Meet the new boss. Same as the old boss.

Gary Full Band Edit

 

So this post is the outline for a radio interview I recently participated in with Insight on Business the News Hour regarding start-ups.  A lot of my clients are start-up businesses, generally these are folks that have been working in a particular field for a long time and want to try running their own business, or people who have been hobbyists and now want to see if they can make a living doing what they love (*cough cough* musicians *cough cough*).

The danger here is in not realizing that a familiarity with a job or hobby and starting and running a business are very different concepts. For this reason, you need to know the “Who, What, When, Where, Why, and How” of getting your start-up off on the right foot.  So here’s your 30,000 foot view of successfully putting together a start-up business.  This is general information so it can help everyone from the start-up band or promoter to someone who wants to make a sell custom instruments, it’s all applicable!

Who?

  1. There are different types of who- Who am I going into business with? Who is going to run it?  Who is going to pay?
  2. Who am I going into business with? Well that’s up to you. It can be yourself, a few friends, some business partners, the money folks, just make sure it’s people you trust.  Trust is key here, without trust there is no business.
  3. Who is going to run the operation? Once again, that’s up to you, but it’s a conversation you need to have with everyone involved, especially the folks who provide the cash.  Different cash providers will have different expectations, but I’ll get into that a little bit more later on.
  4. Who is paying for all of this? There are different sources of funding and each one has its own pros and cons:
    1. Pay your own way
      1. Pros- you don’t owe anyone anything and all of the payments stay in house, lowers the business’ debt to third parties and offers you the most freedom with organizing your business.
      2. Cons- This is easily most expensive and you may need to offer and sign personal guaranties against your personal property.
    2. Start-up loans (Banks/Government bodies)-
      1. Pros- These lower your burden and are generally low interest loans. The lending bodies usually don’t want any ownership or say in the business operations and they’ll have resources you can utilize, such as small business development officers.
      2. Cons- Set regular payments like any other loan, regardless of whether you’re turning a profit or not so there’s very little wiggle room. Also, they’ll still need to guarantee payment one way or another.
      3. Begin searching for these programs on your local small business development group’s website.
    3. Investors (angel investors; venture capitalists)
      1. Pros- Payments made are based on interest, dividends, and returns of the business itself. They’re also putting a little more skin in the game than the other potential financial helpers.  They often have wide support structures to help your business grow and have a true desire to see you succeed.
      2. Cons- you’re going to give up some ownership and organizational interest with outside investors, particular venture capitalists. It will limit how your business can be structured and will most likely impact the decision-making procedures of your business.
      3. You can find a list of angel investors and venture capitalist firms in your area with a simple internet search.

What?

The first question, should I form a business entity or operate as a sole proprietor? Well, I can’t answer that for you, but I can tell you a business entity relieves you of personal liability while a sole proprietorship does not.  Also, there’s some serious tax benefits to forming a business entity.

What type of business entity should you form? (In general the basic forms are a Partnership, a Corporation, or a LLC?)

  1. Partnership– The default, actually the state of Iowa says if you neglect to form a business entity, but are two or more parties engaged in a for-profit enterprise, you’re considered a partnership by default. So . . .
    1. Two or more parties (can be other business entities) working together in a for-profit business.
    2. You can custom tailor your individual debt, equity, and distribution allocations, and net losses can flow-through to the individual, saving some individual tax burden and allowing loss deductions.
    3. Each partner is an agent to all other partners and each partner has an equal voice in formal decision making.  This means that regardless of the amount of ownership each party has, each individual has an equal say in decision making and equal authority against third parties.
  2. Corporation– The traditional business entity, this is generally for bigger firms (think big record labels, folks doing international business)
    1. Two-tiered taxation (tax on corporate and individual level) unless you meet the S-Corporation election requirements (such as one class of stock, less than 100 shareholders) which allows for pass-through taxation.  Note that you can have one class of stock which is divided into voting and non-voting shares and still be considered an S-Corporation, so long as no stock is considered “preferred” stock (as in, at some point in the future, one set of stock could or will be paid on before all the others).
    2. Corporations are probably the most customizable entity, you can outline different classes of stock and ownership, and it grants different tiers of authority (shareholders elect board of directors, directors make most business decisions and appoint officers, and officers run the day to day operations), and different voting value based on class of stock and number of shares held.  It’s probably the most democratic of the business entities.
    3. Interest is freely transferable to other parties.
  3. LLC– The most popular entity these days.  This is what most bands, small firms, and songwriters utilize.  LLC stands for Limited Liability Company, and the goal is just that, to limit individual liability.
    1. Flexible in a different way than corporations, the LLC is basically made for small businesses, it’s like a starter set, a foundation from which to work.
    2. You can choose your taxation model so long as you fit the requirements of that business (note Partnership is the default), and you can change your operations to other models as your business develops.
    3. Primarily for parties that wish to own, operate, and work directly in the business (members and managers).
    4. Any profit the LLC makes is passed to the members as dividends at the end of the fiscal year and is taxed as regular income.

