to get you blacklisted from anything. So they got arrested for having a bag of wheat. But they still got arrested and they presumably you might miss some gigs. That's problem. What if it's not acceptable? What if it's, you know, physical abuse towards a spouse? Okay. Are they is that grounds for being fired from the band? Probably. But these are all things you have to decide. So there's a lot that can happen. There's a lot that could go wrong. There's a lot that can change. All of these things matter and all of these things need to be outlined. And that's what we're gonna do in a band agreement. So let's get into a little bit of that now. 7. The Band as a Business: So one thing that you might notice is that both of these two questions, what bands have and what can go wrong? If you, we took out the word bands and just said company. Things would be pretty much the same. Like what does a company have? Accompany has tangible and intangible things. They have real property and intellectual property. What can go wrong in accompany the company can fall apart. Someone can quit, someone can be fired, someone can die. There can be major disagreements, there can be arrests. So all of this is to say that a band is accompany. And you may have heard that before. If you've, if you're in a band, people have said treat your band like a company. And I'm going to push back on that a little bit. You don't treat your band like accompany. Your band is a company. There is no difference. In fact, from a legal standpoint, your band needs to be accompany. So how are bands arranged as a business? Are the corporations. Maybe we'll stay away from going down the road of explaining all the different legal entities of businesses. But I do want to talk about them just a little bit here. So there's a bunch of different ways to form a business. Let, let's take bands out of the mix for just a second. Let's say you're creating a startup to make video games or some like that. You're going to create a company. And if you create a company, you're either going to create a corporation or a partnership or one of a number of other ones. There's FLP, there's LLP, there's S Corp, C Corp, et cetera. There's a bunch of different things and they all mean something relatively different. Each one of these types of ways you can set up a business. Basically, there's two things that distinguish each one of them, 2.5, let's say 2.5 things. The two things are how you pay taxes is one of them. The second one is who's liable for stuff? Okay. I'll come back to that one in just second. And the kinda 1.5 is what happens to the company when you die. Some types of companies, it goes down to your next air and some types of companies just dissolve when you die. So the liability thing, that means like in a corporation, for example, if I create a corporation, I've essentially created another. Entity, almost like another person. So if somebody comes to me and says I'm going to sue you for everything you've got. And I'm a part of I've started a corporation. What they're talking about is they're not going to sue me for anything. They're going to sue my corporation for everything it's got because the corporation is the thing that's an my personal money and property is protected from the corporation. They can sue the corporation all they want, but they can't touch my personal stuff with some exceptions, but that's the way it's set up. In something like a partnership. There is not liability protections in that way. If somebody goes to the partnership and says, I'm gonna see you for everything. They got a coming after me and my house, my car. So you generally want those kinds of protections. So the way that bands should be set up as something called an LLC. And we talked about LLC earlier in when we were talking about publishing. I'll see stands for limited liability company or corporation. Depending on I've seen it done both ways. Limited liability company and limited liability corporation. So this is one where you have limited liability. So you have some protection. So if someone wants to sue the company, the company is separate from you. And it's a corporation. So there's some tax advantages to it, but really not very much. You're still going to pay kind of a lot of taxes as an LLC, but it's the best way to do it. Most bands set up this way. It's the easiest thing to set out. So the first thing that any band needs to do before any money comes in the door is file as an LLC. So to do that, all you really have to do is go to the website of your local Secretary of State and follow the instructions for filing as an LLC, you want to be oops, domestic will be a term that you see that just means you're not going to operate internationally, even though you still can operate internationally. It's just a lot cheaper to set it up as domestic. And you'll pay something like a 100 bucks to get that all set up. You have to renew that every year, but renewing it doesn't cost money. It's just a form that has to be filled out. But then you're an LLC, fill that out online. You'll get an email right away that says, Congratulations, you are an LLC. So first thing a band needs to do file as an LLC because the band is a business. 8. Operating Agreements: So when somebody starts a company, no matter what the company's doing, you always have an operating agreement. Okay. This is a document that kind of outlines a few important things that can happen. It's important to do this in a company right away. Especially if there are partners in the company that have an equal share of the company, because you want to do this before there's money flowing, okay? Once there's money coming in and out of the company, then people tend to want more of the money, right? So you come to a couple of agreements right away before money's on the table. And you say, okay, if this happens, we're going to split the money equally. If this happens, it's all mine, whatever you wanna do. But people tend to have a much more rational mind before money comes into play. So in a company and operating agreement basically says, if you die, this is what happens if I die, this is what happens if I quit. This is how I can quit. It goes through everything. It's basically a prenuptial agreement for the members of the company. It can be an awkward thing to sort through, but it has to be done. Now the reason I'm telling you this is because a band is no different. A band needs to have the same operating agreement. I'm going to write pre nuptial agreement that if you don't know what that is or a prenuptial agreement is like, when do people get married, they might sign a contract that says this is what happens if we get divorced. I'm an operating agreement is kind of the same thing. But for a business, this is what happens if we hate each other. So this is a contract between the members of the company. Now for a band, we have a different name for this. We call this a band partnership agreement. But it is the exact same thing. It works exactly the same. It says, this is what happens if we hate each other in a year. But we've created a lot of intellectual property together and maybe we've got some real property two. This is how we're going to divvy that out. And remember, if your band goes huge, you might have a document that says, you know, the lead singer is gonna get 90 percent of everything we make. You can sign that document. But when you're behind goes huge and your lead singers making $5 million and you're not. That can happen, right? So you need to be very conscious of this and you need to make very smart decisions when you're putting this together. Because if the band is really well, a lot of money is going to be at stake. Band doesn't do well, then a little bit of money still going to be at stake. And issues involving the band can an almost always will exist long after the band exists. For example, let's say you recorded an album with this band. It goes up on Spotify and then the band breaks up. Okay. It's still on Spotify. You can't take it down if you want, but why would you it's still on Spotify and it's still going to be generating royalties, right? So those royalties need to go to somebody. And if they go to somebody D, are you going to trust that that person is going to send you your cut? There's a lot of complicated things at play here. So, and that music can be on Spotify forever, right? And can be generated royalties forever. Now if the band is broken up and you're not doing anything, then the amount of royalty is it generates ten years from now are going to be relatively small. But couple cents here and there still exists. And you should get your part of that. So let's look at a band agreement. 