How do I go about creating a derivative musical work legally and where do I start?

You need a copyright lawyer to guide you through the process. It is NOT a do-it-yourself project - as too many things can go wrong. You can start the process by contacting the Copyright Clearance Center in Danvers, MA - www.copyright.com.

You need to contact the publisher or publishers of the songwriters and ask their permission. If they say yes, they will most likely take it from there and tell you what terms they want and what sort of contract. They do not need to tell you yes. They can tell you no. If they tell you yes, they can set any price or terms and you can try to negotiate if needed. If they tell you no and if you go ahead and infringe on the copyright, your infringement will be considered knowing and willful. This will put you in a very bad position legally, so do not do it. Yes, of course I think you should have a lawyer help you with this and look after your interests. If you have the money to professionally record and release a song, you should include a lawyer in your budget. If you do not have the money to professionally record and release a song, it will be hard to convince the publishers that they should trust you to share their copyright. As to using stock forms, those should never be used.

If the work is well known, it's probably registered with ASCAP, BMI, Harry Fox, or some similar agency who handles licensing. If you can't find the agency on the work itself, each agency should have a listing of its songs. If the work isn't registered with a rights agency, contact the lyricist/composer directly and negotiate the rights yourself. You can also hire an attorney if you run into problems.

You will need a copyright license from the composer or whoever, holds the copyright on the composition (lyrics) and music if you are using any of the music. I recommend that you get a qualified intellectual property attorney as this is a very technical area of law.