 When?

  1. You can form your business entity right now (if you have everything already outlined and have a good idea of your aims, goals, and how you’d like to operate) but remember that there are certain documents which will need to be updated from time to time.
  2. Now- Organizational and internal documents (articles of incorporation/certificate of organization; bylaw/operating agreement; buy-sell agreement; organizational minutes, EIN) basically all of the documents which state exactly how decisions are made, money is paid, and who is involved and in what capacity.
  3. Annually or otherwise– Documents which need to be renewed, reviewed, or drafted regularly (annual minutes, reports to the Secretary of State’s office; taxes; succession plan) which show you are a real business operating as a real business.

Where?

  1. Different states have different laws regarding business organization, recognition, and the local taxes. Most states are starting to adopt uniform laws and rules which get rid of many of these discrepancies and differences between the individual jurisdictions.
  2. If you’re doing business primarily in a state and the headquarters is in that state, you probably want to form in that state, it’s just going to be easiest. Now, you can do the run around and get a registered agent and an office in another jurisdiction (Delaware is quite popular), but for your start-up this is just the easiest plan and it makes sense.
  3. Another major consideration in choosing a location is not just where you’re doing business but where you’re going to get the most support. Look at the local business community resources prior to starting operations.  It’s a lot harder to start a business in a climate where the community won’t readily offer you the support you need to be successful.  It really does take a village in this case.

Why?

  1. Why form a business entity? To protect your personal assets and individual liability
  2. Why should I go into business for myself? If you know the business and have a passion for it, as well as a desire to go your own way, it just makes sense. There are risks involved but getting professional help and advice can mitigate those issues as much as possible.
  3. Why do we, at Kreamer Law Firm, care so much about this? Because we’ve been there.  We’re an award winning small business ourselves with over 30 years of experience in business law. We want to get things done for entrepreneurs who want to make their dream business a reality.

How?

  1. That’s the easiest question of all. Start by weighing your options, see what you have out there for interest and support, and then come talk to us and we’ll be happy to help you out with all your business law questions and needs.  It’s our passion and it’s what we do.

Well there you go, folks!  The who, what, when, where, why, and how of getting your start-up off on the right foot. Always remember, just because it’s work doesn’t mean it can’t be fun, explore your passions and see what you come up with!  Keep on fighting the good fight, and let me help you start your new business of music.

Listen to the podcast from Insight on Business the News Hour below!

Eastbound and Down; Observations and Predictions from SXSW

Austin Trip

Two weeks in Austin means half my stuff gets packed into the car.  There’s no such thing as packing light!  Photo by author Thomas Leonard Kutz

Good morning everybody!  I’ve taken a little bit of a hiatus from posting on this blog due to time constraints in the office, I know you were worried, but it’s all good, I’m back on the blog wagon and ready to roll!

I spent two weeks this March at Austin’s own South by Southwest.  For those of you who have avoided the internet and the music industry for the last decade or so, South by Southwest (SXSW) is billed as the premiere music industry, film, and business conference.  It pretty much takes over the entirety of downtown Austin (which the locals just love, note the sarcasm) and offers a wide swath of music, arts, and entertainment experiences.

