Freelance Legitimate Business Decision ?

[twocik23]

I've finally decided to take on larger productions and gone freelance (on my own). The first thing that pops up in my head is, **I should be legitimate**!!! I've basically worked as a sub contract DP/editor/etc.. for the last six years and worked under other directors dime. I've taken on plenty of gigs without being incorporated. I've finally realized this is what's missing in my business, not the newest high tech camera or the new bad ass Mac, etc... I believe this gives a customer a sense of dealing with the real business, not some rinky dink guy with a nice camera. I know most of you might disagree with this being freelance kings, but here in sunny rich Naples, FL this is something required for lager productions.


Larger productions = more money = more exciting work :)



So my question is what business plan did you go with and why ? Basically I'm looking to start off small and then work my way into that. I was afraid of dealing with taxes and not knowing what to do at the end of each quarter/year. I was also told that if you don't do any business in the first two years, they classify you as a hobby.


LLC (limited liability corporation)
S-corporation
C-corporation
Sole proprietorship
Fictitious name





Next thing would be insurance. I have kind of looked into 2 million liability and insurance on my equipment. Any thoughts on this please feel free to explain any tips, advice, stories, etc...




Just looking for advice, stories, or suggestions. I plan on going to a lawyer and start-farm rep. to finalize everything, not with some internet service. However I could be wrong with the internet DIY solution, and this is why I've started this thread.

[Dick Campbell]

I work as a sole proprietorship. Your state may vary. In Texas, you file with the county as a DBA <insert company name> (i.e. doing business as). That gets you exclusive rights to that name. You can then get commercial banking accounts, etc. in that name.

The downside is, your county will start to tax you for your equipment and so on, again depending on your state. You file your federal taxes the same, you just include your business expenses and income. (Its not that simple, this is not legal advice, just in general what I have been doing). You also have to pay estimated tax quarterly if you do not have any withholding (again not legal advice). Best to have a tax accountant.

The other downside is, your public filing gets you on many soliciting mailing lists.

The upside is, you have business cards, you look professional, you deduct business expenses, and so on.

[Jim Brennan]

A sole proprietorship is the simplest way to go. The biggest drawback is liability. If you set up a separate entity, (Like an LLC, C-Corp or whatever), you are creating another entity under the law. So, if you get sued, (usually) they cannot touch your personal assets (car, house, savings, etc). There can also be additional tax advantages. There is an extra expense and hassle for something like an LLC, but (IMHO), it is usually mitigated by the advantages if you plan on having a long-term business.

Florida probably has a state office of small business or economic development. Contact them, they may have more info on that. There also some good books like

This (http://www.amazon.com/Jumpstart-Your-Awesome-Production-Company/dp/1581154003/ref=sr_1_1?ie=UTF8&s=books&qid=1225895429&sr=8-1)

or This (http://www.amazon.com/Independent-Film-Producers-Survival-Guide/dp/0825673186/ref=pd_sim_b_2)

or THis (http://www.amazon.com/Risky-Business-Financing-Distributing-Independent/dp/1879505746/ref=sr_1_4?ie=UTF8&s=books&qid=1225895487&sr=1-4)

The first one is more about setting up a company, and the second two are more about that in the context of making a film, but I found all three to have good info.

It never hurts to talk to a lawyer who specializes in this stuff. Investing in good advice is as important as investing in your gear.

[Mark Harris]

Check with a lawyer who knows in your state. I use LLC because it protects and because it is simpler tax-wise than a corp. I carry the typical insurance, workman's comp, and E&O, which many clients require when going corp to corp.

But def check with someone for that state.

[twocik23]

"I use LLC because it protects and because it is simpler tax-wise than a corp. I carry the typical insurance, workman's comp, and E&O, which many clients require when going corp to corp."


Yes that's pretty much the same standard here. I really like taken the off property shoots, but would like to start taking the on property shoots too.











My girlfriends parents own a restaurant, which is completely different than a film business and thought maybe there might be a different way about doing things (licensing). I'm starting from my home and eventually working into a store front, but that would be later down the road once I'm established and pretty much profit gain.

Owning a restaurant in my opinion is a little bit more of a liability than a film business.





After getting established, what were you next steps to generate business ?





Well lets keep the thread going, I'm still very interested in what others have to say or of any stories they can tell. From what I've read, yes this seems to be the best advice.... Talk to a lawyer. :) Which I eventually will.

[Mark Harris]

Well my business is software, not film stuff. But you build business the same way as everything else, by building relationships. I get 90% of my work from people I know, people who have hired me in the past, etc. I do a lot of networking, go to parties, hand out cards, etc. And I will often take a not-so-great job if the company looks to be beneficial down the line. Because I know when I get in, I am good enough to wow them and become a goto guy, and that turns into more work.

I do not keep any kind of office outside my home office. No point, just extra expense. I do all work out of there, and on client site.

[chris f]

You might want to slide this thread into the business/post production forum as there are several threads that discuss this issue that are very useful.

[grinner]

I have an LLC. I never bothered with a business plan as plans change.

[twocik23]

With a LLC do you need to file quarterly ?

I think I also read that this is double tax, is this right ?

[Zim]

ask if they will pay cash!!

[J Michael]

There are both tax and risk implications with choice of business entity and the only valid answer is to consult both an attorney (for the risk stuff) and a CPA (for the tax stuff). The CPA will save you money in the long run.

[Jim Montgomery]

An S Corp is the only way to avoid double taxation and still avoid some liability issues. With an S Corp all income or losses are passed directly to you personally. You will receive a K1(?) form at the end of the year.

Don't think for one minute that corporate status protects you from liabilities. If your business becomes entangled in a lawsuit or other legal issue you can bet your bottom dollar you will be named personally as well. It may not have merit but you will still spend an huge sum of money on legal fees.

Insure well, but be aware that insurance companies lawyers work for, well the insure companies. They could care less about you.

Not trying to discourage you, just trying to make you aware. You are about to embark on a journey that will be at first panic striken, then go to joy, then move on to you being fed up with the whole thing. It may take 5 years or in my case 40.

Creative people can not manage a business, its not their nature. At first opportunity get a good business manager which will free you up to do what you do best.

Jim

[J Michael]

With any business entity you may have to file some things like sales tax reports monthly. Your accountant will fill you in on the requirements, which will vary by state.

The double taxation I think you're asking about has to do with the fact that a corporation pays taxes on its profits and recipients of dividends (company profits that are distributed to shareholders) that are paid out are also taxed.


With a LLC do you need to file quarterly ?

I think I also read that this is double tax, is this right ?