Once you've got solid financial interest in your production package, you'll need to collaborate with your financiers to create a business entity for your production. You may want to form a partnership, a limited partnership, a limited liability company, or a corporation. These decisions will largely be driven by your investors' wishes. While your investors are obviously willing to take a financial risk with you, very few will be interested in acquiring legal liability in the process.

There are many ways to go about forming business entities. All businesses have specific taxation, liability, and legal responsibilities and ramifications. Discussing these issues with legal counsel saves misunderstandings, miscalculations, and countless headaches during the course of film production.

Partnerships

In a general partnership, two people agree to do business together with equal decision-making authority and equal financial and tax liability. In a limited partnership, one partner is responsible for making decisions, and is also responsible for legal and tax liabilities. The limited partner is generally risking only his financial investment in the business.

Corporations

A corporation is recognized as a distinctly separate business entity from any of the individuals involved in the business. Tax and legal liabilities are the direct responsibility of the business. Corporations are strictly regulated and, depending on your location, can be expensive to create.

Limited Liability Companies

Limited liability companies (LLCs) are generally easier to set up than corporations, while providing many of the same personal tax and legal liability protections. With an LLC, you have a number of options available for directing funds. Many fledgling film production companies are set up as limited liability companies. A good place to start is on the Internet where there are numerous Web sites designed to help you set up a small business. For specific situations, it may be necessary to consult an attorney.