9. Example Template: Okay, so I have here an example, bend partnership agreement. Now I'm going to give this to you. I'll put this as a download somewhere around here. And you can download this and read through the whole thing. I'm not gonna, it's gonna sit here and read this giant contract. It's actually not as big as you might think. But also if you have a band, you can actually use this, you know, fill in the blanks. So we're gonna kinda slowly go through this whole agreement throughout the course of the next 20 videos or so. But Let's look at the big picture. Okay, the introduction. This band partnership agreement, also known as the agreement, is made between, is made by in-between name of band, collectively referred to as band. This agreement shall be in effect as of the date of the last signature below the effective date. The band partners agree as follows. Okay, So this is what we all agree to. So some general things about the band, what the band does, non band partnership activities. And this is an interesting one, and we'll talk more about this in a minute. Each band partner is permitted to engage in one or more businesses, including other musical entertainment efforts, but only to the extent that such such activities do not directly interfere with the business and obligations of the band partnership. What that's saying is side projects. You can have side projects as long as it doesn't get in the way of what we're doing, right? This partnership basically says, this band is going to be your main band. You can do other stuff, but we get kinda priority. It's cool, it's fine. You can get rid of this view on, if you want to say, no band member is entitled to be in any other musical activities. You can do that. Metallica does that. Metallica has a weird, I'm not a Metallica fan. I don't know why metallic is coming up so much. But Metallica has a no side projects rule in their agreement. Which is why you don't hear, like the singer of Metallica releasing a solo album. Here's the name and the logo. So here this agreement is set up where it wants you to kinda put a checkbox here. So pick one of these paragraphs that best suits your needs. So each band partner acknowledges that that band name is either the exclusive property of the partnership and not owned by any individual member, et cetera. Or the exclusive property of the partnership and not owned by any individual member, except that in the event that blank and blank cease to be members of the partnership, the partnership. So I'll cease use of the name or not an asset of the band partnership, but rather the sole and exclusive property of individual member of band. So you can choose which works best for your band. Warranties. Another word for warranties is like promises. Like these are things that we promise. Profits and losses. How to deal with money, ownership of recording compositions, division of publishing revenue. It's an important one. Who's going to administer publishing. Remember ships and voting. This is when you say that you're going to be a democracy, you are not. And you can also say here whether or not, like expelling a band member, does this need to be a unanimous decision or just a majority vote? You can decide on those things as well. Who's going to be in charge of accounting? What happens if you decide to call it quits? Distribution of band assets after termination, adding a new band member, leaving band members, determination of net worth, notices, the band bank account, mediation and arbitration, and some general stuff and then everyone's signs. That's kind of what it looks like. And we're gonna go through all of this in detail, but download this, keep it handy. Because we're going to get through more of this shortly. 10. Real Property Issues: Okay, So in this section I want to go through some of the kind of big things that are in the agreement. So first of all, remember that this agreement that I gave you is just one version of it. You can do what ever you want. The only thing that has to be, well, the only important thing is that everybody is in agreement. So you can write whatever crazy thing you want to write into the agreement. You can say, from this day forward, we will all refer to ourselves as the fabulous Spaghetti Monster. And if you all agree to that, then that's fine. You can say whatever you want. So this is just one example of an operating agreement and you can change it all you want as long as everyone agrees to it. So starting with the bit about real property issues, this particular agreement really just has this about real property. Any property owned or controlled by the band partnership, for example, musical equipment, shall not be sold, but shall be evaluated by an accountant. If necessary. Property shall then be distributed as nearly as possible in equal shares among the band members. And this is only talking about termination of the band. So the band breaks up and you own property. What it's saying here with this agreement says is that we're going to look at all the property that the band owns, all the physical things, instruments, the PA, anything like that, leftover merch. And we're going to say, okay, you know, this guitar is worth 800 bucks. This base is worth 800 bucks. These drum kit, the parts of the drum kit that we bought our worth 800 bucks. So each of those is worth about 800 bucks. So you just keep those. And then they're just going to try to divvy out the equipment between people as close as possible so that everybody gets a fair share of it. That's an okay way to do it. Other ways would be auction it all off. If there's a lot of equipment, a lot of the time what people will do is they'll say, We're just going to take everything that the band owns, the company owns, and we're going to sell it all and then divide the profits equally to everybody. I kinda sucks because if there's like a guitar that you bought and the guitar player really likes it, then that's, you might as well let the guitar player habit, but That's kind of a fair way to do it, is just auction everything off. Another thing you can do is just say like single person keeps everything. If a single person financed everything, then they deserve to keep everything, right. So we'll talk more about that when we get into financing the band. But if the lead singers, the one who put up the money for everything, then the lead singers, the one that should keep everything, for example. So those are other ways you could do it. I would also point out, Oh, this is an important thing, that this can be changed later. So if the band agrees to this and then, you know, three years down the road, you have a ton of equipment that the band has bought. Then you can revisit this, right? You can always change an operating agreement or a band agreement as long as everybody signs the new agreement and you can nullify the older green. Also, just to be clear. The band property we're talking about things that the band has purchased. We're not talking about like if the guitar player bought a guitar on their own and is using their own the guitar. That's not, the guitar player keeps that. We're not talking about that. We're talking about only things that the band has bought. So like you saved money from a gig and bought that PA. Pa is now owned by the band because the band bought it. So that's the kind of property we're talking about here. We're not talking about things ONE or bought by any individual member of the band. 11. Intellectual Property Issues: Okay, now let's talk about this slightly stickier issue of intellectual property. So this agreement talks about it in two different places. Here under ownership of recorded compositions. So let's look at this first. The band partners either shall or shall not, let's say shall, for the sake of argument, create a publishing entity, the band partnership publishing company, which ONE? All rights to record and compositions. And then we're going to define recording compositions. So what this is saying is that the recorded songs are all going to be owned by the band publishing company. Okay? That means that the band is karuna going to create a single publishing entity that's going to administer all of the rights of the songs that are recorded songs. So that should make sense. Now if that doesn't make sense, go back and review the publishing stuff. We're gonna talk more about publishing in this document in a minute. So let's just pulled off on that for a second. What this says here, that each band partner agrees to assign any ownership interests in each recorded composition to the band partnership publishing company, and to execute any documents necessary as evidence the transfer of ownership through the band partnership publishing company. So all songs written by the band collectively are going to be assigned over to the band publishing company. If you remember, there are two different ways A-band can publish. Works can deal with publisher. And that's as each individual member of the band can create a publishing company. Or each, or the band can collectively create one publishing company. That will be, That's kind of what they're talking about here in this case, they're saying there's going to be one publishing company and every band member is going to have to sign over their rights to the song to the publishing company. That is a fairly common way to do it. But more on publishing in a minute. Let's go down to here. So after termination, so when the band ends, what happens to those rights? If at the time of dissolution the band is entitled to royalties or owns property that is generating income or royalties and intellectual property. The band partnership shall vote to either establish an administrative trust or designate an individual, for example, an accountant, to collect and distribute the royalties on an ongoing basis to the band partners according to their respective interests. So what this is saying is that we have money coming in even though the band is over and we all hate each other. But there's still money coming in. So what we're gonna do is we're going to hire an accountant. I ever going to have all our royalty checks go to that account, then that accountant is going to disperse them to each individual member. That's one way to do it and that's a very fine way to do it if you're making a good amount of money. But that accountants going to need to take a cut. So if you're talking about a couple of pennies, then don't do that. Another way you can do it is this trust idea and administrative trust. And this way you can think of that as like a bank account. So it's all gonna go into a bank account. And then maybe when there's a $100 in there, some set amount of money builds up, then it'll get dispersed out to each of us. It's another way to do it. You could also just decide someone in the band is going to be responsible for collecting royalties and then distributing them out. You're going to need to trust that person that they're going to actually do it. But that is another way to do it. So that's how that's dealt with in this agreement in terms of intellectual property. Okay, next, I want to look at the section on collaborations. 