Band LLC and Money Transparency Questions

Well I'm no lawyer or anything but...oh, yeah, wait--I actually am a business lawyer and this situation is messed up on so many levels. The possibilities range from relatively innocent accountability errors to straight up embezzlement, breach of fiduciary duty and other civil wrongs. I don't mean to sound super-cynical but I've seen this happen 10,000 times in my practice.

Save all your correspondence, demand a meeting with full disclosure (and copies) of the financial records and receipts, and don't discuss the matter with third parties or post anything on social media (not that you would). Be civil and ask straight questions. Aim to work out a plan for ongoing transparency and amendment of the business filing to recognize your LLC member status. If for some reason the other members refuse to meet or agree to an accounting, the matter should be addressed by an attorney. Sorry.

First move is politely request that guitarist or singer file an amended LLC statement to include all 4 original members. This is not an expensive or time-consuming task, and can happen prior to meeting or undertaking an accounting. If this simple request is refused, you know you're dealing with shady folks. Lord knows I've been wrong sizing up situations before and I hope I am now, but this post is covered in red flags.

 

This does not sound expedient or innocent.

 

Sound advise.
I feel the pain. I was hired on by an existing band a few years ago. I was told up front nobody was getting paid until the sound system was paid for. I should have walked there, but I wanted to play in that band. Four gigs later I was gone. The previous bass player's transfer fell through and he wanted his gig back. I never got a dime. When I asked to be paid for the gigs, I was told I agreed to the deal so I wouldn't get paid. Neve again.

 

Just for clarity, the lead singer and lead guitarist are the only members of the current LLC?

And the guitarist is the bookings and receipts guy?

 

Normally, these kinds of problems can be averted with an operating agreement. It describes everyone's roles, how money will be distributed, etcetera. Often there are exit clauses about how money is distributed when someone leaves.

See if you can google one and see what it entails. Without one, you end up making up the rules as you go along, and the people with the strongest personalities end up dictating to the band. That is what happened when they renewed the LLC without the rest of you.

BTW, I have renewed organizations before, and it's easier, at least in my state, to simply keep all the existing officers on the slate rather than remove some. So, it was a conscious decision on their part to remove you, I believe. The fact that they just did it without talking to anyone shows the kind of independent behavior that concerns me. You are basically being pushed around and aside. If you want full rights under the LLC (which are dubious without some kind of an agreement), then I would be asking for them to file an amendment including you at the band's expense since they took you off without your permission!!

I would try to first talk to them about it. Have an open band meeting -- the more guys on your side the better. Express your concerns, and have solutions. If the financial analyst wants to be paid for his time, then I would suggest asking to see the bank statements and the receipts. You can piece together the situation from there. Make sure you're ready for the "don't you trust me" conversation. I hate those, and you need prepared phrases to blow that "stupid" argument out of the water.

In my view, these guys are clearly out of line. To just kick you off the LLC shows a lack of respect for the other members, and the fact you were full members of the LLC when it was created. Time for some hard discussion as I see abuses coming if they haven't already occurred.

I am also uncomfortable with the guy who is cutting you out of your rights in the LLC doing the financials. If you have to pay someone, suggest a book keeper. There is principle called "separation of duties" that keeps people "honest". The guy with all the receipts and bank statements will have to turn it over to someone who has no conflict of interest, creating a separation of duties. And that will prompt questions. If he knows this, as he spends money, then he will be more honest about it. Better yet, make it clear about who has the authority to authorize what spending.

But frankly, I don't think anyone should be spending a dime without an operating agreement in place given the way things have gone.

I would want an agreement that indicates

1. Obligations of each member/role in the band
2. how the financials are managed/book-kept
3. Financial reporting to the group
4. How proceeds will be distributed, and when, and by what process.
5. Circumstances and process under which someone is admitted or removed from the LLC.
6. Access to financial information
7. Process by which members can vote to eject another member (believe me, I've used that clause a lot in non-profits).

I don't know what kind of money you guys are bringing in, in my county, I can get a 1/2 hour legal consultation through our county bar association for $50. Might be worth the coin to see what your rights are and understand LLC's better.

Right now, all this sounds like bad news, and a recipe for a band implosion.

[note, I just read @4 Strings Good 's post and realized he said most of what I said, sorry, at least I was partly on track].

 

I'm neither a lawyer nor an accountant. I don't think a business entity can simply erase someone's ownership stake. There may be assets that you are rightfully the partial owner of. If they can't buy you out, a potential remedy is for the business to sell all of its assets and divide the cash.

However... don't discount the possibility that the business has no assets and that you will get nothing. I have an anecdote, which is that I sometimes get a treat from the vending machine, and sometimes the treat gets stuck and I lose my money. I used to get kinda bent out of shape when that happened. Then I decided that I would prepare by telling myself: "It's a gamble, and I will not get mad if my treat gets stuck." Next time it happened, I just walked away and didn't let it get me mad.

A similar mental preparation might help you with your confrontation with the band.

 

If this post is legit then the OP is in a world of hurt. Take the advice of 4 Strings Good, get a lawyer. And realize that you’re probably done with the band (thieves hate getting caught) but the two currently on the LLC have already decided they’re done with you by the sound of it.

Good luck and sorry.

 

I’m questioning the
“ we have to pay him for his time”
part of this.

 

Sounds like you’ve just become an independent contractor.

 

I have set up two LLCs for my professional career (I have two consulting businesses) and have never heard of an LLC expiring and needing to be renewed. As others have noted, get yourself a lawyer pronto.

 

Assuming the LLC is organized in Florida, use this site to track filings made with the State.

Search for Corporations, Limited Liability Companies, Limited Partnerships, and Trademarks by Name

If you executed a formal operating agreement when establishing the LLC, read through it to make sure members and managers are defined along with their respective authorities and the other two members are acting within said authorities.

 

I can't speak legally, but I can easily see this being the end of the band(s) and the friendship. "I feel like I might be being ripped off" is a hard discussion for relationships to recover from.

 

None of this would sit well with me at all, especially as an original member. The fact that something is being hidden from you would be cause enough for me to say goodbye. Whatever amount you contributed to for the new P.A. gear might just have to be a loss for you. I just couldn't gig with a band knowing that a couple of members are intentionally keeping financials secret from other members that have a right to know. If they were friends of mine, I'd be hurt.
IMO, I'd walk away. Making music and gigging is a lot less enjoyable if you bring lawyers into the mix and the new BLs refuse to disclose anything. Bad vibes all around.

 

This is....not a band I would be a part of. I'd calmly pack up my gear, leave, and never go back.

 

I had an LLC for twenty years and it never expired. (Recently retired and terminated it) I suppose the law can vary from state to state, but something does seem not quite correct here.

 

The way LLC's have to be run varies from state to state, so be sure to seek information specific to the state in which the LLC was set up. But generally, the LLC has to identify in the operating agreement they initially filed who is an owner and what percentage each owns. If you were officially an owner, then they can't take away your share just by filing a form. Consult an attorney and take legal action (asuming there is enough money at stake to make it worthwhile). Just by doing this you will force them to hire their own lawyer and even if they win, they lose.

 

Or a partner.