My goals in attending SXSW this year were simple: 1) network; 2) see some new acts and meet new business folks; and 3) party a little bit.  Well, I ended up working my butt off to accomplish these goals and came back with a nice little package of stories and impressions for you.

The Old King is Dead, Long Live the King!

Observation: Every conversation would inevitably turn to the decline of some major market.  I cannot count the number of times I heard the phrase “[Insert major city] is dying, you should have seen it ten years ago!” Then, in the next breath, they say, “You should really move to [insert same major city] if you want to advance your career.” There are two problems, in my opinion, with this conversation:

1) It’s en vogue right now to talk about the toll of changing generations and demographics, the upswing in gentrification and corporate overtake of major markets (see, I watched Sonic Highways, too!) That’s not to say it isn’t a problem, it’s a big problem, and needs to be addressed.  Markets always change, they’re the catalyst for change, that’s one of the reasons they exist and persist.  Addressing the issue but not offering a solution doesn’t make you a professional with a deep or profound view of the business environment, it makes you a talking head.

2) Why on Earth do I need to go to a dying market to advance my career?  That’s like a fish telling another fish, “Hey man, that dark water over there?  Yeah, everyone over there is getting caught.  If you don’t want to end up beer battered and fried, don’t go to that dark water.  You know what though, that dark water has the best food ever, it’s life altering, and you should probably check it out.  Watch out, there’s strings attached!” Nah man, I’m good.

Prediction: Major markets won’t die per say, but they will continue to change dramatically.  They will continue to offer something to all artists and start-up businesses so long as the resources are available and utilized properly.  However, the emerging small markets will become the catalyst for change, they turn into major markets over the next decade and then *boom* the cycle starts over again.

Speaking of emerging markets . . .

Home on the Range

Observation: Lots of talk with the start-up crowd about Silicon Prairie, this magical place where tech gurus the world over can find comfort among corn and wheat fields due to the low cost of living and big city-like amenities in a town-like atmosphere.  Alright, that’s a little tongue-in-cheek, but you get the idea.  Tech companies and start-ups in particular are recognizing the rate at which globalization seems to be shrinking our world.  Business is completely mobile for the most part, in fact I can do 90% of my office work from home, on the road, or on an island somewhere in the South Pacific so long as I have an internet connection.  So to diminish overhead and cost of living, why not move to the middle of the Midwest, heart of the flyover states?  Cities like Des Moines and Omaha are feeling a tech boom because the low cost of living and comfortable atmosphere make for a healthy business and personal environment (not to mention the low unemployment rate and the qualified/educated population.)  True to form, everyone I seem to bring to Des Moines from out of town immediately falls in love, what keeps them from moving?  Well, there’s some hang-ups about the perception of no longer living in a “cool” town/state or having to deal with the dreaded season of winter.  Well, you can’t win ‘em all.

Prediction: Generation Z will move to where the jobs are.  Millenials go to where the jobs are.  Generation Xers go to where the jobs are.  Baby Boomers are retiring to warmer climates.  Creativity, the arts, and tech are finding a home in the emerging mid-sized markets of the Midwest and with the low cost of living that’s where the population will flow, with the exception of those individuals whose address or the weather is more important to them than prosperity.

And on the subject of addresses . . .

I’m Rockin’ the Suburbs

Observation: Regional showcases, man!  This is my favorite part of SXSW, different cities showcasing their top talent, usually independent artists hoping to get a little more of a following.  It a celebration and affirmation of hard work not only by the local creative community, but by the individual artists and the local chamber of commerce as well.  Unfortunately there are some issues here, artists playing for free or paying to play, bad PR or marketing, and fundamentally back-patting and celebration doesn’t actually advance your goals.  The showcase means absolutely nothing if you don’t capitalize on it.  You can throw the greatest showcase event of all time, throw millions of dollars at it and get half of the folks on 6th Street at your event, if you don’t follow up and follow through on your promises at the local level, it’s all for nothing.  Unfortunately, that’s what seems to happen a lot.

