September 11, 2018 at 9:01PM

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Producing an Indie Webseries - Should I make an LLC?

I am producing an independent digital series that will be crowdfunding via Seed&Spark. By tax law, the funds raised have to be documented as "income" for the entity receiving the funds - as this would possibly put me in a different tax bracket, one that I can't really afford to be a part of, is it better to create an LLC for the project to funnel the funds into, so I am not liable for them personally? As it's a rather run and gun production with a mirco-budget, I am afraid establishing a company may limit our flexibility in the long run because things would have to be more "by the book"? I don't know enough about tax law or the legal ramifications of creating an LLC, and production certainly cannot afford a lawyer. Any thoughts?

5 Comments

I've made many projects with the ... let's call it questionable ... practice of not forming an LLC. As far as the tax question goes I would say that it depends on if this is a series you're going to shoot this as a one off series now or if this is going to be a project you're going to be working on for multiple years. If you're potentially just shooting this one batch of episodes and that will be it, then (for taxes) I wouldn't go through the process of forming an LLC. The LLC has tax implications but it's a bit more important when it comes to your legal/financial liability in other aspects of production. One thing to keep in mind is that as far as the IRS is concerned you're a filmmaking business, so spend as much of that crowdfunding money the same year you raised it and it's a business expense that will offset the income and help keep you out of that higher tax bracket. I have more info on this and resource links in a blog post I recently wrote here: https://bit.ly/2Mwp3ad

September 14, 2018 at 4:25PM

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Sean Mannion
Producer
6

Thank you! I'll take a look at your blog post :)

September 17, 2018 at 1:26PM

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Alicia Carroll
Writer, Producer
74

Hi,
My take would be get an LLC. Heres why, it allows you protection from fiscal damages that may arise later. An LLC will allow you to have privileges that a sole proprietor doesn't have like access to better pricing on insurance and access to productions insurance which you will need. It simply makes you look more professional also. To keep track of everything create an excel spreadsheet to help organize everything and there are templates out there just google "Profit and Loss excel sheet template".
If you make a ton of money this will help you, and if you're making money later then you can simply pass off this responsibility to tax professional. Having that LLC done early on will give you peace of mind.
I hope this helped.
-Mark

September 17, 2018 at 1:24PM

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Marcos Vidal
A.D.//Narrative Feat. Producer
11

Thank you so much!

September 17, 2018 at 1:25PM

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Alicia Carroll
Writer, Producer
74

Hey Alicia -- Stuff is confusing. I'm not a lawyer, so take this with a grain of salt, but how I would say it is that an LLC doesn't really offer you the kind protection that you're talking about in terms of income. Usually the 'profits' of an LLC are passed off to the owners to file individually anyways. So an LLC won't shelter a modest amount of crowdfunding cash anymore than your own self filing individually. But like Sean is getting at, if the budget is going to the expenses of your production or your expenses operating the business out of your apartment, as opposed to a salary that would go straight into your pocket, you'd probably break down your profits and losses when you file individually. So hypothetically, If you raise $10k and spend $9,995, you would list that, and then the $5 that you got to keep to yourself (if that) sure ain't gonna bump you into a tax bracket.

Another important thing worth considering: what state are you in and how much do you have to pay each year as an LLC in that state? In Arizona, you pay under $100 a year whereas in California an LLC has to fork over $800+ a year. Not chump change! I hear its more than that in NY.

I have no idea what kind of money you are talking about for your overall Seed & Spark campaign, but if it's not much and you can't afford a lawyer, hit up the library and check out some free handbooks, like 'The Pocket Lawyer for Filmmakers.' It will give you a lot of info that you'll need to make this decision and more. An LLC could be very useful to you -- but for other reasons! And fwiw you can often do an initial consultation with a lawyer to get a feel for things too. Congratulations on your crowdfunding and good luck with what you decide!

September 19, 2018 at 8:03PM, Edited September 19, 8:03PM

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Oakley Anderson-Moore
Writer
Director/Shooter/Editor

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