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Defered or % Payments to crew


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#1 Landon D. Parks

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Posted 18 March 2007 - 07:24 PM

OK guys, quick question. If I was to form a corporation for the purpose of making films, and I "Hire" employee's under that company to work on the film, can I legally offer "Deffered Payments" and/or a "% of profits deal"? I know people do it.... but is it fully legal?

It's kind of confusion because of Minimum wage and stuff like that. I can see maybe "Defered payment" being legal, but I with the % of profits thing... If the film never made any money, than you wouldn't owe the people any money, which would violate minimum wage laws.

How to do work around this to legally be able to "Hire" employee's while offering "Defered Payments" or "Percentage Paymeants" AFTER the production and distribution of the film?

I was thinkin that maybe instead of "Hiring" People, you would just "Contract" them... I'm not sure if Minimum wage laws apply to "Contract" labor or not...

Any help is appreciated..
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#2 Frank Barrera

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Posted 18 March 2007 - 08:19 PM

my advice is this: no matter what anybody says to you in response to this post you still need to speak with a lawyer before you get yourself in too deep.
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#3 Joseph Winchester

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Posted 18 March 2007 - 09:09 PM

You need to also check out the different rules that apply to Union members. Chances are you will hire an actor from SAG or a grip from their union, etc. They will have their own rules that you follow when you hire them.

Also think about how you deal with things like insurance for you if someone gets hurt on production and insurances for them, ie: health insurance. I know the Unions have very strict laws that apply to insurances. So be sure to check all of that out.

And yes, hiring a lawyer is invaluable... so do it!

Edited by Joseph Winchester, 18 March 2007 - 09:12 PM.

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#4 David Mullen ASC

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Posted 18 March 2007 - 09:14 PM

Odds are high that this is a non-IA, non-DGA, non-WGA shoot, but possibly SAG, unless Landon has found actors who aren't SAG members. I would find a line producer who has written such deal memos and get their advice.
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#5 Joseph Winchester

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Posted 18 March 2007 - 09:25 PM

Absolutely David, I'm sure the first production won't be union. I'm thinking down the road. If he's starting a company to make films, as he said he is, he definitely needs to think about unions issues, among other things.

Edited by Joseph Winchester, 18 March 2007 - 09:26 PM.

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#6 Hal Smith

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Posted 18 March 2007 - 09:28 PM

I was thinkin that maybe instead of "Hiring" People, you would just "Contract" them... I'm not sure if Minimum wage laws apply to "Contract" labor or not...

There is an extremely narrow IRS definition of what constitutes an Independent Contractor. Screw up with respect to the IRS and they'll come after you for FICA, back withholding taxes, etc. if they audit you. I work as an IC and I am very quick to protect my clients by advising them if and when they start to cross over the line which would make me an employee under the Tax Code. Another area where good legal advice can save you a ton of grief later.
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#7 Richard Boddington

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Posted 19 March 2007 - 07:14 AM

On the other hand....tons of people volunteer their time for film shoots, with the understanding up front that they are not being paid.

I don't think there is law that says you can't give your labour away for free.

R,
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#8 Phil Rhodes

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Posted 19 March 2007 - 09:39 AM

I think you're probably better off just admitting you can't pay people. Almost no deferred or percentage deals ever pay out a penny.

Phil
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#9 Richard Boddington

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Posted 19 March 2007 - 10:38 AM

I think you're probably better off just admitting you can't pay people. Almost no deferred or percentage deals ever pay out a penny.

Phil


Yes, also true.

R,
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#10 Rupe Whiteman

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Posted 19 March 2007 - 11:42 AM

If producer's admit from the get go they have 'limited funds' ie no money, then fine. Just make sure you have the right insurance and that you treat people well on your productions. What goes around comes around. It's really annoying (and so boring) when producer's start to make promises about a great paid project coming up in the future etc etc - you just know that's not going to happen...
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#11 Landon D. Parks

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Posted 19 March 2007 - 01:04 PM

Odds are high that this is a non-IA, non-DGA, non-WGA shoot, but possibly SAG, unless Landon has found actors who aren't SAG members.

Currently anyway, no Unions will be involved upfront. At least till we can afford to actually abide by union laws. This also means no SAG actors, at least for the first few productions.

If he's starting a company to make films, as he said he is, he definitely needs to think about unions issues, among other things.

The reason I formed the company was for limited liability and the ability to apply for credit and loans under the business name. Also, since I went in partners with two other people, they wanted the limited liability.

Starting a company would also allow me to able to buy workers comp & general liability insurance under the company, then "Hire" employee's under the company to work on the films. Although now I'm wondering how to go about "Hiring" employee's where the workers comp will cover them, yet not actually pay them anything :blink: legally. So this is my main concern right now....


On the other hand....tons of people volunteer their time for film shoots,

I was under the impression it was illegal for someone to volunteer unless you where a Not-For-Profit organization? IF you can have volunteers in a for-profit corporation, how would they be handled under the corporate worker comp?

I think you're probably better off just admitting you can't pay people. Almost no deferred or percentage deals ever pay out a penny.

One of the things I'm trying to do with this company is also do DVD Distribution. This way every film is guarantee's a "Distribution" deal, although the amount it actually makes is dependant upon how well we can advertise the film as a single, very small company with very little in the way of money. In some sense, this should mean that the films should make "Some" profit. Although the amount of profit is questionable, hopefully we can soon have enough money for the DVD profits to be able to support the production costs. Although this may or may not happen depending on the success of the films.

