Entertainment Lawyer Tip: Form a Project LLC

We can’t stress enough that you are going to need real legal representation to help you through the process of garnering investors for your entertainment project.  This post will offer an overview, but the things we’re talking about here are going to get complicated in a very real and legal way.

Remember, we’re talking about raising thousands and possibly millions of dollars.  Depending on your budget, maybe even tens of millions of dollars.  So how do you handle that sort of money?

Your investors aren’t going to write you a personal check that you deposit in your Savings Bank Account, so let’s talk about what steps you are going to need to take in order to be able to talk to (and take money from) an investor.  

Form An LLC

Making a film or any entertainment product is like starting a business.  And to deal with the business side of things, you need to have a corporate entity to do that.  One way that many entertainment productions do this is by forming a Limited Liability Company (“LLC”).

An LLC is an entity that you will form to act as the operating body of your project.  It’s the LLC that will be accepting funds from investors. You can think about it as if an investor is buying a share of the LLC when they put capital (money) into your project.

LLCs and Lawsuits

Another benefit of an LLC is that it protects you from personal liability.  If something happens during the making of your project (someone is injured, or makes a claim against the movie etc) then you might get sued.  

Nobody wants that to be the case, but hey, it happens.  And if you don’t have the project set up within the structure of an LLC, then you are leaving yourself open as the sole proprietor of the project.  This means that you personally can be sued and all your assets could be endangered.  But if your project is operating as an LLC, the buck stops there.  They can sue the LLC, but not you.

Even production companies that produce many projects a year will form an LLC for each individual project.  This way if someone sues them for something having to do with Project A, their other Project B and Project C are safe.  But if they had all their projects under one LLC (or worse – no LLC) then a lawsuit could go after the assets of all three projects!  

Easy To Start, Big Benefits

Starting an LLC is really quite simple, and not outrageously expensive.  In New York, it’s $200 and a simple online application.  There are some ancillary costs involved that you can discuss with your lawyer, but an arcane law requires new companies to advertise in two newspapers (yes you read that right, the newspaper), once a week, for six consecutive weeks.

We know, it’s insane.  But only 3 states do this sort of thing, and there are companies you can pay a fee to and they will take care of this for you (your Entertainment Lawyer will be able to get you through this ancient hurdle).  

The rules regarding the operations of an LLC are also fairly pliable.  This will come into play when you start to take money from investors, and when you have to pay taxes for the project.  That’s the complicated part that your Entertainment Lawyer will help you through.

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