Prediction: Every town wants to be a town featured at SXSW.  Every town wants recognition for their creativity and ingenuity.  Very few will actually seek to become a “music city.” Very few will fight for local ordinances and development which enhance the local music and arts community.  Therefore, most local showcase events will just continue to be parties because they don’t energize their local population or the local government enough to make the difference or development for which they just spent two weeks patting themselves on the back.  The only way to change this is for people actually involved in the industry or scene who want to see this change to speak up, get involved, and make a difference in their local government and business sectors.  Then, and only then, will the showcases at any of these conferences, conventions, or festivals actually matter and actually make a difference.

Well those are my very abridged thoughts, everybody!  Thanks again for stopping by, always feel free to leave comments or send me a note, and never stop working at advancing your goals in the business of music!

I’m a Thousand Miles from Nowhere

Nowhere

This is an important one, so keep your eyes open and start taking notes, today we’re talking about the infamous “radius clause”. *Dun dun dun!* The radius clause isn’t a new or novel concept by any means, in fact it’s one of the many methods venues and festivals use to create a demand for the product which they sell to the public (live music.) A radius clause is just the live performance version of a non-compete agreement. (EDIT: For clarification, a radius clause is actually one part of a non-compete agreement in legal terms, but in common form they are often addressed as one in the same, a fastidious, but important, distinction to make.) A non-compete agreement is a binding contract in which an employee or artist agrees to not participate in the business for which they’ve been employed by an employer or festival for a certain period of time and within a certain geographical region.

Now, the courts hear these cases a lot- the idea being that you don’t want employees/potential employees giving up their right to find and utilize employment, so these non-compete agreements have to be “reasonable.” What is reasonable, you may ask. Well that’s where this all gets a little sticky. A few years ago, Lollapalooza was investigated regarding their radius clause, a daunting 300 mile restriction beginning three month before the date of performance and last through six months after the date of performance. Now if my first grade math is correct, that’s nine months, NINE MONTHS, that an artist can’t perform within 300 miles of Chicago. Here are some places within 300 miles of Chicago: Detroit, Ann Arbor, Indianapolis, Milwaukee, Madison, Windsor, Columbus, St. Louis, Iowa City, Green Bay, Dubuque, and the Quad Cities.

Another hot ticket festival, Coachella, had this radius clause in 2010:

“Except for the Festival [(i.e., Coachella)] and unless otherwise agreed to by “Festival” in writing, artist shall not advertise, perform, or publicize any performance:
a) in Los Angeles, Orange, Riverside, San Bernadino, Santa Barbara, Ventura, or San Diego counties from December 1, 2009 until 30 days after the Festival
b) At any festival in the States of California, Nevada, or Arizona until 30 days after the Festival
c) Or announce any other US festival prior to Feb. 15, 2010”

So are those restrictions reasonable? We may never know, lately as these issues are investigated, the investigator seems to punt, and before long the issue is forgotten about by those parties most likely to call it into question.

With that in mind here are five issues to address when reviewing a radius clause or non-compete agreement:

1. Consideration– What is each party getting in return for complying with the agreement? Is the artist/band getting paid? Are there no side gigs which can take away from profitability for the promoter? It’s like any other contract, there needs to be a give and take in order to be binding.

2. Length– How long are we talking? Two months? Nine months? Generally dealing with employment, three years is considered okay while five is considered excessive, but in entertainment three years is longer than some careers! What can each party handle, and what is the extent to which each party is willing to go?

3. Distance– How big of a territory is cut out? Is it a few dozen miles? A few hundred miles? Obviously depending on the circumstances hundreds of miles will suffice, but this is a balancing act. Take into account the trade-off of time and distance, as well as the overall consideration between the parties. What exactly is the purpose of this distance? To ensure profitability and protect party interests.

4. Extraneous Restrictions– If the agreement is for a festival does it bar from all other performances? Are private events and functions okay? How about charity events?

