Band Partnership Agreements

In my last post I spoke briefly about Band Partnership Agreements (BPA).  I feel like this idea deserves to be expanded on due to its importance for working bands.  When a band is just starting out, everyone is excited about the music, the creativity, the possibilities, and everyone in the band is (more or less) willing to do what it takes to help the band succeed.  In order to avoid the time and expense of litigation, band members should think about how to deal with the internal problems that will almost inevitably arise, during the early days of happy cooperation.

As I stated in the previous post, a band is generally, by default, a partnership.  Unfortunately the default rules for a partnership do not resolve many potential problems a band may face, such as who owns the rights to use the band name and how revenues from records are divided after a member leaves the band.  So if your band operates as a partnership, you should write a BPA.  “But wait,” you may think, “aren't verbal agreements binding?”  Generally, yes, they are binding.  But do you want to stake your share of the money or ownership of the equipment on some he-said-she-said argument?  How complex of a BPA that a band will require depends on the band.  The permutations of BPAs are as limitless as the personalities of bands.  Some bands may not require a complex agreement and may be able to create a BPA by themselves.  Other bands may require expert advice. 

Here are some of the most common issues covered by a BPA:

Band name ownership

This becomes a point of contention when past band members try to use the same band name or a substantially similar name.  Under partnership rules the name of the band is owned by all band members, so when one member leaves, they can continue to use the band name.  With multiple bands using the same or similar names, fans could be confused as to which band is which, leaving the name of the band “diluted.”  Bands can agree on a single owner and under what circumstances past band members can use the name.

Establishing the Operating Rules of the Band

With standard partnership rules, bands make most decisions by a majority vote of the members, with each member having one vote.  There are a few exceptions to this, such as admission of new partners, adopting or amending a partnership agreement, and ending the partnership, that require a unanimous vote.  It’s clear to see how the default rules can lead to a tie or some other impasse.  The members can use a BPA to agree how to break a tie and whether they want to require any issue to be passed by a supermajority or unanimous vote (such as hiring or firing band members).

A BPA can also establish rules to regulate non-band activities through warranties and indemnities.  For example, each band member could warrant (promise) that they will show up to practice on time.  Breach of the warranty could then be used as grounds for expulsion from the band.  Additionally, each band member could indemnify the other members for conduct that could get the band sued.  For instance, a band member may get sued for causing property damage and personal injury by drunk driving the band truck to a gig.  Under the default partnership rules, all of the members would be liable for the actions of the drunk driving member.   However, indemnification requires the drunk band member to repay the rest of the band for any suit resulting from the drunk driving.

Also, when band members come across a dispute they cannot resolve otherwise, a BPA can establish the means of resolution.  The standard means of dispute resolution is a lawsuit, which is very expensive, very stressful, and produces a winner and a loser.  A BPA can establish mediation or, if that fails, arbitration, as an alternate means of dispute resolution.  Mediation can cost much less than a lawsuit and provide each party with a better outcome than a court could because, unlike courts, mediators can look at all aspects of the parties’ relationship, not just the dispute at hand.

Band Members Leaving the Band

There are a few issues related to band members leaving.  First, the band revenue needs to be divided.  This includes revenue earned when the member was in the band and some revenue earned after the band member leaves (for sales of records the member was part of or, potentially, sales or merchandise).  A BPA can describe specifically how the band wants to accomplish this and can vary how it treats quitting and fired members.  A member may get full shares of revenue earned during the membership period and a fraction of shares for revenue earned after leaving the band.  Second, the band has to decide how to divide band property to the departing member.  How a band does this could depend on whether the member quit or was fired.  A quitting member may be made to forfeit ownership of any band property.  The agreement may also state that if the departing member’s share of property is over a certain dollar amount, the band will pay the departing member in instalments so as to protect the band’s financial health.

Songwriting Income

Generally, songwriters own the copyright in the songs they write, even songs co-written with others.  This allows anyone with the copyright to a song to make money from publishing the song, even without the knowledge of the other copyright holders.  Band members can use a BPA to agree how to share songwriting income, if they want to share songwriting income.  This can be a point of contention when not all band members are song writers.

The sooner a band writes a BPA after formation of the band, the easier it is.  Once the band gets rolling, it can be much more difficult to separate the issues from the egos.  Every band will have disagreements and every band will have members depart.  A BPA can help a band have a more harmonious, or at least, much less acrimonious relationship, even when that relationship ends.