Making Your Band into a Brand: Does Your Band Need an LLC?

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While it’s not strictly necessary, an LLC can help your band. Whether you’re rocking out with your audience in a packed concert or recording a new song in a quiet studio, there are certain risks and responsibilities your band may encounter. An LLC can help to limit those risks and protect the interests of your band and its members.

What is an LLC?

A Limited Liability Company (LLC) is a company that can be essentially anything you want. Once established, the LLC can operate as a full legal entity separate from any members, owners, and employees. You can think of it like a person. In much the same way that you are a legal person when you’re born and given a social security number, an LLC becomes a legal “person” when it’s made.

What does this mean for your band?

As a legal entity, an LLC can do everything a person can do: make contracts, own intellectual property, sue and be sued. All of these can be helpful benefits for your band.

Contracts

With the ability to make contracts under its name, the LLC will be the party responsible for executing the contract. You may sign the contract under the authority of the LLC, but you will not be personally responsible. This means if you cannot pay or otherwise perform under the contract, the LLC is responsible instead of you. Others may sue the LLC for breach of contract. Even if they sue the LLC and take all of its property, they can’t come after your personal property. Only in very rare and egregious circumstances will they pierce through the LLC to reach you.

Intellectual Property

LLCs can also help to keep your intellectual property organized. You can set it up so that the LLC (and not the individual members) owns all the copyrights to your music. This will make it easier to share profits and reduce friction between band members over who owns the copyright and who receives the royalties.

Dissolving the LLC

If your band ever breaks up, you can dissolve the LLC. The law provides automatic and simple processes for the dissolution of an LLC and the distribution of any remaining assets. This can help you avoid conflicts between band members.

Other Benefits to LLCs

Clarifying Expectations

Like we said before, an LLC can be essentially anything you want it to be. You create it by filing articles of organization and creating a legal contract called an operating agreement. You can do whatever you want within this operating agreement. One benefit is that you can assign individual band members, managers, agents, and other people specified roles, responsibilities, and benefits. This can help to clarify expectations and let everyone know what to do. And, in the event that someone can’t or won’t live up to those expectations, the operating agreement can provide a remedy for you.

Fiduciary Duties

LLCs create what lawyers call “fiduciary duties.” Fiduciary duties exist between the members of the LLC, and between the members as a whole and their employees, managers, and officers. This means that everyone must act with:

  1. A duty of loyalty—They will not exploit the LLC and its members for personal benefit or for the benefit of a third party.
  2. A duty of care—They must do their best in good faith to advance the interests of the LLC as a whole.

Let’s say a manager becomes a member and starts to exploit the LLC for the record label’s interest. That person has breached their fiduciary duty and can be sued and expelled from the LLC. They must then return any assets they took and provide compensation for any damage they have done.

Better Credit Options

Because LLCs can form contracts, they can have credit scores. This can be helpful, especially if your own credit score is not so good. If you wanted to, say, lease equipment, you may not be able to do so under your own name. The LLC can have better credit than you or any of the other band members. Many businesses actually prefer to give financing to business entities rather than individuals.

Tax Benefits

Finally, there are tax benefits for LLCs. As a business, you can “write off” the costs of doing business, the depreciation of instruments and other equipment, and possibly even the costs of promoting and advertising yourself (though this may vary). You would not be able to do this as an individual when filing your taxes, unless you can honestly claim you’re fully self-employed as a member of the band.

Also, the LLC—just like a person—pays its own taxes. If the LLC makes money, it pays corporate taxes. You only pay whatever income comes through the LLC to you as part of your income taxes. This means you can “hold” money within the LLC and wait to distribute it to yourselves until the right time (like when taxes are lower).

Call Cornerstone Law Firm for help.

As you can see, there are lots of great benefits to forming an LLC for your band. If you’d like to set up an LLC, call Cornerstone Law Firm. Our attorneys have experience with drafting operating agreements and other organizational documents for lots of LLCs. We can help with yours too. Give us a call today to set up a consultation!

Copyright Clearance in Self-Publishing

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Self-publishing is a growing industry and an incredible opportunity for authors to get their message out without the interference of a publisher or publishing house. But self-publishing also comes with a number of legal dangers, including copyright infringement. If you are using images that you yourself did not create, whether photos or drawings, then this article is for you. Here are a couple tips on how to avoid copyright issues when publishing a book.

1. Fair use does not mean what you think it means.

A common response to these copyright concerns is to say that fair use will protect you in your use of images. If your book is educational in nature, fair use is especially tempting. But there are a few things you should keep in mind. The first is that fair use does not just mean what you think is fair. It is a complex legal doctrine that relies on four factors, and the way these factors are analyzed by courts is not always the way you might expect them to be. For example, the “educational” nature of a work is more complex than simply saying it teaches something. And even if you don’t expect your book to sell many copies, its commercial nature already puts judges in a skeptical position on a fair use claim.

