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View Full Version : Pros and Cons to a Screenwriter LLC?


Bunker
12-28-2010, 01:45 PM
What do you guys think about screenwriters setting up their own LLC? Is there any point, especially if you don't have a steady or large stream of income through screenwriting?

I only ask because I have some career momentum (an optioned script that's making some headway and a free writing assignment). End of the day, I might not make a dime. But I had someone ask me why I don't set up an LLC, and my response was, "I'm not really sure." LLCs are generally useful in protecting the invidividual from lawsuits, but I'm not sure how or if that applies to "amateur" screenwriting.

JJBones
12-28-2010, 01:52 PM
Most writers, directors, producers, etc... who make a good living in Hollywood will set up Corporations rather than LLCs... Often referred to as "loan outs" or "personal services" corporations, because typically, the "artist" will be loaning out their personal services through the corporation.

This provides that protection of lawsuit vs. the individual that can be absorbed by the corporation instead. Usually an S Corp is what is set up.

No sense in doing it until you have certain income thresholds -- check with your accountant. Because there are fees in California $800 per year even if you make nothing... Plus startup costs which can be a few thousand...

Hamboogul
12-28-2010, 01:55 PM
How are free option and free writing assignment "career momentum?"

nathanq
12-28-2010, 02:13 PM
How are free option and free writing assignment "career momentum?"

Yeah,

not to be a downer here, but you may want to wait until something of yours actually makes it to the screen and pulls in cash before you think of making your own media empire.

catcon
12-28-2010, 02:38 PM
How are free option and free writing assignment "career momentum?"

A lot more momentum than I have! Seriously, though, I already run my own incorporated business (computer consulting) and when the time comes I'm just going to make "screenwriting" a new line of the business. Yeh! Problem solved!

Bunker
12-28-2010, 03:30 PM
How are free option and free writing assignment "career momentum?"

Why, WHY did you have to attack me with reality!?!! NOOOO! MY CAREER IS LANGUISHING!!

"Career momentum" basically means "My writing career has nothing going for it except for hope."

I was curious if LLCs are useful to a screenwriter at all, but I wanted some free internet advice on that because I didn't want to pay money I haven't made on screenwriting to find out.

Anyway, 2011 might be THE year... or it could be another 2010.

Hamboogul
12-28-2010, 03:33 PM
Hope is always good. It's often what keeps our butts on the seats when we don't feel like writing that day.

Slappynipsy
12-28-2010, 03:50 PM
Don't you have to do those weird "quarterly meetings" with like you and your dog and keep minutes for the whole thing? That's how i worked in Texas for folks I knew that incorporated or did an LLC

emily blake
12-28-2010, 05:13 PM
When it's my turn, I have a plan. That plan is to go to Edward Jones, throw my paperwork at them and tell them to do whatever it is they should do.

SoCalScribe
12-28-2010, 05:28 PM
What do you guys think about screenwriters setting up their own LLC? Is there any point, especially if you don't have a steady or large stream of income through screenwriting?

I only ask because I have some career momentum (an optioned script that's making some headway and a free writing assignment). End of the day, I might not make a dime. But I had someone ask me why I don't set up an LLC, and my response was, "I'm not really sure." LLCs are generally useful in protecting the invidividual from lawsuits, but I'm not sure how or if that applies to "amateur" screenwriting.

Just a quick clarification... LLCs cannot serve as personal services companies. You need to form a corporation in order to take advantage of the tax benefits. Generally speaking, the primary advantage of a loan-out company is that it allows you to file your own taxes (i.e. an employer would pay the full fee to your loan-out, which would then file its own tax return... presumably with the necessary deductions for business-related expenses... rather than having the employing company - or the IRS - make the income deductions for you). The legal protection is limited because the loan out is still loaning out your services, which means that you're on the hook for a breach. And since it's your own personal services company... any lawsuit would just land back in your lap again.

As a general rule of thumb, you're not going to see a significant benefit to creating a loan-out until you're consistently making a six-figure income from your services... and you should be making some kind of steady income to justify the expense. That doesn't have to be just from writing... a lot of people will form a personal services company to render a variety of services for them (producing, writing, directing, consulting, etc.). Without a steady income, the limited tax benefits combined with the expenses you'd incur in administrative fees and accounting fees to maintain a company and file a corporate tax return would outweigh the savings you'd enjoy from not having a company make the tax deductions for you.

thatwritergirl
12-28-2010, 05:31 PM
But I had someone ask me why I don't set up an LLC, and my response was, "I'm not really sure." LLCs are generally useful in protecting the invidividual from lawsuits, but I'm not sure how or if that applies to "amateur" screenwriting.

It doesn't.
An LLC is useful (or can be) for a writer at a certain income level, as can creating a trust. But that's for tax consequences.

An LLC won't protect you from intentional tort liability--say, negligence or defamation. So if you libel someone in your screenplay, it's you that's on the hook, not your LLC. The barrier basically goes down.

Now, if you're producing, taking out loans, entering into contracts, etc., and it's the LLC that's the "person" for those transactions, then, yes, there can be benefits assuming you don't do anything to 'pierce the corporate veil'.

But for someone just starting out? Better to set up a second checking account and keep diligent track of all your writing-related expenses.

Bunker
12-29-2010, 12:47 AM
Thanks for all the good info, everybody! This forum is amazing for those "What should I do if...?" questions. Apparently the answer is, "Don't start an LLC."

ExtHollywoodDay
12-29-2010, 03:36 AM
The breakeven point is somewhere around $200,000 a year.

true_illusion
12-29-2010, 07:54 AM
As for the LLc thing Bunker, i cant comment, i know jack about business management.

As for the career momentum, well, thats a personal issue in my opinion and what is career momentum to one person might be nothing more than a leaky faucet to another. Beauty is in the eye of the beholder and everyone has to start somewhere.

The point of the matter is, my 2010 was similar to yours, had a small indie producer from LA take out a cheap option on my low budget horror spec. Then got an offer to do a "free re-write" on another low budget horror spec by a detroit indie producer - so i did it because financing was already in place and the project is now in post-production with a scheduled February screening here in Detroit.

Why is my 2010 important you ask? simple, I have been able to use the option and the rewrite to my advantage, and as of right now, I got a psychological thriller spec in the hands of the DoD at Plan B Entertainment, and a low budget action spec in the hands of two other production companies that specialize in low budget action movies.

Now nothing may come of it in the end and i could get rejected by all three, or a best case scenario, Plan B likes my spec, Brad Pitt attaches himself to star in it, they give me the easy in with Brillstein and my other spec sells to one of the two other companies after they get into a bidding war over it, and i am probably labeled a "rising star". I would be happy with somewhere in the middle...

So dont let anyone tell you that you are going about it the wrong way or that you dont have momentum.

BurOak
12-31-2010, 01:23 PM
Most writers, directors, producers, etc... who make a good living in Hollywood will set up Corporations rather than LLCs... Often referred to as "loan outs" or "personal services" corporations, because typically, the "artist" will be loaning out their personal services through the corporation.

This provides that protection of lawsuit vs. the individual that can be absorbed by the corporation instead. Usually an S Corp is what is set up.

No sense in doing it until you have certain income thresholds -- check with your accountant. Because there are fees in California $800 per year even if you make nothing... Plus startup costs which can be a few thousand...

Wouldn't it be less expensive to incorporate in Nevada and naturalize the corporation to California (if need be)?