I. Basics of LLCs
Independent filmmakers are busy people and often wear many hats. The producer of an independent film is often the person organizing the numerous tasks and people doing them to put a film together. To make sure he is not the one holding the bag for everything at the end of the production, the filmmaker needs a business organization that spells out who does what, who is responsible for paying for things, how those people are to work together, and under what circumstances they are to break up. The creative rush of working on a film sometimes has the effect of putting the business organization on the back burner, but this can have dire consequences. Like any group of people forming to do business, a film should have a formal business form, or the principals will be liable for all the debts of the project personally. If there is no business form registered, the participants will be treated and taxed as a partnership, with each partner liable for his or her divided share of the debts. A single person making a film will be treated and taxed as a sole proprietor, and will report film income and debts as his own, on his personal income tax form. The organization form which is the easiest and most suited for a film production involving a group of people is the Limited Liability Company, or LLC governed in Ohio by Ohio Revised Code Chapter 1705.
Wealthy patrons have been a godsend to artists, musicians, writers and other creators for centuries. The commissioning of Michelangelo to paint the Sistine Chapel, the portraits and sculptures done for royalty and others allowed many famous artists to pursue their creativity full time. Individual benefactors have been counted on to provide a living wage to the artistic community, and this model continues to this day, with Broadway “Angels”, big investors underwriting new companies, and business forms for films that allow for “private offerings” of a limited amount of shares in the film. The traditional and most oft-used development process for films is still begging and borrowing funds from friends and family, since federal and state securities laws have prevented any wider solicitation of the general public. The laws and rules are designed to protect so-called “passive” investors, especially the less-sophisticated and less wealthy, from fraud, and provide both civil and criminal punishments under federal and state law. Independent filmmakers in particular, weary of the money crunch, have wished for a way to fund their film other than taking out a mortgage on their home. They need not only wealthy angels, but a way to reach out to not-so-wealthy angels who believe in their project and want to help out monetarily.