Should your film/TV project be its own LLC?
- Thread starter Kingda Ka
- Start date
Most common, no.
Most people use the telephone or personal contacts to approach and attract investors.
The LLC structure is appealing to both those involved and investors alike. While it doesn't always protect the directors in charge of said LLC, it does (normally) limit the liability of the investors to the amount that is invested. To determine the best legal and business structure of your business, I suggest you consult an attorney/accountant.
For example, you can use certain structures if you keep the amount of investors to a limited number, but you're forced into another structure when you hit a higher amount of investors. The rules for attracting money in the US has also been changed lately. It's best to be safe.
Most people use the telephone or personal contacts to approach and attract investors.
The LLC structure is appealing to both those involved and investors alike. While it doesn't always protect the directors in charge of said LLC, it does (normally) limit the liability of the investors to the amount that is invested. To determine the best legal and business structure of your business, I suggest you consult an attorney/accountant.
For example, you can use certain structures if you keep the amount of investors to a limited number, but you're forced into another structure when you hit a higher amount of investors. The rules for attracting money in the US has also been changed lately. It's best to be safe.
Creating an LLC will not attract, or detract investors, per-say. What having your film as an LLC does is to protect the filmmakers from any tax liability, by creating a legal entity to place that liability on.
If you are receiving investment capital, you would want to receive it under the umbrella of the LLC for that reason.
Now, if I were an investor with 10's of thousand, to millions of dollars to invest, I would think twice about giving that money to a private party, than to an LLC. Why? Two reasons...
1. Having an LLC to receive your funds, and manage the spending of those funds for tax purposes, shows that you are interested and intelligent enough to do things the right way.
2. This protects me as an investor against, "co-mingling" of funds, which is a potentially dangerous legal problem for both of us.
Thanks. I am co-owner of a C-corp for my day job, I understand how an LLC works. Any investors in your small business will generally require it to be a C-corp for tax purposes - your company needs to be a C-corp to be on "Shark Tank" or get listed on "RockthePost", for example.
Generally, an LLC is reserved for small businesses or a specific project - we are currently doing a $1 Million project in Nebraska that the owners formed an LLC with the project manager to co-own the project. This keeps them at arms length from each other for the profits/tax liabilities of their respective companies.
I guess the question I was asking is do film/TV investors invest in fledgling production companies or just the specific project? If I was an investor I would want a piece of the production company, if I was the production company I would want investors to only be involved one project at a time, however, it is usually the person with the purse strings who gets their way.
Generally, an LLC is reserved for small businesses or a specific project - we are currently doing a $1 Million project in Nebraska that the owners formed an LLC with the project manager to co-own the project. This keeps them at arms length from each other for the profits/tax liabilities of their respective companies.
I guess the question I was asking is do film/TV investors invest in fledgling production companies or just the specific project? If I was an investor I would want a piece of the production company, if I was the production company I would want investors to only be involved one project at a time, however, it is usually the person with the purse strings who gets their way.
Well.. generally in Hollywood there are executive producers who stick with a single production company. So I wouldn't say they have a stake in the company's assets overall, but they do have a huge influence on the company. They do however want a large stake in the project they invest in because they need to both make back their money and get profit.
Otherwise they are going to want to be able to claim this as a loss on taxes, which at times can be better than the film doing good.
So short answer, no they don't invest in companies, they invest in films.
Also as LLC is for companies... if you register your film for an LLC you are basically founding a production company, as you will have to file it as something... Feature Film isn't a company type.
This is no where from experience, but I've heard investors investing in a single feature or investing in a slate of films. I suppose, depending on your position, either way makes more sense, especially considering the 6/3/1 rule.
To get a piece of a production company would be odd.
Prime reason for a different LLC for each project is that if you get sued, they can't go after all your projects for cash, just the one directly involved in the lawsuit.
Indie filmmakers should never use the same production company name more than once.
Indie filmmakers should never use the same production company name more than once.
Or you know... don't do something that can get you sued....
I would recommend reading the first two chapters of Louise Levison's book.
This is something I have no knowledge of personally as I've only funded via crowdfunding so far, and I won't cross that bridge until next year for my current project.
However, based on my experience as a business owner of a production company that currently has a small number of paying clients, I would NEVER want to give away a percentage of my business for capital for a specific film project. My understanding is that you create an LLC for your film, and only offer a percentage of the profit from the film, should it sell.
As previous posters mentioned, you can get sued for anything, BUT you can do things to make yourself an undesirable lawsuit target -- different LLCs is of those ways.
A pissed-off gaffer eyeing your Mercedes is going to be hugely bummed when his lawyer tells him your car was bought several LLCs ago and the actual film he worked on is in bankrupty with 35 creditors ahead of him.
Louise Levison has one book, but she has done 7 editions of that book, which is considered seminal. And, on top of that, she also has a regular newsletter dealing with developments in the industry.
A company can protect the shareholder but not the director, because, by law, a director may be liable for wages and IRS deductions not paid. A bank or lender will also know that a company can be a shield, so it will go around that by demanding personal guarantees.
A company can protect the shareholder but not the director, because, by law, a director may be liable for wages and IRS deductions not paid. A bank or lender will also know that a company can be a shield, so it will go around that by demanding personal guarantees.