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I understand each film should be its own LLC, however how do you go about making a parent company to have an offshoot for each LLC?
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I think S32 member Bill Costantini may be able to advise.
Its simple. Each LLC can have one or more members. Members are people. LLCs (companies) are also people in this instance and therefore can be members. So, you create your production company LLC. Then that company is a member of the film's LLC. In your articles of organization you define the percentage of the company owned by all members. So in the film's LLC your production company LLC owns whatever the percentage that is defined in your PPM and the other investors (which are the other members of the film's LLC) own the percentage that they have purchased. Even easier is the film's LLC is made of two entities: your production company and the entity that is the investors. Then the membership of the investors LLC is divided up based on the shares purchased. Depends on how you want to handle the organization and management of the different entities. That may have sounded complicated, but its the least complicated part of the entire process.
Awesome information Jon. Thank you!
The first things I would do is spend enough time to understand what the various entities are; how they are formed and maintained properly according to federal and state law; and the benefits and differences of each one. That would save me a couple thousand bucks in attorney consultation fees, and would allow me to spend the majority of my money on the attorney fees to structure and maintain my entities properly. The minority of my money would be spent on the consultation fee, which I would have minimized by doing as much fact-finding as possbile beforehand. So if I were doing a flim project, I'd probably have to consider an S-Corp or a C-Corp at the top with separate LLC subsidiaries for each different potential income and expense stream that might exist for that film brand and its separate and diverse intellectual properties. I'd know the differences between an LLC, an S-Corp and a C-Corp; I'd know the federal rules, and the differences in federal taxations, like the tax rules for 1040 and 1120 incomes; I'd know the rules of the state that I'm incorporated in; and I'd know the importance of not co-mingling funds. I'd understand articles of incorporation and articles of agreement; matters and rules regarding, but not limited to: board, reporting, accounting, stock issuances; capital distribution; taxing matters; P&L, I&E and ledger activities; and corporate meetings issues. Then, after becoming very familiar with all of those matters, I'd sit down with my competent tax attorney; map out all the potental income and expense streams like branches of a tree; participate in a cost-benefits analysis; determine the best route to go that provides the best tax benefits and other benefits; and then I'd go from there. That's what I would do.
You make my head spin, Bill. Lol
It's really simple stuff...once you learn the few hundred facts. Producing a film - understanding and getting financing; and getting all of those pre-production, production, post-production, marketing and distribution elements together and accomplished - is probably 300 - 500 x more complex and difficult than understanding the structure of LLC's, S-Corps and C-Corps. Maybe even 1,000 x more difficult. Really.
Well put Bill and I agree with you. I would add that when choosing a business structure I would; (i) understand what the state law obligations of maintaining the business will be particularly if the business exists for more than a year, (ii) be sure to sign all business related transactions/documents as a representative of the business and not in an individual capacity, and (iii) correctly determine whether actors and crew are considered employees or independent contractors of the business.