12. Outside Collaborations: Okay, So collaborations, this is something that is always in a band agreement. And it's really this bit that we already looked at a little bit of, but I wanted to zoom in a little bit more on it. So with this agreement says is that band members can do other stuff. You know, they can be members of other bands. They can be doing side projects, other things like that. But that this is kind of their main band because it says each band partner is permitted to engage in one or more businesses, including other musical entertainment efforts, but only to the extent that such activities do not directly interfere with the business and obligations of the band partnership going on. Neither the band partnership nor any other band partner shall have any right to any income or profit derived from a band partner, from any non band partnership business activity permitted under this paragraph. Okay. So let's pick that apart. Here's what that means. And this is important. That means is, let's say, I'm the guitar player in this band, and I decide to start another band. And that band has a hit. Okay? Nobody in this band is entitled to any money I make with that other band. Okay. That seems common sense, right? But it's actually not because if I make a ton of money with this other band, like let's say this band is called the spaghetti peppers. And my other band is called something else. So if my other band, it might be advertised as the band that is made up of the guitarist from the spaghetti peppers. That might be my claim to fame over there. And then I have a hit. So then this week Eddie peppers are gonna say, well now wait a minute. The reason you made so much money over there and because you were advertising yourself as like the guy from the spaghetti peppers. So we're entitled to a cut of that. This happens once a lot of money is at play. These things happen. I was in a dispute just like that once where someone said some other business activities I was doing outside of this group was doing much better than the group is doing. And all of a sudden, this group wanted a piece of that. And it got kind of ugly. But in the end, it was determined because of our band agreement that no, they were not entitled to the money I made over there. And that's what this says. Neither the band nor partnership or any band partner shall have any right to any income or profit derived from a band partner, from any non band partnership business activity performed under this paragraph. So if I'm a band member and I do something as another unrelated band, even though the name of that band follows me around. No one from the spaghetti peppers is entitled to money that I make from that band. It's kind of a complicated provision, but it's important one to understand. 13. Right to Use the Band Identity: Okay, the next thing I wanna point out is the right to use the band identity. Who gets that? For example? Well, let's just look through it first. So this is the section on name and logo and it says, the name of the band is this trademark and service mark. The band also uses this logo. Okay, Then we get to this part that we looked at already, but I wanted to zoom in again on the second part of this. So select one. So the band name and logo is either the exclusive property of the partnership and not owned by any individual member. Okay. So just that part. So let's assume that's true. The the name and logo is the exclusive property of the partnership and is not owned by any individual member. So who has the right to use it? Let's look at the second part of this. The partying band members shall have no interest whatsoever in the band name and logo apart from the limited right to be known as an ex member of the band. So what that's saying is that if somebody quits, the band can't use the band name and logo, except in the case where they're referring to themselves as an ex member of that band, then they can use the name and logo. Probably the name, probably not the logo. In the event that the partnership dissolves. So if the band breaks out, no individual members shallow have a right to use the band name and logo apart from the limited right to be known as an ex member of the band. So if the band breaks up, nobody can use the name of the band anymore. It's all or nothing in this case. Okay. Let's look down here. So this is the one that says it's not owned by any individual member, except that in the event that somebody decides to leave the band, the band shall cease use of the band name and logo. So that would mean something like this is a band called Dianne Smith and the spaghetti peppers is the name of the band. Okay. So you might say here that the name is owned by the partnership, but if Diane Smith leaves, it can no longer be known. The band, the remaining band cannot use the name Diane Smith and the spaghetti peppers, right? That's the case for this one. So this says, the partnership shall cease use of the band name and logo, including formerly band name and similar references. So that means that if Diane Smith leaves dance within the spaghetti peppers, the remaining band cannot be called Dianne Smith and the spaghetti peppers, and they cannot be called, use the phrase formerly known as Diane Smith and spaghetti peppers. In connection with any offering of entertainment services, departing band members have no interest whatsoever the band name and logo, apart from being known as formerly in that band. In the event that the band dissolves, no individual member shall have a right to use the name and the logo. Okay, let's look at this third one. The name and logo is not owned by the band partnership, but rather the exclusive property of one member of the band, Let's say Diane Smith, Dianne Smith and the spaghetti peppers. So unless authorized and writing, shall remain that person's sole and exclusive property during and after the term of this agreement. So that means that Diane Smith owns it now and forever. The other band partner shall have no interest whatsoever in the band name and logo apart from the limited right to be known as a former member of that Ben. So if the band dissolves and on the guitar player and I start a tribute band to Dianne Smith and the spaghetti peppers. I cannot call it Dianne Smith and getting members. We see this in the Grateful Dead. The Grateful Dead have a similar provision that says something like without Jerry Garcia, they cannot be known as the Grateful Dead. So you still see them touring, but they're touring as the dead, right? Not the Grateful Dead. Because without Jerry Garcia, they cannot be the Grateful Dead. So that's how that works. You can devise this however you want. You can write whatever crazy thing in here you want to write if you want, but everybody has to agree to it. 14. Publishing: Okay, there's a lot of stuff in here on publishing, right? As there should be because it's important. So here it says revenue from the band, partnership publishing company, if such Publishing Company has been created, shall be distributed as follows. So remember earlier on we saw that all ownership of the songs goes to a single publishing company. It could also be that the band is set up so that each individual member has their own publishing company. A lot of bands do it that way. And then each of those publishing companies as is administered by a single entity. Um, but in this case, we're creating one Publishing Company is definitely simpler to do it that way. So they're saying, how should the revenue be split? And they want us to decide here. So all music publishing income derived from accorded compositions, including both writers and publishers share, shall be divided equally among the band members. So everything divided equally. Second option, the band partner shall share equally in the publishing income from recorded compositions, the writers of each recorded composition. So I'll receive an equal pro rata share of the songwriters income with respect to each recorded composition. By way of example, if two band partners right, a Record, a competition, each shell share equally as songwriters income from that song. The publishing income shall be distributed equally to all ban partners. Okay, here we are talking about splits. Okay? Earlier we were talking about copyright. We talked about splits. Or maybe it's when we were talking about revenue or publishing. So what this is saying is that remember that in publishing. Remember that when it comes to the performing rights organizations, there's the writer's share and the publisher's share, and each is 50 percent no matter what. Okay? So what this is saying in this