Do you perform or record as a band? Here are some legal considerations to think about:
1. In the absence of a written arrangement among you, the law deems you a partnership. This means that each of you is responsible for all the debts and other liabilities that any of you incur on behalf of the band.
2. It also means that any property or income you bring into the band belongs to the band and that it is shared equally among the members.
3. Although many bands don’t do it, it is really important to have a Partnership Agreement among the band members, if only to override the “default” structures that the law imposes.
4. At $60 for on-line registration, registering your band as a business under the Business Names Act in Ontario is a good investment. It also forces you to do a proper search of the availability of your group name. The name is then protected from being used by any other band in Ontario and in most instances in Canada.
5. Setting up a corporation in Ontario is an important vehicle to reduce taxes and individual liability, but it makes economic sense to hold off until significant revenue is coming in. On-line registration costs $360 and the exercise also generally requires a lawyer to ensure that it is done according to your specific needs.
6. Your money is better spent on a lawyer who can guide you through the issues that you should address in a Partnership Agreement among the members. These include:
– contributions to capital
– income sharing (equal or otherwise) and holdbacks
– banking and signing authority
– time commitment expectations
– management of the business
– withdrawal or expulsion of a partner
– what triggers dissolution
– what happens to band property on dissolution
– songwriting and performers’ performance shares
– voting and decision-making
7. When you do move to the next step – setting up a corporation – you will have settled many of the issues you need to address in your Shareholders’ Agreement, by having gone through the process for the Partnership Agreement.
Craig Parks is a director on the CMAO Board and sits on the Governance Committee. He is also legal counsel to MROC – Musicians’ Rights Organization Canada.