The Legal Side -- Part One / Basic Setup

Historically, a lot of motion picture companies have funded their films through separate legal entities -- limited partnerships (LP), and, more recently, limited liability companies (LLC). The production company becomes a member of the new entity, which is designed to serve the purposes of the single film or perhaps a group of films. Sometimes these entities are called "funds." In most every case, the investment itself is a security, which means your business activities and the whole process of designing and offering the security (your investment) falls under the governance, guidelines, rules and laws of the federal and state governments, specifically the Securities and Exchange Commission and your state securities office.

So, when it comes to setting up your production company and your investment offering, you get into the need for legal counsel. You need to find someone who knows how film companies and film deals are structured.

As a side note, it is also possible to raise money for a film in the form of loans, but you need to understand the distinction between a loan and a security. A loan can be accomplished with a simple loan agreement in which you specify how and when the loan will be repaid. But you cannot attach profit participation or distribution of income from the movie to the loan or else it will become a security and you'll have to do all the legal stuff. If you decide to take loans for your film just keep in mind that you can be sued for repayment (if things fall apart on you).

We've decided to form a production company called Highway 29 Motion Pictures as an LLC, then we'll bring out an offering in the form of a second LLC called Elm Street Film Fund. Highway 29 will act as a member of the second LLC.

There is a lot more to be learned about the legal side of setting up your company and its projects. The info I'm offering here is from my own experience and is not professional legal advice, just some guidelines that could perhaps be helpful.

I'll blog more about legal matters later and also get into the financial setup for our first film -- "the deal."