one is that the publisher's share gets split equally between all members of the band, no matter what period, but the writer's share. So that's 50% of the total is divided by way of contribution. So after each song is written, the split is written out on a sheet and it says, I contributed 80% of the song. You contributed 20% of the song. Okay? So we agree on that, and then that is paid out as a writer share here. So publisher's share is all split equally. Writer's share is split in a pro-rata away, meaning different for each song depending on who contributed what to the sun. Okay? Or Option 3, all revenue derived from recorded composition shall be pooled, whether it is characterized as publisher or songwriter revenue. Each band partner shall receive one credit for performing on each recorded composition, the writers of each recorded composition. So I'll receive one credit for writing each band partner's total number of credits equals the numerator, top number of refraction. Total number of credits equals the denominator refraction. Each band partner then receives this fraction of the song income. So this is another way to do it where you're basically dividing everything up based on contribution. But in a more kind of vague way. I don't think this is very common. The most common way in my experience is this way where the band shares all the publishing and there's going to be other people that share in the publishing too. If you have a record deal. And other people who take some of the publishing, I should say. And the writers split based on contribution. It's kinda the most common. This way is also fairly common. Okay, then the next thing we need to figure out is whose keep an eye on the publishing. So we've already decided in this agreement that the publishing is going to be administered by a single publishing company, not by individual members publishing company. So in the event that one band member leaves the band partnership, control of the jointly owned copyright shall be vested exclusively and the remaining band members for the term of the band partnership, leaving members interests in the band partnership publishing company. We shall extend only to those recorded compositions which were commercially released for sale during the leading members period, That's band partner. Leaving member shall receive semiannual accountings and payments with respect to any income. So what this is saying is that if someone leaves the band either by their own choice or they're fired, they will continue to receive their royalties, both as a writer and a publisher for anything that was commercially released before they left the band, but nothing after, which makes sense, right? So they will continue to receive their share of the money. 15. Email Lists, Social Media Accounts, and Contacts: Okay. One thing that's really not accounted for in this particular agreement that I think should be and is really important, is the marketing assets of the band, in particular, the fans. So what that means is any email lists, the social media accounts of the band, any professional contacts of the band, all of that stuff. Who gets to keep that if a band breaks up? Now in this agreement, it isn't directly Noted who gets to keep that. So I think it would fall under band property. It seems like it should fall under intellectual property, but I think in this case it would fall under property. Because what we say here is the property shall be distributed as nearly as possible equal shares among the band members. So I think what would happen with this is one member of the band would say, the social media accounts of this band are worth $10 thousand to me. So that would be like a chunk of the pie that they would take in exchange for everything else. That's not a very good way to do it. So I might, if I was actually using this, I might add a section here and say something like just really spell it out. Social media accounts, email lists and fans, databases. And then say, who gets them. So you might say if there is, if we are in a situation where there is a front person, like the example we were using before about, I forget the name I came up with. Diana Smith. Was that it? Diana Smith and the spaghetti peppers? Maybe Diana Smith wants to stake claim to that. Now, early on in the band agreement. That could be that would make sense to me. This isn't really something that can be divided up. And it isn't something that you want just a throwaway, right? You don't want to just say we're going to delete the accounts because that's such a waste. That's valuable to somebody some member of the band wants that. You could say. Any member will have the option to buy the accounts from other members. And then you'd split, want to specify how a price is going to be determined. If it's going to be like an internal auction, like whoever is willing to bid the most for it? I don't know. I don't know the answer to this one, but it should be specified how you want to do it. 16. Firing a Band Member: Okay, Let's talk about probably the stickiest situation that bands will ever be in, hopefully. And that is changing the membership of the band. Now remember, the band is accompany and therefore, there are legal responsibilities that you have two people who are employees of a company or co-owners of a cup. So this agreement deals with it in two different places. The first is in the voting. So expelling a band partner doesn't need to be unanimous or just a majority vote. Um, I think it's assumed here, but you might clarify that. If you want to say and then unanimous, that means unanimous minus the person being voted on. Because they're probably not going to vote in favor of kicking themselves out of the band no matter what happens. So you could say unanimous minus the person being voted on, or you can say just needs to be a simple majority vote. I would go with unanimous here minus the person being voted on personally. I think that's, you know, expelling someone from the bands a big deal. And I think you should all agree on it. But if you just want it to be a majority vote, that's fine as well. It's up to you. Okay. And then the second place it deals with it is down here leaving numbers. Okay, So there's two ways someone could leave a band. They could decide to leave. What this agreement will call resignation. Or they could be forced to leave or in voluntarily leave by being expelled. Okay. So really resignation or expulsion are kind of are two terms here. So if someone resigns, if they leave on their own, they need to give 30 days notice. And during that 30 days, band can prevent that person from being on any live concerts or recordings that have been scheduled. So the reason for that is just that if if the drummer comes and says I'm leaving the band in 30 days, then. And we're scheduled to go into a recording studio. If we can find a new drummer in time, we should have the new drummer play on those recordings, right? Because hopefully that new drummer is going to be with us for a long time. And the old drummer doesn't really care because they're quitting. This actually just happened to, there was a case with Aerosmith and their drummer where they were in the process of firing the drummer. And they didn't want him to be on a recording or on a performance for the Grammys, I think it was. And there was a lawsuit filed. It was an ugly business. So that can happen. Okay. But that's only voluntary. So let's move on. The band, partnership shall provide written notice if it expels a partner. So if you're going to expel somewhat, if you're going to fire a band member. This has do it in writing. Don't just do it in writing though. Sit down and have a conversation. It'll be terrible. It'll, you'll hate it, but have a conversation with the person, then give them something in writing that says you are no longer in this band. And expelled members also can be prevented from performing in the 30 day period before their actual expulsion. This is a little vague on that one. They're not there. They need to give 30 days only if a partner only if they resign or if expelling them needs to give 30 days also. So I might clarify that in your version. Okay, now what they're entitled to, this is actually a fairly sticky thing. So let's go to a new video and talk about that. 17. What They Are Entitled To: So when a band member leaves and for either reason, either they're expelled, fired, or they resign, quit. There are really two things. It looks like three, but there are two big things that have to happen. Let's look at the middle 1 first, leaving members share of any royalties, commissions, or licensing fees earned from sound recordings, which include leaving members performance. And then the third one and expelled partner shall be entitled to receive the value of his or her interest in the partnership according to the provisions of the agreement. So the first third are related. The leaving members proportionate share of the net worth of the band partnership as of the date of disassociation. Okay. So the second one, they're owed all the royalties that they're owed is really what that says. And that will continue on like basically forever. Any recordings that they're on, you know, they still are on those recordings even though they're not in the band anymore. So there continued to be owed royalties for those. So that doesn't change. Now, the trickier one here is Leaving members proportionate share of the net worth of the band partnership at the date of