Being in a band is a business and the same commercial rules and laws that apply to plumbers and lawyers apply to musicians. There are a number of compelling reasons why you should have some kind of written agreement between band members, there are no sensible ones that I have heard that suggest you should not.

If you are in a band and that band is trying to make money, then under the Partnership Act 1908, your band is a partnership. This means legal obligations and duties exist between you and the other members even if there is no formal agreement. Each band member is equally liable for the debts and obligations of the band. Yes, you could be responsible for a debt that you didn't even know about.

The Act also says that all partners are entitled to share equally in the capital and profits of the business and must contribute equally to the losses. It doesn't allow for the fact that different band members may have contributed different amounts in terms of skills and/or money, and should be entitled to different shares. Under the same Act, any one band member may shut down the business. Are you sure you want that to happen?

Once the band starts to generate income, and especially if there is the prospect of recording, the band members should give some thought to formalising their internal arrangements and to organising the best way to do business with others. The choice really comes down to one of two structures, a partnership or a company, but the rules are the same. The primary advantage in trading as a company is the concept of limited liability. This is in direct contrast with partnerships where the individuals are personally liable for any debts they incur while trading. I will always advise you to go with the company. It may require a little more work at the outset, but that limited liability thing can sure help you sleep at night if you bugger something up.
Whichever structure you go with these are the type of things it needs to cover:

Who is in the band?
Clearly identify each member with their full name and address.

Who owns the business?
Will each band member be an owner of the business, or will some be employees? Ownership can be restricted to one or a few individuals – perhaps to those members who founded the band.

How long does the agreement last?
Note when the band started, even if this was before you got around to drafting the agreement.

Band name
You must decide who holds the rights in the name. You may decide that the name is owned by the business as a whole, or by one or more individuals. If the business owns the name, the agreement should address who has the right to use the name in the event the business entity (and the band) dissolves.

Rights in songs and sound recordings
Who owns the rights in songs written by fewer than all the band members and who has the right to the publishing income generated by those songs? Sound recordings made by the band may be the property of the business or the property of certain individual members.

Money
Will all band income be paid into a joint bank account? Who can make withdrawals? What is and what isn't band income? Will all income be treated in the same way? Can any member spend money on behalf of the band?

Assets
It is important to establish what equipment and property belongs to the group, and what belongs to the individuals. Who pays to fix things?

Division of Profits and Losses
Profits and losses in a band partnership are usually distributed proportionally, according to each member's creative and financial contributions to the group. The writer's share of income from musical compositions will often go to the composer of a particular song, while any publishing income the band receives may be divided equally among the band members. However, some circumstances may justify a different split. For example, you may determine that the owner who handles all the administrative and promotional work for the group makes a larger contribution and, therefore, deserves a larger portion of the profit.

Decision Making
Will some decisions about the group have to be agreed on by everyone? Can others be agreed to by a majority? Does every member have to be present when decisions are made? Will you keep a record of your decisions? Does everyone have equal voting rights? Can anyone sign on behalf of the rest of the band? Can any non-members (e.g. your manager) vote? It is common for each owner to have an equal vote on all issues.

Duties
Will each member have set duties? Who looks after the money? Who hustles gigs? Who deals with the manager and the record company? Who talks to the press? How much time is each member expected to contribute to the band? Is everyone committed to rehearsals, gigs and tours? What if some members have full-time jobs or other commitments? Can members play with other groups?

Death or disability
Death or disability of a band member could result in the remaining members buying out the partnership interest of the member who is gone from the group. However, contingent payments from royalty sources would continue to be paid to the disabled or deceased member's estate for activities engaged in while that member was still in the group.

New members
Who decides? How are they paid? New band members may only be given payment from future band activities in which that new member becomes involved. Originating owners must also decide whether new owners will have all the profit participation rights and voting rights of the original owners. Originating owners may not want a new owner to be entitled to a share of assets or income streams that were secured prior to the new owner joining the business.

Break up
What happens if the band breaks up? If the band splits who will be entitled to the remaining assets (e.g. masters, equipment, trade marks). How do you carve up what is left?

Leaving
What notice does a leaving member have to give? Will they receive any payment when they leave? Can a member be sacked? On what grounds? In addition to listing specific reasons, you may want to include a catch-all reason that allows an owner to be expelled for any conduct that warrants expulsion in the discretion of the remaining owners.

Resolving Disputes
You may want to use mediation or arbitration to resolve any disagreements over band business. These methods lead to a less expensive and quicker resolution than filing a lawsuit. APRA offer such a service.

So there you have it. Really, the only way to do this is with the assistance of a lawyer or accountant, preferably one who has some understanding of how the music industry works, but even if you can't afford this at least write down some answers to all of these points and get everyone to sign them.
If you do this properly your rules will form the backbone of your business.

'Devil's Advocate' is a music industry opinion piece from the principal of Auckland legal practice Dominion Law, which specialises in matters musical. Contact Chris by phone (09) 638 6696 or email via chris@dominionlaw.co.nz