How do I make my film studio legally a business?

HeySiri
HeySiri Posts: 382 Just Starting Out*

I'm making a short film and want to sell it online like on Amazon when it's done. To do that, do I need to make a legal business? I think I have sort of an unofficial business, but I'm wondering what I'd do to make it official. Will it cost me anything? The internet has been surprisingly unhelpful in answering my questions.

Thanks

P.S. here's the website to my studio because why not www.friesenfilms.weebly.com

Comments

  • Triem23
    Triem23 Posts: 20,079 Ambassador

    To a certain extent this depends on country/state/county/city you live in. You should contact the small/local business association in your area. 

    For me (So-Cali) it was as simple as applying with my local County Clerk. Every few years I have to run a "dba" (Doing Business As) announcement in a local newspaper/directory and pay my business taxes. Federally a single-person dba needs to show a profit every x number of y years, or the business gets downgraded to a hobby.

    I'm discussing dba's, which are basically single-person businesses. If you're getting into LLCs or other corporate structures, you'll really want to talk to a lawyer because local laws vary. 

    You don't want to LLC, you do want to dba. 

  • GrayMotion
    GrayMotion Posts: 1,599 Enthusiast
    edited March 2019

    NO no no no no no no...dba attaches all assets, your house ,your car, your wages....all income and assets are taxed at the highest rate possible...31%

    An S Corp is what you want to do. A S Corp does not pay federal tax at the corporate level (25%), business losses can offset income AND personal assets (DBA) are NOT attached. This means you can never loose them to the IRS...only business assets can be attached. So if your business fails and you owe the IRS...the Company owes the IRS...not you..... and the company can file a chapter 11 restructure or dissolve and surrender assets.

    S Corp officers do not have to draw a wage...rather you can pay yourself with dividends...a bonus every 6 months is a dividend....taxed at around a max of 13% and as low as ZERO

    Give you an idea- I left Just Over Broke in 97 - I've owned a fiber optic splicing business since ...I invoice around 350K a year...expense are around 100K. My corporate tax rate under a Schedule K is around 11%. When I pay myself...ever 6 months....I usually pay no tax ...other than State taxes which are around 2%

    As an employee at a J.O.B or a dba in the USA  you pay around 28%-31% tax on ALL income, Corp's at 25%, S Corps 1/2 that, schedule K ongoing...bad years -good years...an average...sometime no federal tax at all. FACT: The J.O.B AND DBA's---"You" doing business as...people pay 90 percent of the Federal taxes...that's why they want to raise the minimum wage to 15$ an hour...more money to the FEDS coffers. Payroll taxes on the "wheels on the  bus" makes the USA go round and round.

    Please.........Check your local State regulations but absolutely do not do a DBA!! Bad! Boo Hiss!

    Note: Under most States if a company sells to the public and delivers anything tangible.....a CD or DVD with a video  on it ( If you give the customer any physical item) then sales tax for the State applies. That's why you have to register with the State...so they can get their money to :-)

    EDIT: An LLC is something you use to open up another business branch under an S Corp , C Corp...or as a stand-alone LLC ----->Limited Liability Company....also designed to protect personal assets.

    C-Corp, S-Corp, LLC or DBA have nothing to do with the State(s). Purely a Federal mechanism for taxing business activity.  Under Federal guidelines an LLC has to show a profit every 5 years...or as Mike said...it's reclassified as a hobby and full tax burden is applied. 

  • Triem23
    Triem23 Posts: 20,079 Ambassador
    edited March 2019

    I'll trust @GrayMotion on that. At the time I set up my dba that was on the advice of my lawyer. Then again I have almost no assets. And I remain small enough that my taxes are basically non-existent (I often get refunds). 

    Gray, does it change things if we note HeySiri is a minor? 

  • GrayMotion
    GrayMotion Posts: 1,599 Enthusiast
    edited March 2019

    Minors can be owners of LLC's  in most States but they may not be able to  enter into a legally-binding agreement or hold a credit card or business checking account in their own name... BUT parents can... on their behalf.

    It is best that HeySiri do some educating on his State laws before diving head first into a tricky situation :-)

    The Fed tries to send me refunds to ...even with the amount of money I claim.......I send em right back. It's a game we play with each other....I think I gotta em confused ;-)

  • GrayMotion
    GrayMotion Posts: 1,599 Enthusiast
    edited March 2019

    Oh....and then there is insurance and bond ability.....the MOST overlooked thing when it comes to operating a business and interacting with the public. Damn citizens. Sue happy group! I only work commercial for that very reason. Residential can break you for life.

     

  • GrayMotion
    GrayMotion Posts: 1,599 Enthusiast
    edited March 2019

    To answer your questions you asked

    "sell it online like on Amazon when it's done. To do that, do I need to make a legal business?"  
    YES - you have to pay sales tax on sales to each and every State the product sells in. Amazon has been being forced to report sales to each State. Only a business can report sales tax.

    "Will it cost me anything?"
    In my State - (Colorado) you have to register your business every year....cost...50$. Means nothing....just away for the State to get more money. If a customers searches the State database you either have standing or not. In some States this is called a "business license". Again..means nothing unless your customer is accustom to over paying for everything... Renewal by Andersen or an Angie's List consumer for example  :-)

    Bottom line...educate yourself...not as easy as you think..but not hard either. Don't be afraid though...17 and wanting to start a business.....commendable. Most 17 year olds are chasing rich girls with fancy cars :-)

  • FilmSensei
    FilmSensei Posts: 3,108 Expert

    @GrayMotion Speaking as a guy who has owned a business in Colorado since 1994, I re-register yearly online, and it is a lot cheaper... $10. I have both an S-Corp and LLCs. I created the S-Corp before LLC's were in vogue, but now I would only create an LLC.

  • HeySiri
    HeySiri Posts: 382 Just Starting Out*

    @GrayMotion Okay... I'm very confused still. I mean, I'm starting to get this, but business is confusing knowing nothing going in. Basically: I want to sell my movie when I'm done making it.

    What I've done:

    • Make websites, social medias for my studio
    • Done 90% of preproduction work for my first film (just need to finish raising the money and then buy the needed props and et cetera)
    • Created a GoFundMe to raise funds
    • Set up a bank account to hold all these funds in
    • Set up a spreadsheet that chronicles all transactions, reimbursements, et cetera relating to the studio's money

    Based on this, what do I do to make my studio a business? Enter some info on a government website or something? 

    Thanks!

  • GrayMotion
    GrayMotion Posts: 1,599 Enthusiast
    edited March 2019

    The Basics...

    1- Determine business type - I'd look into LLC

    2 - Apply for a Federal Tax ID #. This is called an EIN - Employer Identification Number.

    https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online

    3 - Research your State and see if you have to register your business with the State. Like I said...my State is 50$ for initial registration and a Sensei mentioned...10$ ever year after that.

    4- Make sure you Do or Do Not have to collect sales tax. If you have to collect sales tax then you need to get a TAX ID number from your State (County more than likely) for a sales Tax #.

    RESEARCH YOUR STATE LAWS AND YOUR ELIGIBILITY TO OWN A COMPANY BY YOURSELF

    All the rest you listed above is just mechanics of what you think is important for your business.




  • cligerson
    cligerson Posts: 1 Just Starting Out

    I've been wondering that, too. As far as I know, it all depends on the country or state where you live. However, my friend advised me to make my business legal in this case.

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