Colorado Artist Company Act Takes Effect in U.S., Creates ALLC

The Colorado Artist Company Act took effect on Wednesday, August 12, in the U.S. state of Colorado, after being signed into law in June. The measure allows artists working in music, painting, photography, film, writing, digital content and other fields to form a new business entity called an artist company, or A-Company.

Under the law, an A-Company is an ALLC with “a stated artistic mission set forth in its articles of organization or operating agreement.” The business must be owned by one or more artists, who are required to hold at least 51% of the voting securities.

The Colorado Legislative Council Staff said in a fiscal note that while the bill allows artist companies to file as a new business type, “it is assumed that the registration process will be mostly the same as for other types of LLCs.”

How an existing LLC can convert

The law outlines steps for an already-registered LLC to become an artist company. Members must determine which existing works and works created during the company’s existence will be “assigned or exclusively licensed” to the ALLC.

They must also decide whether certain decisions require “supermajority or unanimous approval,” whether a later operating agreement can supersede the A-Company’s articles of organization, and how to identify ownership shares.

Distinct governance features

ALLCs include elements not found in traditional LLCs. These include “separate voting for artistic decisions versus business decisions” and relaxed requirements for “formalities customarily associated with” standard LLCs.

The structure can also prevent unauthorized career decisions and disputes tied to unclear agreements. Any “action materially affecting the ownership, licensing, transfer, or revisionary right of artistic work” requires “approval by a majority of all voting interests of artist-members.”

“Any governance and control rights must at all times remain with” artist members, the law states. Nonartist investors may hold economic rights, “including rights to distributions, royalties, revenue participation, or other financial returns, without corresponding governance or control rights.”

Additional provisions

The law also provides an option to establish a “public benefit artist company” and a process for adding artist members. Upon dissolution, the described rights revert to the appropriate members.