Mind you, right now we want to BUY all the equipment, so that the only production cost's are what we need for location insurance, food, transport, and possibly crew and cast payments one day.

I just hope I did all this right and that it works out... Right now I'm better of then I was a year ago. I mean, at least I?ve got the company formed and partners involved. Now it just comes down to buying the equipment and figuring out how to hire people for free and what insurance we need to cover the crew in case of injury.

Right now, we are not going to concern ourselves with insurance to cover E&O, Location Insurance, etc... We'll just have to rely on the limited liability of the company to protect our ass's in the event of a law suit.
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#12 Landon D. Parks

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Posted 19 March 2007 - 01:17 PM

From the looks and sounds of it, there has to be some legal way to hire crew for a no paying or defered paying job... I mean, otherwise people would be getting in trouble for it, and places like "Mandy.com" wouldn't have listing just for Low/No/ Defered Payment jobs... There has to be some legal way around the IRS and state/ Federal requirement to pay people... I just can't figure out how it's done. I was hoping that someone here who has done it before could offer advice on how they did it?

Thanks,
Landon
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#13 Daniel Smith

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Posted 19 March 2007 - 01:49 PM

Well.. I have a legal contract sitting in my drawers covering all the terms and agreements for a 'deferred contract'. I could probably scan it in and send it to you if you really wanted.

And, I also remember hearing some time ago that you can seek 5 minutes of a solicitors (lawyers) advice without having to pay anything. I personally don't see how that works but it's probably worth looking into.

(I'd personally setup the contract, and then start asking solicitors if it's air tight)

Edited by Daniel Ashley-Smith, 19 March 2007 - 01:53 PM.

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#14 Stephen Williams

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Posted 19 March 2007 - 02:02 PM

Right now, we are not going to concern ourselves with insurance to cover E&O, Location Insurance, etc... We'll just have to rely on the limited liability of the company to protect our ass's in the event of a law suit.


Hi Landon,

I don't think you have much to loose anyway!

I know somebody who rents planes to a flying school in LA. He does not bother with liability insurance as his debts equals his assets. He saves himself $25,000 a year !

Stephen
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#15 Richard Boddington

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Posted 19 March 2007 - 10:30 PM

From the looks and sounds of it, there has to be some legal way to hire crew for a no paying or defered paying job... I mean, otherwise people would be getting in trouble for it, and places like "Mandy.com" wouldn't have listing just for Low/No/ Defered Payment jobs... There has to be some legal way around the IRS and state/ Federal requirement to pay people... I just can't figure out how it's done. I was hoping that someone here who has done it before could offer advice on how they did it?

Thanks,
Landon


Landon, really the IRS does not bother with small operators like you, even if it turns out people can't legally give their labour away. The IRS goes after the big guys that they can make a major score on, ie rob them of their money.

Consider having the IRS come after you a nice problem to have to solve, it means you've made enough money for them to notice you.

It's the same with all these new script writers and indie film makers that are so paranoid about having their "brilliant" ideas stolen. There are so many hundred more important things to worry about. Like finding the money to get some thing made in the first place, and then actually making it.

Contrary to popular belief the video pirates in Hong Kong are not salivating for the next low budget indie film.

When people START riping off my work en masse then I'll know I have arrived. Until then I have a hundred other more pressing matters on my plate.

If you're going to make some thing, just make it.

R,
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#16 Michael Collier

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Posted 19 March 2007 - 11:21 PM

Call it a club. Then your not hiring people, their joining the club. Nothing illegal about that and there is no reason to file for a business liscence, workers comp, etc etc. now I am sure if your budget excedes a cerrtain point, it would be hard to call it a club anymore, but for most low budget films that will cover you.
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#17 Landon D. Parks

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Posted 20 March 2007 - 12:24 AM

Nothing illegal about that and there is no reason to file for a business liscence, workers comp, etc etc.

Too late, we have already filed the articals of organization for the LLC, and applied for our Federal EIN.

As to the whole "Club" thing... That might work, if your a non-profit corporation. But a For-Profit Corporation starting a club for the purpose of getting free lanor might be looked uppon bad by the IRS, if they do find ya.
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#18 robert duke

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Posted 22 July 2007 - 12:03 PM

Hi Landon,

I don't think you have much to loose anyway!

I know somebody who rents planes to a flying school in LA. He does not bother with liability insurance as his debts equals his assets. He saves himself $25,000 a year !

Stephen



Remember that you are LIMITED LIABILITY. get insurance. because you are personally involved in the decisions of the company, you are liable for any accident that involves your personal decisions. including hiring a stunt guy or fire arms guy or electrician who may not be competent. these people often work low budgets and impact the safety of a set. CYA. get an attorney. dont listen to any of our advices or off the street opinions.
get a tax lawyer. they can tell you where the IRS draws the line.
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#19 Robert Hughes

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Posted 24 July 2007 - 12:42 PM

Limited Liability? That means you don't have to pay back your creditors when you go bankrupt, right? :unsure:
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#20 Stephen Williams

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Posted 24 July 2007 - 01:19 PM

Limited Liability? That means you don't have to pay back your creditors when you go bankrupt, right? :unsure:


Exactly
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