disassociation. In other words, on the day that they're fired, what is the band worth? And you need to give them, you basically need to cash them out of that. So how do you figure out what a band is we'll worth? That's insane. This last one, kinda the same thing and expelled partners. You'll be entitled Lucy, the value of his or her interest in the partnership, the band, according to the provisions of this agreement. So we need to figure out what the band is worth and then pay them for that, pay them their cut, and then send them on their way. That's tricky. But luckily, it's outlined here, determining what the band is worth. So we'll get to that in just a minute. So hold on to that for a few minutes. Let's talk about how to add someone to a band, and then we'll come back and then talk about how to value the band and what this fire to band members is actually owed. But before that, there's one more thing I want to get in here. This little bit. A band partner may be expelled from the partnership for the following situations. Now this isn't everything. This is just kind of some special cases, um, but these are important. The band partner seeks protection under the federal bankruptcy code. So in other words, a band member declares bankruptcy and that can can potentially if you check that box, get them fired from the band. Why? Why do we care? Because remember, the, the, let's keep with, keep picking on drummers. The drummer in our case is a co-owner of our company, which is the band. And that ownership of the company is an asset that they have and it's worth something. So if they declare bankruptcy, all their assets get auctioned off and anyone can buy that asset in an auction. So in theory, membership in this band goes up for auction and anyone can buy it. You don't want that. That's no good. So what you can do is say, if someone files for bankruptcy, basically they're fired and cashed out. That prevents the anyone or just a bank owning a chunk of your band, which you don't want. This one is similar. A band partner makes an assignment for the benefit of creditors so they can't put their membership in the band or their stake in the band up for collateral or anything like that. And then you can specify anything else you want here as well. So don't forget about this little thing here. It's an important little provision. 18. Adding a Band Member: Okay, Let's talk about these slightly happier situation of adding someone to the band. So again, this deals with it in two places in the voting rules. So first is admission of a new partner. Does it need to be unanimous or majority? I would vote for unanimous for me personally, but it's up to you. And then we go down to this paragraph. Okay? Each new band partner must agree to be bound by all the provisions in this agreement. Okay, so step one, does the member of the band agree to the band partnership agreement? Okay? A new band partner shall not have any rights to the band partnership property or assets existing at the time of admission to the band partnership. Cat. So if we own that PA, if the band bought that PA through the hard work of the band and the band owns that PA, Then we add a new member. They don't own a chunk of the PI. They can use it and everything. But the band prior to that person paid for the PA so they own it. So we can't add a member to the band. And then right away, fire that member of the band. They're not owed a portion of that PA right? Because they weren't part of the the band that bought it. So anything existing, any existing property or any of the proceeds derived from existing property. So if we sell that PA, they don't get a cut because they didn't help buy it. They just weren't there. For example, revenue or, or a royalty is generated from recording compositions, sound recordings or other material or created prior to the band partners admission. So now we're also talking about royalties. So royalties on recordings that we made prior to that member being in the band, they don't get royalties for that stuff that they're not on. They get royalties for stuff going forward. But not anything in the past there remember, there are new member as of that day and going forward. But we can't pay royalties twice, right? Like if we add a new drummer, if we fire a drummer and then add a new drummer, the drummer on the old recordings still gets royalties. The new drummer doesn't get royalties until he plays on a new recording, right? So we can't pay royalties twice. Whoever's on the recording gets the royalty. So that's it. They don't the determination of net worth, does it matter to someone being added to the band? They don't have to buy into the band necessarily or anything like that. 19. Valuation of the Band: Okay, figuring out the value of A-band is a nearly impossible task. I've gone through this a few times where we had to figure out the value of a company or a band. And even for a normal company, it's impossible. Even if you said like your hardware store down the street, what is the value of that hardware store? Is it all the stuff inside of it? That's one way to think of it. Is it the real estate it has? That's another way to think of it. Is it the brand that it's made? That's a good way to think of it, but how do you put a number on that? Is it the salaries of the people that work there? Is it the potential for money that it will make later? That's a good way to think about it to, all of those ways are good ways to determine the value of a company, but none of them are perfect. So in a band, a lot usually what we do, as we rely on that last way, which is how much money do we think we'll need, or how much money do we think that band will make over the next, say, five years? That is a common way, but it's so much of a guessing game, right? So what's outlined in this contract is actually pretty good. It says if the leaving member and the band partnership cannot agree on the net worth of the band partnership. So step 1. Let's all just try to agree. Let's all just say the band is worth a million dollars, four dollars. Who knows? So if you can't agree, then what you do is you will agree on an accountant. Now, there are accountants that are specialized in doing this exact thing that will come in. Go through all of your books, go through your taxes, go through, look at all your gigs in your brand and everything, put together a big report for you. I have one here somewhere and say, based on all the factors that we can find, we think that this is what your band is worth. So that's the simplest way to do it. So we're just gonna say, Okay, we can't agree. We're going to hire an accountant, a mutually agreed upon accountant so that it's an unbiased account. Okay. They're just going to come in and look at the numbers and figure it out. This can take as much as a month, sometimes more for them to do. It's a lot of factors that they look at. And that's it. And we're just going to say whatever that accountant comes up with, that's the number. Now the reason we can test this number is because as a current member of the band, I want this number to be low, right? Because I'm going to have to pay if it's a four person band, I'm going to have to pay a quarter of the number to the leaving band member. So I want this number to be as low as possible right now. And the leaving band member wants it to be as high as possible, right? So that's why the idea of just agreeing on this is unlikely. Having an unbiased accountant is really what you need to do. So that's the way it's done. Then once you have that number, then we have outlined here how it's going to be paid so that the band just doesn't have to fork over a ton of money. Basically, it says if the share is less than 10 thousand, that we pay it in 12 monthly installments. So the band will pay the leaving member a $1000 a month for 12 months or whatever it ends up being. No more than 1000, I guess a little less than that, shares more than 10 thousand, but less than 25000. It will be paid over 24 months. If the band is or if the shares over 25000, it will be paid over 36 months. So it says basically it's a way for the band not to go bankrupt, to get rid of the person. Just says we're going to spread out the payments so that we can keep working. Okay? And that's ox, by the way. If it's 10 thousand bucks, you might play a gig and make it 1000 bucks and then be like, well, the entirety of that gig, it goes to that band member that we fired. That's how it goes for a certain bit of time. That's the price of firing people, I guess. But eventually it'll end and you'll have a new band member and everything will be fine. Okay? So that's that for valuation of a band, it's a very complicated thing to come up with a valuation, but this contract simplifies it by just saying we're going to hire an expert who knows how to figure that out. And then we're going to all agree before we even see that number. We're going to agree to go with a number that that expert comes up with. 20. Obligation to Record: Okay, So there's one other kind of sticky situation when it comes to a member leaving or the whole band breaking out. And that is if they have a recording contract, if they have a deal with a record label, there might be an extra little wrinkle in here. So let's talk about that now really quick and we're gonna go into more detail on it in the later stuff when we talk about the next big, big chunk, when we talk about record labels and how record labels work. So the wrinkle is that you're not going to find it