5. Consequences for Breach– What happens when one party doesn’t live up to their end of the deal? Is there a ban on future performance? Potentially a monetary punishment such as damages?

These are all issues which need to be considered in negotiations and some middle line must be approached in order for the limitations within the agreement to be seen as reasonable. I have no doubt everyone will have questions about this, and how you discuss the topic with each party will ultimately decide the enforceability of this agreement. So get out there, talk to each other, and work together to establish a better business of music.

Thomas Leonard Kutz is an attorney at Kreamer Law Firm, PC in West Des Moines focusing on transactional and entertainment law, business and estate planning. He is a Wisconsin native and transplant to Des Moines via London.

For any of your transactional, entertainment law, business or estate planning needs please call Kreamer Law Firm at 515.727.0900.

Kreamer Law Firm
“We get things done.”

The 12 Days of Christmas- Entertainment Law Edition

Tom Interview

The season is upon us so here it is, the 12 Days of Christmas- Entertainment Law Edition!

ON THE FIRST DAY OF CHRISTMAS MY LAWYER GAVE TO ME:
-Assurance I’m not working for free.

ON THE SECOND DAY OF CHRISTMAS MY LAWYER GAVE TO ME:
-Two liability waivers.

ON THE THIRD DAY OF CHRISTMAS MY LAWYER GAVE TO ME:
-Three indemnifications.

ON THE FOURTH DAY OF CHRISTMAS MY LAWYER GAVE TO ME:
-Four outstanding contracts.

ON THE FIFTH DAY OF CHRISTMAS MY LAWYER GAVE TO ME:
-Five phone calls!!!!

ON THE SIXTH DAY OF CHRISTMAS MY LAWYER GAVE TO ME:
-Six contractor signings.

ON THE SEVENTH DAY OF CHRISTMAS MY LAWYER GAVE TO ME:
-Seven partner filings.

ON THE EIGHTH DAY OF CHRISTMAS MY LAWYER GAVE TO ME:
-Eight more revisions.

ON THE NINTH DAY OF CHRISTMAS MY LAWYER GAVE TO ME:
-Nine page of contract.

ON THE TENTH DAY OF CHRISTMAS MY LAWYER GAVE TO ME:
-Ten mile non-compete.

ON THE ELEVENTH DAY OF CHRISTMAS MY LAWYER GAVE TO ME:
-Eleventh hour advice.

ON THE TWELFTH DAY OF CHRISTMAS MY LAWYER GAVE TO ME:
-Twelve routing dates.

Happy holidays everybody!

A Button on a String, and I Heard Everything

The City Council of Des Moines is considering a measure which would allow people ages 16-21 to be in music venues through 9pm to 11:30pm.  Appropriately, this is an article about youth and falling in love with music.

I live in Des Moines, Iowa.  Not so much a city, but a tall town on the cusp of what I can only describe as musical brilliance.  I live in Des Moines, but my story didn’t start here.

I grew up on a small farm outside of a small town in southern Wisconsin called Fort Atkinson.  There were more cows than people.  Frankly, there probably still are more cows than people.  I remember that little town on the Rock River and I remember some pretty specific things.  I remember where I had my first kiss.  I remember where I crashed my first car.  And I remember where I fell in love with music.

I was (maybe) 6 years old.  At my grandparents’ house we used to listen to old country records and watch concerts on TV all Sunday long.  I’d put on a cowboy hat and dance around with a guitar like I was a rock star up on stage.  Mom would laugh, Dad would instigate me to do wilder stunts and spins, Grandma would take Polaroids and Grandpa would smoke cheap cigarettes and drum out a beat with his hands while my little brother tried to keep up with everything going on.

We sang along in the car.  The radio was the first appliance turned on in the morning and the last one turned off at night. There was music everywhere we went.  One of my first clear memories is hearing on a radio spot Kurt Cobain had committed suicide.  My parents took my little brother and I to our first major concert at an irresponsibly young age (8-ish), an outdoor country music and camping festival.  It was awesome, for the first time witnessing such sound in that open space.  Then it was weekly dances and local band shows at bars, venues, and dance halls with our folks at the age of 10 or 11.  It was spectacular.

