Filmmakers gain a huge advantage when they start a film production company. This process allows them to pursue equity-based crowdfunding for larger sums across a wider base of investors than just typical donation-based crowdfunding. It also helps to protect your film, management team, opens additional financing opportunities and makes your projects far more appealing to film investors. You will, of course, need to secure legal counsel to pursue this path, however, here is a high level overview of some of your options.
Start a Film Production Company
After consulting legal counsel, you'll find the best state (or region in your area) in which to set up your film production company. There are investment and tax implications associated with your choice, so make sure to do your research. Setting up a company protects you personally, as well as your investors and your project, since they are all now separate legal entities. Should anything go wrong with your film production, your investors cannot go after your personally, only the assets of your company. You also look far more professional to your investors, making your offer much more appealing.
Types of Film Production Companies
When choosing the type of film production company to set up, your choice affects the cost of filing to register the company as well as future tax implications. The location of your company will also affect these variables. Should you open an LLC, DBA, C-Corp, S-Corp or other? Only you and your attorney can answer those questions, but here are a few examples of company types from which you can choose:
Sole Proprietorship - This type of company is one of the most common structures in business. It’s an incorporated business that is owned and run by a single individual with zero distinction between the two, as in, the business and the owner.
Limited Liability Company - The Limited Liability Company or LLC is a hybrid legal structure which provides limited liability of a corporation along with certain tax cuts and flexibility when it comes to partnerships. The owner is defined as a member or members, depending on how many individuals are involved in the business.
Corporative - This business is operated and owned for the benefit of those who are using the services it provides. This means all profits that are generated by the company is distributed among its members.
C-Corp - A corporation is owned by shareholders and is considered to be an independent legal entity. This makes the corporation and not the shareholders liable for any debts that it incurs.
S-Corp - This type of corporation is created via an IRS tax election, allowing the corporation to avoid double taxation.
Partnership - As the name implies, a partnership is a business where two or more individuals share in the decision-making process. Each individual contributes equally in all aspects of running the business. All profits and losses are distributed equally among the partners.
Naming and Protecting Your Film Production Company
Everyone loves a good production company name. Try to come up with a an easy-to-remember creative namer, such as Ridley Scott’s ‘Scott Free’, Spielberg’s ‘Amblin Entertainment,' Drew Barrymore's 'Flower Films,' Jamie Foxx's 'No Brainer Films' and so many more. After some serious brainstorming and creative juice flowing, you'll want to check if your company's name is available and trademark it for yourselves at https://www.uspto.gov/trademark.
Whom to Hire for Your Film Production Company
Running a film production company is serious business, and for that you'll need to invest in both an attorney and a CPA, who takes your business as serious as you do. Too many filmmakers try and skimp on or skip this step, but it almost always backfires on them and turns out to be more costly than any money they thought they saved up front. If you're truly dedicated to film production, you need to prove this to your potential investors. Investing in your company up front is the best way to demonstrate you've got "skin in the game" and plan to take your investors' money very seriously.
Secure Capital for Your Film Production Company
Now you've set up your company, covered all the legal and financial channels and it's time to start fundraising!!!! Crafting your film business plan is the next step to thinking through your slate of films, how much money you need, the timing and return of investor payback, financial projections and so much more. You will be able to showcase your amazing story and script, the great talent associated with your film, demonstrate your storytelling capabilities by telling your financial story as clear as day and demonstrate with zero doubt that you know how to handle film production money. As we always say, the more serious you are about film investors, the more serious they will evaluate your offer. Once you are prepared, it is quite easy to find investors who are looking for ways to expand their portfolio and a film production company looks good on any investor’s portfolio.
How to Set Up an LLC or Corporation for a Film Production Company
You want to protect your investors' money, yourself and the film.
Corporations such as LLC or S-Corp provide this type of shelter in case anything goes wrong before or during filming.
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Balancing Act Pictures LLC
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