Movie Making Manual/Setting up a production company

Why bother setting up a production company?

One company per project

As a disclaimer, the legal information provided in this section should not be taken as 100% true and is merely sourced from some second-hand knowledge and my experience. You should ALWAYS contact a business lawyer to confirm legalities, especially in the formation of partnerships and companies in the name of business.

Some people suggest that you should setup one company per project - specifically an LLC. An LLC has advantages over a corporation for many reasons that work towards streamlining (ie no shareholder meeting, simple operating agreements instead of strict rules and guidelines, etc) the business process; in other words, decisions can be made quickly without chain-of-command consultation. From the Wikipedia Entry on LLCs:

'One reason that businesses choose to be organized as an LLC is to avoid "double taxation." A traditional corporation is taxed on its income, and then when the profits are distributed to the owners of the corporation (i.e., the shareholders), then those dividends are also taxed. With an LLC, income of the LLC is not taxed, but each owner of the LLC (i.e., each member) is taxed based on its pro rata allocable portion of the LLC's taxable income, regardless of whether any distributions to the members are made. This single level of taxation can lead to significant savings over the corporate form. Similarly, under some circumstances, members of an LLC may deduct losses of the LLC on their personal tax returns.'

By creating an LLC under ownership of a corporation or a single proprietor, not only are rights more easily transferred (ie if rights belonging to an owner is sold to a separate owner), but in terms of profits and losses, if a film bombs (ie fails or results in more expenses than profits), it may be written as a tax writeoff, as losses can be deducted in the United States. However, as with any incorporating action, there are a series of legalities that follows that may be undesirable, of which I don't know the exact specifics.

Before incorporating under an LLC, please contact a lawyer or legal consultant, especially one that is trained in business-related law. Incorporation is no simple matter and comes with its own pitfalls, as deceptively simple as the forms may be.

Choosing a name for your production company

UK

1) Check with the names database at companies house: http://wck2.companieshouse.gov.uk

2) Check to see if your name is already used on a website: Use this page for .uk domains: http://www.nominet.org.uk/ (use the search on the bottom left)

3) Check with companies house to make sure you're not using any banned words or phrases.

Registering your production company

UK

A solicitor will charge around £200 to set-up a limited company; by following the guide below you can do it yourself for just over £40. That said, this is not legal advice, and if you have any doubts or queries you should contact a solicitor, accountant, and/or Companies House.

1. Download form 10 and form 12 from the Companies’ House website. Download form 10cs if you have more than two directors. Download or order the relevant guidance notes which includes Company Formation - code GBF1, Company Names - code GBF2, Business Names - code GBF3, Director’s and Secretaries Guide - code GBA1
2. Fill in the forms on your computer and print out. Get the company directors and secretary to sign form 10 (and 10cs if necessary).
3. Buy a copy of Memorandums and Articles for company formation, for about £6 from a legal stationer such as Oyez. Oyez is based in London, but can mail the Articles if you purchase them via 0870 7377370 or at www.oyezformslink.co.uk.
4. Fill in the Memorandums and Articles and get all directors and the company secretary to sign it with a witness (the witness can be anyone).
5. Take form 12 to a solicitor and sign it in front of them. Get their signature on the form. Most solicitors charge £7 or so per signature. Photocopy each form for your records.
6. Post form 10, form 10cs (if used), form 12 and the Memorandum and Articles, with a cheque for £20 to Companies House. This is supposed to take 5-6 working days to process upon receipt.