LLC vs INC? When?

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  • LLC vs INC? When?

    Advice on creating LLC or INC as a screenwriter? Once you have that set up, if you got paid for another position in the entertainment industry aside from writer, can you also have it go through your company (i.e., producing, directing, assistant directing, etc)

    Preference on LLC or INC?

    I know some advice have been, don't do it until you're making $100+K annually, but what if you're on the cusp of that? Let's say you're sure your option will be exercised next year and you'll get a check for 75k for that script. On top of that, there's a potential another project of your could go some time next year for another 75k or so. Would it be worth it to just create your loan out (llc or inc) at the top of the year then so that you can reap the tax benefits in the event those checks do some later in the year?

  • #2
    Re: LLC vs INC? When?

    as a practical matter, it's a distinction without a difference. the tax benefit of either an LLC or a corporation ("S-Corp") is for pass-through taxation so that any profits or distributions are only taxed when you receive them, not also taxed at the time that they're earned. an LLC can elect to be taxed like an S-Corp and isn't subject to the usual corporate formalities, which makes it the preferable entity of choice for writers' "loan out" companies.

    https://firemark.com/2015/01/12/shou...entertainment/

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    • #3
      Re: LLC vs INC? When?

      I, too, need to consider a loan-out. Who do I talk to about setting one up? My lawyer? An accountant? Thanks in advance for any advice, hivemind!

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      • #4
        Re: LLC vs INC? When?

        lawyer first, then accountant i would think.

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        • #5
          Re: LLC vs INC? When?

          I guess I'll wait to see if these options actually turn into purchases, and deal with them without an LLC or Inc set up for myself. We'll see if any more deals pop up. If they do and my career takes a turn for the better, then I'll set up an Inc.

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          • #6
            Re: LLC vs INC? When?

            this is not legal advice but generally, especially for loan-out style structures, an LLC is the default entity of choice because it's simpler in terms of formation, provides the same protection against personal liability as a corporation, and the same pass-through taxation benefits as an S-Corp, if so elected. incorporating imposes statutory requirements in terms of maintaining books, board of directors, election of officers, etc. that an LLC does not. all things being equal, i can't think of a compelling reason for a sole proprietor to go with a corporation over LLC at this point

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            • #7
              Re: LLC vs INC? When?

              Great point! But I've seen so many online presences that say an LLC is NOT a loan out. I will definitely contact an accountant and discuss everything before I make any official moves.

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              • #8
                Re: LLC vs INC? When?

                Originally posted by nightcrawler View Post

                I know some advice have been, don't do it until you're making $100+K annually, but what if you're on the cusp of that? Let's say you're sure your option will be exercised next year and you'll get a check for 75k for that script. On top of that, there's a potential another project of your could go some time next year for another 75k or so. Would it be worth it to just create your loan out (llc or inc) at the top of the year then so that you can reap the tax benefits in the event those checks do some later in the year?
                I would speak to an accountant. I always heard if you made $200-250k and above. Most are LLC. But also I would check the terms of those deals because almost writing jobs pay in steps and not all at once. You might get a portion up front, some during, and some after depending on the breakdown. Also if it's near the end of the year you could get the other check in the next year which would change things.

                I'm on the verge of incorporating myself. I also believe there's a yearly fee to maintain the company license or what not each year.
                Quack.

                Writer on a cable drama.

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                • #9
                  Re: LLC vs INC? When?

                  I have an S-Corp that was set up by my accountant.

                  There are annual costs for the corp of about $800 plus periodic accounting and filing that needs to be done, which I pay the accountant to do, but is worth it because it gets done right and I have no idea how to do it anyway.

                  One of the benefits of the S-corp is that we pay our medical bills through it, which apparently has some tax advantages. I also charge my cell phone, gas, car lease, cable & streaming bills, and more through the corp which has a higher deduction rate than if I did it personally.

                  So yeah, talk to an accountant familiar with entertainment finances.

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                  • #10
                    Re: LLC vs INC? When?

                    It's my understanding that a lot of the #s regarding S-corps will change if/when the GOP's tax bill passes, passthrough entities being one of its main subjects. But I don't know that anyone really knows the specifics of the changes yet, including the 51 senators who voted for it.

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                    • #11
                      Re: LLC vs INC? When?

                      the tax rate for pass through income would fall from 39.6% (same as highest personal income bracket) to 25%. Kansas did this, although eliminating it entirely, and went flat broke in less than four years

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                      • #12
                        Re: LLC vs INC? When?

                        Thanks for the info, Joe... even if it puts me in need of a stiff drink.

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                        • #13
                          Re: LLC vs INC? When?

                          I have an S-Corp set up through accountant. So far so good.
                          https://twitter.com/DavidCoggeshall
                          http://www.imdb.com/name/nm1548597/

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                          • #14
                            Re: LLC vs INC? When?

                            Why S-Corp over LLC?

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