In elementary school we’d string fishing twine over pieces of wood or cigar boxes and plunk at them with quarters or buttons; I later found out this was what old blues guitarists did as kids, it’s strange how some things turn out to be completely universal.  In middle school and high school all we would talk about is what concert we’d go to next, and after Mom interrogated us for the details, my buddy’s older sister would drive us hours just to see some crappy local band we had heard of once play in a bowling alley for a $10 cover and a t-shirt (thanks Jenny, you’re the best.) We put together acoustic shows on docks, piers, and boathouses; mosh pits in cornfields while the band played on gooseneck trailers and hay wagons, the obligatory bon fire burning thirty feet high over your shoulder; old school punk shows in driveways, sound blaring out of the front of the garage through second-hand amps and karaoke machines; battle of the bands in high school gymnasiums which ended in trips for coffee to Perkins or IHOP until 4am, just in time for Dad to be getting up for morning chores (and you weren’t getting the day off, “if you’re old enough to stay up all night, you’re old enough to work all day.” Thanks, Dad.)

The main players in those days, the creative drivers, were your childhood friends.  We didn’t know anything about music theory, just picked up instruments and started playing — it was bad music.  I mean, it sounded bad, it was basically just noise . . . but every once in a while something beautiful would come out of it.  In between the noise and the nonsense, the sophomoric lyrics and bad rhyming, there was something fantastical.  It was organic.  It was passionate.  Suddenly, instead of spending our time shooting off bottle rockets and TPing houses (yeah, we totally did that) we were making music and playing gigs, 14, 16 years old, honest to God gigs!  The older musicians were always there to offer insight on our music or tell us which gigs to avoid, constructive criticism for the price of a Mountain Dew.  In college we played small bars, block parties, fraternity and sorority houses, charity events, the crowds varied in size and age but there was ALWAYS a youth contingency there, repping the next generation of rockers.  It was amazing, it built a passion, and it kept us out of trouble before we were “adults.”

Where are we now?  We’re lawyers, doctors, agents, managers, factory workers, farmers, small business owners, and musicians.  We came from a small rural town and live in dozens of states and a handful of different countries.  Music gave us the passion to pursue our dreams, without music, where would any of us be?

Now, the point behind all of this.  In the city of Des Moines right now, there is a discussion about allowing people over the age of 16 access to music venues until 11:30pm (previously 9pm).  The venues need to meet a bunch of restrictive requirements, including 100 live music shows per year and dedicated stage area which only about four or five venues in town would meet.  Additionally, at least 50% of its gross receipts are derived from items other than alcohol sales.  That last requirement is a hard one to meet.  Music on the local level doesn’t pay the best and cover charges only go so far.  Obviously you can make up the difference with food and merchandise, but frankly alcohol is the big ticket item.

I was asked this morning if minors just wanted to be given access to alcohol.  Here is your common sense answer.  Where is a minor going to have better access to alcohol? At a venue with bouncers, bartenders, security guards, and support staff who neither want to be fined nor lose their job nor have their establishment shutdown, not to mention all the other patrons more than willing to turn someone in for being stupid, or at home alone with their mom and dad’s liquor cabinet?

What about the people who don’t want minors at their shows?   Business owners can have the option, 16+ or 21+ shows.  You may need to re-evaluate why you’re going out if you’re interested so little in an act that the sheer possibility of a high school student being in the venue with you makes you want to stay home.  This is, if nothing else, an exercise in personal responsibility on the parts of business owners, parents, and the next generation of music enthusiasts, because the bottom line is this: if you don’t want your kids to go, don’t let them go.

This proposal needs to change the way we think about fostering music in Des Moines.  Music venues are not bars, and bars are not music venues.  Yes, they have bars in them, yes they make a lot of money selling alcohol, yes there are plenty of people 25+ there who will be in the same establishment as a group of high school students, but that’s really no different than bowling alley or a driving range.  The language has to change, we’re not talking about letting 16 year olds into bars, we’re talking about giving them an opportunity to see live music in real venues and to build the musical culture in this town.

