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LLC's, taxes, & production


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#1 William Mckay

William Mckay
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Posted 06 July 2014 - 11:08 PM

Hello,

Given that many of you have been in the business awhile -  I thought I'd try here. 

 

I was hoping someone here might have either some experience to share or could recommend a firm or two. I just started an LLC expressly for a feature film. Liability insurance and proper payroll witholding were unavoidable.

 

How does the IRS handle a film as a speculative business? In other words, the film, or product of the LLC, may or may not get sold. Are the pile of expenses a valid write off even though we have zero income for the year and then fold the LLC?

 

Most of the feature films I've researched have production companies that are dissolved after a film is completed. So that seems standard fare. But what if it has no distributor? Can it be sold as a single piece of property in it's entirety to another party even if the LLC is log gone? Another LLC?

 

Lots of questions.. can anyone recommend an experienced film attorney you've used, or an accountant to help me navigate through this stuff?

 

Most of the folks in my neck of the woods advertise some mileage in film production, but they haven't a clue so far.  Equipment Emporium has been helpful with the insurance questions so far, they seem to be reliable.

 

Suggestions?

 

Thanks everyone so much

 

 


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#2 Richard Boddington

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Posted 07 July 2014 - 12:16 AM

 Are the pile of expenses a valid write off even though we have zero income for the year and then fold the LLC?

 

Possibly.

 

There may be an issue in US tax law that you need to look into.  If the LLC retains the asset can it write off 100% of the film's expenses in a single tax year?  Since the LLC owns the end asset you may only be able to write off say 20% a year.  Typically the LLC owns the rights to the movie, this is to protect you from lawsuits.

 

You also need to check how the IRS treats the money that comes into the LLC to make the movie.  If the LLC takes in $500,000.00 in  investor funds, and spends $500, 000.00 on the movie, technically you would have a net income of $00.00.  Except the LLC owns an asset, and if you can't write off 100% of the films expenses in a single tax year, this means you will have a tax liability to pay.  That will be a problem for you.

 

Now if you were a production company making the movie for someone else, and you handed them the finished product at the end and had no lasting ownership, ie no asset to show for the money spent.  Then you would have a full write off against income.

 

You need to check the above issues with a corporate accountant that does film structures.  If there is a tax problem. you need to ask them what structure would work to avoid a tax issue, if possible.

 

I'm not an accountant but I play one on TV.

 

R,


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rebotnix Technologies

CineLab

Visual Products

Metropolis Post

Ritter Battery

Abel Cine

Tai Audio

FJS International, LLC

Rig Wheels Passport

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Aerial Filmworks

The Slider

Glidecam

CineTape

Media Blackout - Custom Cables and AKS

Technodolly