in this contract. It's a provision that is in the record contract. And it might obligate each member of the band to the recording contract individually. Okay. Here's why that matters. If the band says they're going to release two records with this record that right? So they've committed to put out two records with a record label, and so far they've only released one. Okay, Now let's say the drummer quits. So the band is still obligated. The span is still under contract to release that. The next album with that record label. But the drummer, the drummer who quit, might still be obligated as well. So that means whatever the drummer does next, if the drummer puts together a new band or joins another band, they may have to take that album, whatever their first album is that they release to the existing record label. This can be good and bad, right? Because that drummer can go around to a new band and say, I already got a record, they've already got a record deal. It's probably going to come out with my former record label. But it can be bad because if that band already has a record label or a record deal, then you've got problems. Or if you don't like the record deal that you had, you have problems also. So really how it shakes down is the record label usually has right of refusal for the leaving band member. That means that the drummer record a new album with a new band. They have to take it to the old record label, which will then say we want to release it. And then they're bound to it. Or we don't want to release it, and then they're free of that contract. So it's kind of a right of refusal situation. But it can be, and it's important to remember that departing band members can be obligated to the recording contract of the band that they've left. Okay. And that's true for all band members. Yeah, especially the lead singer. If the lead singer leaves and does something different, they, they may still be obligated to release with that label because that's what the label wants, right? The label wants that act. So if the lead singer go somewhere else, they're more than likely going to hunt them down and make sure that anything they release is released on their label. So just one kind of special provision to keep in mind. We'll talk more about that when we get to record labels. 21. Bootstrapping Finances: Okay, Let's talk about financing. So how do bands get money to get off the ground? There's a couple of different ways. And if you're in a band, we're gonna talk about how you might be able to find some money. The most common way is through what we're going to use the business term here of bootstrapping. This is the way that most bands get off the ground. Bootstrapping is this term that we use in business basically to mean, well, it's kind of a throwback to an old pirate term. I'd like pulling yourself up by your bootstraps. Like, you know, that's, that's kind of impossible gravity wise. But the idea is, you start with a little bit and you use that little bit to make a little bit more. And then you use that a little bit more to make it a little bit more. And then you use that little bit more to make more. This is the best way because you never incur debt, right? So what we're gonna do is you're going to put a band together and you're going to play a tiny little gag and you're going to make a 100 bucks. You're going to reinvest all of that. You're going to say this, this goes into the band fund. And then you're going to play another little gig and you're going to make a 100 bucks. Now you've got 200 bucks. Eventually you're going to have enough to buy that PA that you need. And then you're going to get better. And so you're gonna get paid more for gigs and then you're going to reinvest that money. And no individual member of the band is gonna get paid a cut until you're making a significant amount of money. That's called bootstrapping. It's great if you can do it. But that means every one of the bands working for free for awhile. And maybe that's not feasible. If you have to pay people, then you need some money coming in right away. So or if you need equipment right away from the ground, up, from the first time to band gets together, you need to rent a rehearsal studio, or you need to buy the PA right away, then you need money right at the top. So let's talk about a couple different ways that that happens. First, let's talk about how various members can contribute to the band and weighs what they get for their contribution. 22. Money from Members: Okay, so let's say you're in a band. There's four people. One person in the band is rich, and everyone else in the band is not rich. Let's just say that for a hypothetical situation. So the person in the band that's Rich is going to have the money to give to the band to make things happen. So what do they get in return? Okay? So whenever any member of the band puts money into the band, it needs to be figured out what kind of investment that is in the bent. And it can be one of two different things. It can be what's called Let's do this. Members. It can be what's called a capital contribution, or it can be alone. So you probably know it alone is. But you might not know what a capital contribution is. So a capital contribution means you're giving money to the band and you'll get it back in the value of your ownership being higher. Okay? So earlier we talked about the case where we fired the drummer and we owe them 25 percent of the band because everybody in that band owned 25 percent of the band. Okay. So normally each, oops, caps each member of the band, and let's say founding members owns an equal amount of the band, okay? It doesn't have to be that way. You can change it when you create the band if you want. But, but if, let's just say the singer puts a $1000 into the band as a capital contribution, then they might own 40 percent of the band. And the rest of the members split the remaining 60. Okay. So the amount there needs to be kind of disgust and figured out amongst the band. But if I am the singer and I have $1000 to spare, I might put $1000 into the band to get us off the ground. If we all agree that I'm going to do that as a capital contribution. And that means that what I get for my $1000, a higher percentage of the ownership of the band. Okay. Now we know how that matters, right? Because that matters. We saw above. If we quit, right? If I quit the band and I own 40% of it, now I can cash out on 40% of the band or the value of the band. And it also has to do with later down the road. It might have to do, we might use that same number for royalty splits and things like that if it can happen that way. But it doesn't have to. So for my contribution of that money, it could be determined that I get I own more of the band. Okay. This works out well for if you have someone who is like the front person of the band, the front person might dump a whole bunch of money in the band because it's their band. You know, they might own a 100 percent of the band. They can set it up that way. But if you don't wanna do that, if let's say you want, you know, the rich bass player to throw a $1000 into the pot so that they can, so that we can get this band off the ground. But you don't want them to own more of the band if that feels weird to you, because it's kinda weird, then don't do that. Do it as a loan. So and if it's alone, it's paid back with money. The band makes overtime. So that means that you are, the band is essentially negative $1000. Now you owe the bass player a $1000. And you can say, okay, we're gonna give you, you know, $10 extra for every gig that we play until that $1000 is paid off or something like that, you can make an arrangement to pay that money back. But the band does have debt now. But if it's debt owed to someone in the band, then it can be that it's better, it's easier to deal with them owning money to a bank or a credit card. So it is a good way to do it. Let band members contribute money to the band. In general, I would prefer it always as alone rather than a capital contribution. But if the band agrees that it can be as a capitalist contribution, then you can do it that way. But it needs to be stated and written down somewhere. What kind of money that is is that capital contribution or is that alone? 