Denver, Colorado. Photo Credit: Bill Griepenstroh
The Colorado Artist Company Act has gone into effect, and in keeping with its title, the law is designed to enable creatives to form “artist companies,” or LLCs featuring “a stated artistic mission.”
Technically signed into law in June, the Colorado Artist Company Act took effect this past Wednesday, August 12th. Spanning nearly 30 pages, the bill aims to allow artists – referring here to those who create across music, painting, photography, film, writing, “digital content,” and different areas yet – to establish the aforementioned artist companies (or “A-Companies”).
What exactly is an A-Company? According to the law, the term describes an “ALLC” with “a stated artistic mission set forth in its articles of organization or operating agreement.” Moreover, the business must be owned by an artist or artists, who are expressly required to possess at least 51% of the voting securities at hand.
“While the bill allows artist companies to file as a new business type,” the Colorado Legislative Council Staff added in a fiscal note, “it is assumed that the registration process will be mostly the same as for other types of LLCs.”
The in-depth law also details outwardly straightforward steps through which an already-registered LLC can file to become an artist company.
Additionally, each option – registration and conversion – is on the table for both Coloradoans and eligible individuals located outside the Centennial State, per the text.
Among other things, members must then determine which existing works and works they create while part of the company will be “assigned or exclusively licensed” to the ALLC.
Said members will further work out whether certain decisions require “supermajority or unanimous approval,” whether a subsequent operating agreement can supersede the A-Company’s own articles of organization, how to pinpoint ownership shares, and much more.
Meanwhile, distinctly ALLC-unique elements are in place as well – like, for instance, “separate voting for artistic decisions versus business decisions” and relaxed requirements for “formalities customarily associated with” traditional LLCs.
Plus, the A-Company could potentially prevent unauthorized career decisions and the well-documented pitfalls associated with unclear agreements. Any “action materially affecting the ownership, licensing, transfer, or revisionary right of artistic work” is subject to “approval by a majority of all voting interests of artist-members.”
Regarding works assigned or exclusively licensed to the ALLC, artist members themselves will seemingly be in the driver’s seat from the control perspective.
“Any governance and control rights must at all times remain with” them, though “nonartist investors may hold economic rights, including rights to distributions, royalties, revenue participation, or other financial returns, without corresponding governance or control rights,” the bill reads.
Finally, the described rights would revert to the appropriate members upon dissolution, the text explains in more words.
This is, of course, only an overview of the multifaceted law, which also lays out an option for establishing a “public benefit artist company,” a process for adding artist members, and more.
But it’ll be interesting to see if the ALLC catches on – Armstrong Teasdale highlighted questions about the possibility of Colorado’s becoming the “Delaware for artists” – and if different states adopt similar measures moving forward.