A second thing to keep in mind is that fair use is a defense. That means it is only implicated when you are being sued. For most individuals being sued means you have already lost. The costs and stress of a lawsuit are enough to overwhelm most people and persuade them not to move forward. Such parties often settle or pay out the demands from someone who claims they were aggrieved in the copyright process. In short, do not simply rely on your understanding of the factors that you look up online in considering fair use. It is important to have a legal opinion before you rely on it in publishing photos.

2. There are more sources than ever for photos you can use.

Just as self-publishing has lowered the barrier to entry on publishing documents, there are more places than ever to obtain legitimate free photos to use without paying royalties or without fear of a lawsuit. Please note that Google is not one of these places. Rather, it is important to go through legitimate vendors who secure the rights to photos and can provide print licenses for their use. Of course, you can also obtain photos through other sources, such as through local artists or designers who can create work for you.

Conclusion

Publishing a book is an exciting opportunity, but it can come with legal dangers. Be sure to consult an intellectual property lawyer for sound opinions on what photos you can use and what ways to avoid potential legal trouble. At Cornerstone Law Firm our copyright attorneys can view manuscripts for you and give advice on civic photos and whether you can use them. Contact us today to set up a consultation.

An image of characters from Empire

3rd Circuit Rules on “Empire” copyright infringement

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The 3rd Circuit Court of Appeals released a ruling last week on whether the hit TV show Empire infringed on the copyright of a Philadelphia television writer. In Tanksley v. Daniels, the court ultimately ruled that there was no infringement in this case because there was no actual copying or material appropriation. The background of the case involves the claim of a local Philadelphia writer that the show Empire was largely based on a script that he had written and previously pitched to the executive responsible for empire.

Empire and its similarities

The facts that gave rise to the case are as follows: Mr. Tanksley met with a Fox executive and pitched him a TV show about a black music mogul/executive who is struggling with family drama and a personal health crisis. The Fox executive expressed initial interest, but subsequently turned down the script. A few years later, Empire premiered, exploring some of the same themes.

The court declined to find infringement in this case, despite the similarities. One of the primary reasons for this was that many of the alleged similarities were scènes à faire, and thus, not copyrightable. Scènes à faire are plot elements flowing predictably from a general idea. For example, drunk college students in a movie about college would be scènes à faire. It would be absurd for someone to claim that all college movies were based off the first college movie ever made just because there were drunk college or kids going to class. Instead the court noted that there were two ways to demonstrate infringement. First, by demonstrating actual copying. That is to demonstrate that a unique element that is capable of being protected was actually lifted from the original work and used in the copy. Second, to demonstrate material appropriation. That is to demonstrate that the work taken as a whole by the average laymen observer would be perceived to be a copy of the original.

Interesting Legal Developments in Tanksley

The court rejected that expert witnesses were necessary to further develop the record in determining whether there was infringement. Rather the court noted that the average observer could tell if a painting was copied, if a song was ripped from an original, or if a TV show’s plot had been lifted entirely from another. The court went to great lengths to demonstrate, in narrative form, the plots of the two shows side by side demonstrating that the similarities were superficial at best. Rather most of the local producer’s claim was based on the existence of prototypes, such as a black record executive who is struggling with family drama. A black record executive, the court concluded, is a classic example of a “prototype” that cannot be copyrighted, and family drama would an example of scènes à faire. Both of these are unprotectable elements and not subject to copyright protection.

Another unique element about this case is that the 3rd Circuit affirmed a dismissal on a 12(b)(6) motion. 12(b)(6)—dismissal for failure to state a claim upon which relief can be granted—is usually only granted where there is no need to develop any testimony or other facts on the record. The court said it was no error for the district court to have looked at the two TV shows referenced in determining the 12(b)(6) motion. Ordinarily anything outside of the pleadings is not considered in a rule 12 motion, but the court ruled that where the Complaint is based on two works of art, those works of art could be considered implicitly a part of the Complaint as if they were attached themselves.

Conclusion

This case is part of a growing national trend establishing that copyright infringement claims that do not have merit can be dealt with on 12(b)(6) motions. The ability to dismiss the Complaint earlier in the process will likely have more defendants fighting aggressively and early. This is good news for large companies who are often the target of copyright trolls, who can now have their cases dispensed with more efficiently. This case also lays out the “prototype” exceptions to copyright protection in a helpful way, and will likely be cited for this proposition for years to come.