23. Outside Financing: Investors: Okay, Let's talk about investors. This is kinda the Holy Grail that a lot of people want to get their hands on. But I'm going to convince you that you kind of don't want to get an investor. Here's how an investor works. And investor is essentially a capital contribution. It's exactly a capital contribution, but from an outside person. So the reason investors invest in things, and investors do invest in bands, it's rare. It's really rare, but it happens. What an investor gets for putting money into something is a return, right? Investors are in the business of making money. By lending money, they need to make money. So if an investor gives you, let's say $5 thousand to the band, what they get is capital. That means ownership. They get ownership in the band. So if someone, if you're a band that's just getting started in an investor comes along and says, I'll give you $5 thousand to get you all up and running so you're ready to play gigs with all the equipment you need and all that good stuff. But they're going to say, now, I own 25 percent of the band. They're essentially a band member that doesn't play in the band, right? That means they can, they can help make decisions. They can vote. Perhaps, depending on your agreement with this investor. They might be able to make decisions, they might be able to vote. And they certainly have a right to take 25 percent of what the band makes. Okay. Because they're not playing in the band, but they still own part of the band, a big part. So there are going to take a good chunk of that money. So you're gonna owe them for life, for the life of the band. They own part of the band. It's not easy to get rid of an investor once you have one, it can be done, but it's hard. So you're effectively selling a chunk of your band. If you get an investor. Now, I will reiterate what I said before. Investors investing in bands is extremely, extremely rare. It's not wise to go after them. Because think of the risk for the investor and this investor puts 5000 dollars into your band. What they need to be able to do is get 5000 plus more back. That's the business they're in. So they're going to they need to bet that your band is going to make it big and take off, and then they're going to make a whole bunch of money. But how many bands existed in the world and what are the odds of yours which hasn't even started yet, going to get huge, right? It's just, it's just inconceivably rare to be perfectly honest. So it's not a good investment for an investor to make. But there are some that do it. So if you find one and they want to give you money, you can consider it. But remember, you're selling part of your band. That's the most important thing to remember. It's generally not a good idea. So an alternative to that is just taking out a loan. So let's talk about loans. 24. Outside Financing: Loans: Okay. Bands can get loans because bands are businesses and businesses can get loans. Business loans exist. So you can go to a bank and look up what their options are for business loans. And you can apply for one as a bent, totally reasonable. Here's what the bank is going to need to see in order to give you a loan. They're going to need to see your ability to pay it back. That's the biggest thing that they need. Now remember, just like investors, banks are a business and they're in the business of making money by giving money. So they need to make a little bit. So you're going to pay it back plus some. But the difference in an investor is that an investor is going to then even after it's paid back, ONE part of your band, whereas alone, once you pay it back, plus a little bit for interest, you're off the hook, right? So it's generally better. And an investor you never act actually have to pay back the money. They're just going to take a chunk of money forever. So you need to be able to show the band that you're, or the bank that you're going to be able to pay it back. And the way you would do that is if you're already playing gigs, you can show that as revenue. So what you would do is say, Okay, we play one giga month and we make $500 at that gig. And we've been doing that steadily for a year. Okay, that's not a lot. But let's say what, what is that? 500 times 12, 6 thousand dollars. So we play one giga month and we make $500. And we've been doing that for a year. That will show the bank that it's likely that you'll be able to keep doing that. So they might say, Okay, we'll give you a loan for $6 thousand because it looks like you'll be able to make that back in a year and pay us back. It might they might not be willing to go as high as $6 thousand, but close to it. And so that's very reasonable to do. You can make them a little more confident in it by putting something up as collateral, right? You can say, Please give us $6 thousand. Here's evidence that we'll be able to make it back and pay it to you. But also, we have real fancy guitars, a nice PA, really good set of drums. All of that together equals $5 thousand worth of equipment. And we'll put that up as collateral. Now this is scary. That's really scary because that means if you can't pay it back, the bank can come in, take your care, right? So, but here's what you need to remember about that. The bank doesn't want your gear. Bankers don't care about your guitar. They don't want your guitar, they don't want your drums. What they want is money. So they might take it if you really default on the loan, they might come and take that equipment, it's theirs and they're going to auction and often sell it. But in reality, if you can't pay the loan, they're going to do some things to try to get you back on track without taking your gear. The first thing we're gonna do is not just show up at your door with some muscle and break your knees and take your guitars. That's not what they do. I think. So. You can put things up for collateral, but know that it's possible that they could take it. Also know that with alone. Usually there's one person that needs to be the majority on the hook for the loan. So if it's a band, we might name one person and say, You're the one really going after the loan so that if the band breaks up, the bank knows I'm going out to that person, whether or not no matter what. Also just one thing to clarify that I just said a second ago. It if we put the guitarists guitars, and the drummers, drums up for collateral, that doesn't mean that they have to be a that has to be equipment owned by the band. We can put any equipment personally owned by individual members up for collateral if we want to. If they're willing to do it, we can do that. It's better to put things owned by the band up for a collateral. But if we want to put if I want to personally put my car up for collateral, we can do that too. It's possible. They'll take anything as collateral, but the owner of it has to agree to it, obviously. So loans are a very legitimate option. It sounds scary. If you're going after alone as a band. Don't take one that's too big. Only take what you need. Smaller loans are better because you're going to have to dig out from it. You're going to have to pay it off first before anything else really gets achieved. But loans can be a really good option. 25. Accounting, Accounts, and Audits: Okay, now we've got a bunch of money flowing through our band and we've got some agreements with an investor in a bank and we've got all kinds of stuff going on. How do we keep track of all of this? Let's go back to our band agreement here. This agreement does talk about that in two places. Okay. Right here. Books of accounts and records, the books of the bands partnership and all our documents related to the business of the band partnership shall be maintained and its principal place of business and shall be available for inspection at reasonable times by any band partner or designee of the band partner. So that means that somewhere, look at your rehearsal space or something. You need to kind of have all of the documents together of your accounting stuff. If you're using an accountant, which I would highly recommend. If you're using an accountant. It can be at the accountant's office. It can also just be a digital file if you're keeping track of this in a Google Doc or some kind of spreadsheet. That's fine. But it needs to be made available to any band member who wants to examine it. So if they think that the drummers stealing from band, they can look at the accounts and make sure everything lines up and all the money is there. That should be there. The fiscal year of the band partnership shell and then December 31st. Fiscal year means the financial year. The band partnership shall provide an accounting statement to each band partner twice a year at the end of June and December. So twice a year, whoever's in charge of the band finances is going to say, here's how we're doing and send out basically a statement. We go down back here, band partnership BankAccount. The band bank account will be opened by so and so someone in the band should have the right sign checks and draw on the band account. So what they're saying here is that you should really name one person to be your band accountant. If you don't have an outside accountant, someone's going to be in charge of taking checks to the bank, taking cash to the bank, paying the bills, paying the loan, and be able to write checks and do all that stuff. So whoever is the most financially savvy in your band should really name that person to keep track of all of this stuff. 