Basics to Forming a Production Company

This isn’t really rocket science. It’s pretty simple. I’ll give you the basics but I’d advise you to look further into the types of companies you can form and the detailed liabilities for each. You really don’t need an attorney to create your company. However, if you can get an attorney that will form your company as well as some other legal work I will mention later and do it all for a better total price then make a deal. I’d definitely recommend having a lawyer draft the contract between you and your partners (I’ve dealt with some crazy people). There’s really three main things:

1.) A company name

2.) A business license from City Hall

3.) A fictitious business statement (states your “Doing Business As” (DBA). It’s literally just a write-up in the local paper announcing your company in the legal section (normally 50-75 bucks)

The business license application will ask you your basic contact info and what type of company you are forming, i.e. Sole Proprietorship, Partnership, or Corporation. Below are the descriptions for each type:

Sole Proprietorship: You are in business for yourself. No legal paperwork involved. You are the only member of the company. No limitation of liability though which means if you’re sued then you’re personal assets are at stake. Sucks!

General Partnership: 2 or more people involved. Normally no govt. filing but an agreement between partners is recommended which basically states who is responsible for what and what their rights are.

*Joint Ventures* are a special type of partnership to combine two companies, i.e. co-producing, co-writing, creating a tv pilot, etc.

Limited Partnership: allows some of the partners to enjoy liability protections. There are general partners (GPs) and limited partners (LPs). Generals are liable for any legal crap that could go down. There has to be at least one GP. Only GPs can obligate the company into contracts, loans, hire/fire people, etc. Limited partners (LPs) are normally investors. They don’t have company control and will only risk losing their investment. You can be both a GP and LP at the same time. You do have to file with the state to form the LP part. You don’t have to have a GP agreement but you should.

C. Corp: Owned by shareholders which are generally the board of directors and managers. Directors and managers legally obligate the company. All shareholders have limited liability. You have to file with the state. The company will have “bylaws” governing how the company will operate.

S. Corp: *2 Big differences between a C and S corp*

  • Cs can have unlimited shareholders and Ss are limited to 75.
  • Cs are double taxed (business and personal) and Ss are only at the personal level.

LLC: This is the most popular method for production companies because there’s limited liability protection and the benefits of a partnership. It’s owned by its members, managed by members or the people the delegate. You have to file with the state. Taxed at individual level only. Company operates based on the company’s internal agreement between partners. You can own and work for your company as a director, writer, etc.

LLP: This is limited to specific professions (like Doctors and Lawyers) and would not apply to a production company.

I earlier mentioned that I would later mention the other initial things you’ll need your attorney to do. So here goes:

  • You’ll need him to create the LP (limited partnership) paperwork for your investors.
  • You will also need him to write your “Offering Memorandum” which also isn’t rocket science. It just says what each share represents, how many there are, and how much money you’re raising.
  • Finally he will need to set up the escrow account with your bank to hold the investment money.

All of this shouldn’t cost more than 2 grand.

Not too bad. Alright it’s 12:30 AM. I’m crashing. PEACE!

Nathaniel Latimer
323.898.9976
http://www.imdb.me/nathaniellatimer
http://resumes.actorsaccess.com/nathaniellatimer
http://nathaniellatimer.nowcasting.com/
Social Norm Movie Blog: http://www.socialnormmovie.wordpress.com

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