Incorporation

Paul Bruening · February 1, 2006

Hey folks,

I am going to incorporate my company. Then incorporate each production and rent the gear from myself. What do you prefer for the production: S or LLc?

Brad Grimmett · February 1, 2006

You should ask your accountant and attorney.

Stephen Williams · February 1, 2006

You should ask your accountant and attorney.

Hi,

I think that's good advice. From experience if you have too many companies then accountancy, legal costs and insurance seem to erode any profits that you might have made!

Stephen

Mark Allen · February 1, 2006

Hey folks,

I am going to incorporate my company. Then incorporate each production and rent the gear from myself. What do you prefer for the production: S or LLc?

I'm speaking with a few accountants in the next couple weeks about this very issue. I'll try to remember to share any brilliance I glean. There are many sites on the internet which discuss this issue and they all resolve to "Consult your tax attorney."

Mitch Gross · February 1, 2006

My accountant and I settled on an LLC for me.

N DeWood · February 1, 2006

Hello,

It really depends on your production and your goals. If you are an independent seeking to create independent films or programmings in the hope of selling them to would be distributors, a single LLC will do fine for many reasons.

Unlike a Corporation, with an LLC, you don't have to adhere to rigid corporate meetings, minutes, etc., that must be done with a corporation, and has to be maintained on a yearly basis. Of course each State's corporate laws differ, but they all have similar requirements for a corporation. An LLC is easier to setup, and you don't have to deal with declaring what type of shares you wish to issue: Par or Non Par. Some states may even require a certain amount of Capitalization before you can incorporate.

OTOH, an LLC will allow you to easily setup a legal structure, without the hassle of corporate requirements. Don't setup an LLC for each production. You need to pay filing fees, yearly business fees, obtain different EIN numbers, and various insurance coverages, file quarterly IRS reports (even if you don't make any money), and the list goes on. One LLC can take care of most of your needs. However, if you will be getting into large projects with other producers or companies, then your own LLC and their LLCs or corporations could create a specific LLC jointly just for that purpose. This way, the production is jointly owned by your LLC and whatever structure they're conducting business through.

Finally, remember the "S" in S Corps is an IRS election to prevent your company from being double taxed as a C Corp. It is not a different category of corporation. An S class corporation is OK if you intend to have up to 75 shareholders, and wisht to raise capital by issuing shares. However, that brings up another question: Are those investors there for just that one production, or are they long term investors who simply wish to own part of your S Class Corp? With an LLC you can raise capital, but you have to do all sort of things such as amend the by laws, and convey what is referred to as "member" interest. It's not the same as Corporations.

There are many other things involved in choosing a legal entity. Also, there are tax considerations to consider which you must discuss with your CPA or attorney.

Best of luck.

Nick,

February 2, 2006

" they all resolve to "Consult your tax attorney."

I suppose that's good advice, but guess what, tax law is so complicated in any western democracy that no matter what you do the tax man can take issue with it and make your life hell.

Give your taxes to five of the best accounting firms money can buy, guess what they'll all come back with different figures for you!!!

Why does this happen, shouldn't the math be cut and dry? No it isn't, each accounting firm will interpret the tax laws differently because they are so complicated and vauge.

Have your taxes audited by five different auditors from the tax office and they will all come back with five different sets of figures!! For the same reason as above.

Call the IRS and ask them a question, call back and ask the same question to a different person, and you'll most likely get a completely different answer. It really is screwy, and Canada is just as bad.

That's why a flat tax system that eliminates all deductions and loopholes is the only way to go. You could put the entire return on one page, instead of 50.

R,

Brian Wells · February 2, 2006

That's why a flat tax system that eliminates all deductions and loopholes is the only way to go. You could put the entire return on one page, instead of 50.

Yes, and I'm sure there are boatloads of CPA's prepared to hire lobbyists to ensure that never happens!