There’s a social and cultural incentive here to inspire the younger generation, to fuel the flame, that passion for music, but there’s also a business incentive.  Des Moines, you are on the verge of being a music city, a title that serves as an economic driver according to studies by IFPI and Music Canada internationally and Bravo and the Des Moines Music Coalition locally (links below).  You want to keep bringing ingenuity and creativity to your town in the form of the young professionals you so desperately court?  This is your rock opera.  This is your opus.  This is how it starts.

With a single chord.

———————————–
IFPI and Music Canada Study- “Mastering of a Music City” – http://ifpi.org/downloads/The-Mastering-of-a-Music-City.pdf

Bravo and DMMC Study with Professor Dave Swenson- “Central Iowa’s Music Economy” – http://www.desmoinesmc.com/wp-content/uploads/2014/06/Central-Iowa-Music-FINAL.pdf

City Council Communication regarding pilot program- http://www.dmgov.org/Government/CityCouncil/Communications/2015/15-551.pdf

“Baby don’t you sign that paper tonight,” she said, but I can’t work in fast food all my life . . .

Panhandling

Contracts. *cold shiver*

No two syllables strike more fear into artists than that word.  Well, maybe sellout, but the two go hand in hand, right?  Contracts are a fundamental legal document that you deal with on a daily basis, some times without realizing it.  They can take the form of a handshake, an oral agreement, the formal kind (the kind I prefer) involve signatures.  The thing about contracts is they’re everywhere, and if you’re not paying attention they can come back to bite you, hard.

In the United States we have a legal concept called the freedom to contract, the idea being that you’re able to give up certain rights or privileges through your solemn vow.  So if you’re not paying attention, that paper you just signed to take you out of the kitchen and on to the big stage may have just revoked all of your creative licenses and rights.  That hit song you wrote?  Guess what, it doesn’t belong to you anymore, it belongs to the record company.  Hell, you won’t even get to sing it, they’re handing it off to whatever artist in their rolodex is currently functioning as a platinum record factory.

Now, we can’t cover everything, that requires a full year of a contracts course in law school plus another semester of contract drafting.  So here’s your brief (and incomplete) breakdown for contracts and what to look for when reviewing one.

1) Is it in writing?  You’ve heard me preach this over and over again so I won’t get into it, but doing business in writing is the friendliest way to do business.  Handshakes and oral agreements lead to dispute and misunderstanding.  Do it right and get it in writing.  If the other party doesn’t want it in writing, don’t trust them.  In my personal experience the party trying to convince you that you don’t need a contract, is the party that’s going to start changing the deal halfway through.  Avoid the headache, get it in writing.

2) Is there an offer, acceptance, and consideration? Offer and acceptance are pretty easy, was an agreement offered up?  Did the party it was offered to agree?  Boom, done.  Consideration is what secures the agreement; what is changing hands?  For musicians and artists, this will usually be your product for compensation, representation, etc.  You’re offering your music for money, your image for an endorsement, your money for payment toward distribution of the music.  If the transfer is a one way street, it’s not consideration and it’s not a contract, it’s a gift, and some gifts are more trouble than they’re worth.

3) What is the term?  How long does the agreement last?  Can either party get out early?  How does one leave the contract early?  How long are payments made?  Is the contract automatically renewed or does it completely terminate at the end?  Big questions that make a big difference.  Look for the term and make sure it’s agreeable to you.

4) What are the deliverables? This goes back to consideration.  What is ACTUALLY being exchanged?  Is it something concrete or is it a vague idea of something that may or may not exist?  If it’s more the latter than former, step lightly, you may be giving up more than you realize.

5) What are the penalties? What happens if one of the parties breaches the contract?  Are both parties liable for penalties or is only one party bearing all the risk?  Be very leery of the penalties, and very aware of the liability should something go wrong.  Be cautious, don’t be overly pessimistic but be prepared to think in worst case scenarios, the road to ruin is paved with the gold bricks of good intentions and blind optimism.

