So I have a question that might seem boring on the surface, but I've been trying to look into it and getting all sorts of technical jargon and legal stuff so I thought I'd see if anyone here has done something along these lines.
Since screenwriters are self-employed, it seems that the popular step is to set up an LLC that is taxed as an S Corp in order to help with taxes and your business of self-employment, however, it seems like a lot to do. Has anyone set one of these up for themselves? How do you handle being in this self-employed business?
Well I would like to make a career out of screenwriting. Still working on getting it started but with the potential of having money coming in for it, it would be nice to know what kinds of things I need to take into account as far as taxes and making it a business.
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I have four LLC corporations but I don't know why you think you'd need one for screenwriting. The only reason I have mine is to protect myself from personal liability which doesn't always protect you anyway especially if you are the sole owner. Also keep in mind you have to pay money to keep the LLC going every year even if you don't make a dime,
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I don’t earn trade in the USA. But John August says you need to be earning around 400,000 to make it worth your while.
I have a few company structures in Australia. The cost of maintaining those structures had to be less than the savings it makes to make it worth your time.
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Craig. He was probably talking about a C corporations or an S corporation. Limited Liability Companies (LLCs) because an LLC doesn’t pay any taxes so there's no tax savings. The LLC earrings are passed through to the Members (owners) and the owners pay their personal taxes.
In Aus a corporation is it own legal entity. They have a fix tax rate at 32%. Individuals have a sliding tax rate. You have to be earning more than $180k to have a average tax rate above 32%.
We have two corporations and a family trust that enables us to distribute income as we desire around the family groups.
The US tax laws are far different.
Thank you everyone for your insight and knowledge.
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I have an LLC because it allows me to deduct expenses (meals, gas, workshops, etc.) on my taxes, but a simple local business license will do the same thing. In either case, be careful; in the U.S. if you don't show a profit (even just $1) 3 out of every 5 years you claim biz expenses, you run the risk of having the IRS re-classify your "business" as a "hobby," which allows them to disallow all your previous biz deductions, making you liable for back taxes, penalties, etc.
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Never made any significant $ to justify having my own individual LLC, but I have been a part of several. We formed mainly to protect ourselves from lawsuits. The scripts were sold to LLC as assets. We drew salaries and paid income tax at end of year.
But don’t worry bout LLC’s until there is $ on the table and you’re making enough to hire licensed Accountants and Lawyers.
It's certainly something I will have to continue to research and plan for. Thanks all.
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Dan M. I understand why more than one person would want to form a LLC when making a film because that could offer some protection in case of a lawsuit. . However if you were an individual who owns an LLC and there were no other members it would offer no protection in case of a lawsuit.
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Nathan. That is what people hire a CPA for.
Again in Aus. We tend to start a new company per production. Then all expenses and risk is captured in one place. The asset can be moved out later to disconnect it from any remaining debt.
Hi Nathan. A few answers come to mind. You should speak to a lawyer and a CPA about this issue. I think, generally, the common wisdom is that until you sell your first script, it's not a huge issue unless you have some unusual deductions to take. Setting up a corporation or an llc does let you take some deductions you can't take as an individual. You would probably set up an S Corp because it offers protections that an LLC doesn't https://www.legalzoom.com/articles/the-definition-of-an-llc-managing-member You are setting up the company to create a corporate shield for your personal assets. LLCs are more appropriate when you are working with others to actively run a business and when you are accepting investment. Film companies set those up specifically because the LLC operating agreement lets them cover duties, obligations, compensation, etc which vary from production to production. I hope this helps . . .
Nancy Fulton
-- nancyfultonmeetups.com
PS: The primary protection for your screenplay is copyright registration at www.copyright.gov. It's critical to protecting your work. If you work with a co-writer, make sure you work with an attorney to set up an agreement between you so the work doesn't get trapped in limbo if you stop being able to work with one another in the future.
Sorry, Dan Guardino, it actually did in my case. My sole-member LLC (me) protected me from personal liability during a difficult time (lawsuit). It helped that I very carefully kept the biz accounts completely separate from my personal accounts - but a simple biz license (or no structure at all) wouldn't have kept me safe regardless of meticulous accounting. The LLC did that.
Thank you, Nancy Fulton and others for the great advice and giving me plenty to think about. Luckily, it seems that I may have more than just a screenwriting business that I can include within an LLC as well as more people than just myself, so I will continue looking into it and seeking legal advice. Thanks all!
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John. I had a similar situation and I had to spend $330,000 in legal fees to protect my assets.
Sorry to hear that, Dan Guardino
John. Thanks.