26. Profits and Losses: Okay, Next up, I just want to go over a couple other things that are in this agreement just to kind of put a little point on them. So first is this section on profits and losses. This is how, this is really what we're gonna do with money when we make money. So band plays a gig, we get paid $1000. What do we do with that? There's a bunch of different philosophies about this. So here's what this agreement says. Unless otherwise, agreement in writing, band will share all equally in all net profits, losses, rights and obligations of the band partnerships. Okay? Then after deducing band partnerships, expenses, bubble blah, net profit shall be distributed in cash to the band partners. So what that means is, let's say there's four people in the band, we make $1000. We're going to first pay off all our expenses for that gig, which might be salaries. And I think this means other than us, the members of the band. But if we have an agent that needs to get paid, if we have a live sound person that needs to get paid, anything like that. If we have rent for our studio that needs to get paid, a rehearsal studio, whatever costs we incurred to make flyers or do promotion, little stuff, our collective travel costs, anything that it took, any money that we owe that's going to get deducted first. Then from what's left, we're all gonna split four ways go. So that's perfectly fine. You can do this however you want. But that is a pretty good way to do it. Another good way to do it that I like is actually to add kind of a fake fifth member, or if added an additional member to the band to be paid. So what that would mean is if we have four members, we're actually going to take our leftover money after we pay our expenses and we're going to divide it by five ways, okay? And so 20 percent is going to go to each member and then 20 percent is going to go to the band savings account. Okay, That's gonna get used for our next recording project. The next time we need to buy some gear, the next something. But it always keeps some money in the pot, so to speak, for band activities. So that's a good way to do it. I know some bands that take the money from gigs, pay their expenses, and then take 50 percent of the leftover money and put that into the band pot. And then 50 percent gets split between the band members as their salary. That's a lot, but you can do it that way. That would be great if you're saving up for a recording project. So there's a lot of different ways to do it. So just something to think about. 27. Meeting and Voting: Okay, Next thing is the voting thing. We did talk about this business of unanimous and majority and the different issues, but we didn't actually talk about how voting is set up. So let's look at this. Each band member shall have the right to participate in the business of the band partnership. Meetings of the band partners can be called by any member of the band partnership upon reasonable notice. So any member of the band can say ban meeting, and that's like an official thing with reasonable notice. Now it doesn't have to be this way. This first sentence is not a given. Each band partner shall have the right to participate in the business of the band partnership. Perhaps you don't want it that way. Perhaps you want to say j is in charge and whatever he says goes. You can do it that way too. So that means there's no voting, There's no band business, and there is no meetings. You can get rid of all the rest of this stuff. Because down to there. Yeah. And you're adding all that stuff. Meetings and voting isn't charged whenever he says, God, I like this. This is my kinda band. So you can do that if you want. Now you're not going to have a very happy band. And you're going to have to pay them a lot. Because this tells me that I'm in charge of this band. I'm on the hook for everything. And I'm going to have to pay everybody a lot of money. And because they're not going to be personally invested. So I'm not gonna do that. But you can, if you want. You can make your band a dictatorship. You can make it a democracy. You could make it a socialist venture. I don't know how you'd do that in a band. I don't know. Let's think about that. It's kind of fun to think about. But keep in mind. 28. Breaking Up The Band: Okay, What if we decide we want to just end the band? Remember that your band as a company. So it's not as easy as just walking away. There is a little bit of legal stuff you have to do. This isn't really about that, but this is how we agree to terminate the band. So let's look at this section. This agreement and the band partnership shall not terminate for the reason that a band partner leaves the partnership. K Again, that's not really a given. You could say here that if one member leaves, band is over. And I think we're going to say that at the end down here, if blank leaves the band partnership, that band partnership shall end. So we can check this if we want and say, if j leaves the band, the band is over, no more band. You can do that if you want. But if you do that, I would take out this sentence because it a little bit contradicts. If a member leaves the band partnership shall remain in full force. Among the remaining numbers, I guess this is saying, except if this one specific person leaves, this agreement shall terminate in the band partnership shall end upon the first to occur of the following events. The written agreement of the band partners to end the band partnership or by operation of law, except as otherwise provided in this agreement. So if we all agree and sign a document that says the A-band is over, then this whole contract is terminated. By operation of law. I think that would mean that if I don't know exactly what that would mean is if for some reason the A-band is forced to terminate because of a legal issue. I don't know what that would be. Perhaps the band declares bankruptcy. That might do it. But I can't think of another great reason, so I'm not really sure, but I guess it's good that it's in there. If a court says your band has to break up, then probably should. Okay. So then we can kinda add this clause in that says there can be, we would call this a, a key person clause. I mean, there's one kind of key person that everything sits on, and if that person leaves, the whole agreement falls apart. Will see key person clauses more when we talk about record labels. 29. Arbitration: So at the bottom, there's this bit about arbitration. So this is complicated it because I have weird feelings about arbitration, but let me just try to explain what it is. Arbitration is a process that you would go through if you have a major disagreement. So it essentially prevents you from suing each other. Which sounds good. But there could be a case where you have to sue each other. And if you agree in this contract to arbitration, you kind of can't sue each other. Arbitrary. Well, if you imagine, if you go to court, you've got the two sides, a judge and a jury, right? That's how CTE works. Arbitration is just the two sides and a judge. And the judge here listens to it and says, You win. End of story. No jury. So in a lot of agreements these days, there is an arbitration clause that says, That's how are we going to do it if we have to go to court? I don't really like it. People sneak him and everything. If you've ever signed up for a social media account like Facebook, like you can't sue Facebook. It's impossible because when you signed up, you agree to arbitration. So that kinda gets stuck in here and I don't really like it. But it is sometimes better. So what I would suggest with this is read through this study up on the rules of arbitration and decide if you really want to put this in your agreement. So it's something to think about. 30. The Answer Is In The Agreement: Okay, The last thing I want to say about these ban partnership agreements is that you want to put everything that you can think of in the agreement. If there's something weird and specific to your ban, put it in the agreement. Whenever a question comes up, what we want to have happened is we want to be able to say the answer to that question is in the agreement. We have it already figured out. We don't have to butt heads over this. We have already figured this out. So if someone says, How do you guys split revenue? The answer is, it's in the agreement. If I was to say, I wonder how Metallica was initially funded. Well, the answer to that would probably be in their agreement and I could probably find, you know, what their rules were for capital investment if I wanted to. So no matter what happens, you want there to be this document that basically says what you're going to do in every situation. That's why bands have these. It's also why bands protect them. You're never going to find Metallica's band agreement, but I will bet you a million dollars that one exists. They have it and their lawyers have it. Probably no one else is ever going to be able to find it. These are not things that bands make publicly available like ever. I've never found one by a well-known bend because it's private. You know, it's private how you agree to work with these people who are also your friends. So just keep in mind that anything that you think might ever come up, Ember, put it in the agreement. And don't forget that you can revise the agreement as often as you want, as long as you get everyone to sign it, the new version of it. 31. What Comes Next?: All right, You've reached the end. That is the end of the third musicians guide class that I've made. I've got at least three more than I'm going to make. So what's coming up next? Next I'm going to dive into record labels, how record labels work, and how recording contracts work. After that, we're going to go into distribution. Super, super important. If you are releasing music on your own, distribution is critical. And then last one in this series is going to be the not very sexy but very important issue of taxes. How musicians need to deal with taxes and the best way to do it so that you don't get in any trouble and also don't end up paying a ton of extra taxes. So that's what's coming up next. I've got a few more things for you to check out in this class yet. So don't leave yet. Stick around. 32. Bonus Lecture: Hey everyone, want to learn more about what I'm up to you. You can sign up for my e-mail list here. And if you do that, I'll let you know about when new courses are released and when I make additions or changes to courses you're already enrolled in. Also, check out on this site. I post a lot of stuff there and I check into it every day. So please come hang out with me. And one of those two places are or both? And we'll see you there.