6) Where and how is this contract enforced? To drop a little legal bomb on you, International Shoe (one of the premiere civil procedure cases EVERY law student studies) basically says a jurisdiction with minimum contacts to a conflict will be a proper venue and jurisdiction for the dispute.  Now, this is something that can be contracted away or modified.  Many contracts will have sections related to governing laws of various states, or the choice of venue where disputes must be settled, even how they should be settled (mediation, arbitration, bench trial, etc.).  Now, this isn’t an issue if everyone involved is from Chicago and has a nice budget to work with, but what if the artist is in Chicago and the contract stipulates everything needs to be handled in Los Angeles?  It starts getting a little hairy.

Be aware of what you sign and how it will be handled should something go wrong.  Ask questions, talk to an attorney or a business planner, someone who is a personal representative with your own best interest at heart.  It’s worth paying a professional a little bit up front than to end up paying thousands of dollars more later on and potentially losing your intellectual property.  Be cautiously optimistic and meticulous with what you agree to, talk to advisers when you don’t understanding something, if you don’t understand the business side of things, reach out!  We’re here to help you, and never forget you’re working in the business of music.

Can’t See the Forest Through the Trees

jkhui

We’re knee-deep in music festival season right now and let me tell you, I’ve seen some amazing festivals so far this year. This led me to the realization that there’s a dramatic difference between working a festival, going as a participant, and being an attorney at a music festival. When you’re just an attorney bystander of these events, it’s sort of like being Neo at the end of The Matrix, you can see the code which makes up the world around you. You see every little problem area, liability issue, or reputation damaging facet of your surroundings.  With that in mind, let’s talk about the business/legal infrastructure of a music festival or large event. Here’s just a few observations I’ve made over the last few months, and some things to be aware of for large event planning:

1) Environmental Liability– I’m not saying we need to control the weather, but it’s something of which to be aware. Trees and falling limbs, wind damage, lightning, bodies of water, extreme heat, not to mention just generally severe weather, will affect your bottom line and can detrimentally affect performers, ticket holders, and site workers. Limit your environmental liability by monitoring the site and the weather thoroughly; a good site manager, operations monitor, and emergency coordinator should have this under control.

2) Personal Liability– People get hurt, equipment gets lost or stolen, property gets broken. This is the nature of the beast. Limit your liability by having an emergency response plan, coordinating with your insurance company, local law enforcement, and private security. Have ambulances on call and a first aid station ready to go. It’s easier and cheaper to be proactive than retroactive.

3) Contracts– Contracts galore, everything involves a contract. The best contract is a personalized document drafted by an attorney which addresses local law and is tailored for the event. Template contracts are okay but may not meet the specific needs of the event. Oral contracts are worth the paper they’re written on. Execute the contracts properly, if there’s a problem don’t ignore it, communicate about it, and keep your promises.

4) Permitting and Licensing– Your relationship with the city is important. Make sure you have all the necessary permits and licenses in place and displayed properly. This is especially important if you have a camping festival, extended hours, or anything involving a potential curfew conflict.

5) Health and Sanitation– Listen, nobody wants to use an outhouse sitting in 100° weather which hasn’t been cleaned for three days.  Make sure you have adequate health and sanitation facilities (toilets, handwashing stations, hand sanitizer, showers, misting tents, etc.) and make sure they’re kept clean and full of the necessities.  The city should have a basic guideline for the minimum number you need. Double it. Also, when I go to a festival I like to see garbage cans EVERYWHERE. I mean, I don’t want to walk twenty feet without running into garbage and recycling cans. Make sure they’re emptied regularly to avoid garbage runoff which could potentially damage the environment or your event’s reputation.

In short, this is something you learned in kindergarten; communicate openly and directly, do what you say you’ll do, and clean up after yourself. If you can follow these simple guidelines, you’re well on your way to establishing a good reputation in the business of music.

If you’re interested in learning more about the legal considerations regarding music festivals, or have any questions about transactional, entertainment, or business law please contact Kreamer Law Firm, P.C. at 515-727-0900.