Meeting Summary: STARTING & MAINTAINING A SMALL BUSINESS IN FILM & MEDIA

MCA Meeting November 2015
Written by Mary J. Schirmer

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The November MCA meeting, hosted by Patrick Barlow in the studios of Barlow Productions, featured a panel who discussed setting up your media company to avoid legal and tax problems.

Moderator:  Lou Stemmler — operates two LLCs:  Silver Streak Studios and Midwest Legal Video Services

Chad Carpenter – in October 2014, formed Middle West Movies LLC as a non-profit motion picture company

Tom Daiber — St. Louis District Office of Small Business Administration (SBA), loan guarantee program through Federal Government, free counseling for small businesses, and help with getting some of the 25 percent of government contracts set aside for small businesses.  Four programs:  SCORE (more below), Veterans Resource Center, Women’s Resource Center, and Small Business Technology Development Center.

David Houlle — operates S Corporation Sight and Sound Production Services, 37 years in business, Missouri’s largest rental house for grip, electrical, and lighting equipment including trucks and generators

Stephen Pidgeon — operates S Corporation Pulse Media Technology, formerly Pulse Productions. Software consulting, animation, virtual reality, content for upcoming technology.

Kathryn E. Van Voorhees — attorney in private practice through Van Voorhees Law, franchise and small business law, former insurance lawyer.  She attended as a representative of St. Louis Volunteer Lawyers and Accountants for the Arts.

Panelists emphasized the importance of setting up a legal entity to separate your personal assets from your business assets, to limit liability.  “Every time you fix a problem, you learn how to prevent a problem,” Van Voorhees said.

Consider your legal entity a business pre-nup, she said.  We all want to work with people we trust, but things happen, like illness, moves, and loss of interest.  Talking with an accountant to help set up the financial deal, and then talking with an attorney to formalize a contract, and then having the accountant and the attorney talk with each other will help business owners get what they need.

The SBA provides match-ups with retired business executives, who volunteer to help you write a business plan, market, and deal with media, through a program called SCORE.  “They help solve growing pain problems,” Van Voorhees said.

Many business owners form a limited liability corporation (LLC).  Missouri charges $50; Illinois $600.  An LLC allows you to separate your personal assets from your business assets and pay taxes through your personal tax forms with designations for business income and expenses.

To form your LLC, you need a business name, a manager, a registered agent (here’s a tip:  pick someone you know), and a statement of the purpose of the LLC.  Van Voorhees said you could search State and Federal websites for trademarks, or you might need to hire a trademark lawyer to research the name.

If you apply for a Federal Employee Identification Number (EIN), be sure you’re applying to the Federal Government and not to some copycat business that’s trying to capture some of your personal information.

If you have a lot of property and businesses (like Donald Trump), you want separate LLCs for them.  If one goes bankrupt, creditors can’t touch the others.  Stemmler suggested that you start with one.  If your business spins into a different direction, or another direction, you could form another LLC.

An S Corporation allows the business owner(s) the tax benefits of and LLC, while paying yourself a salary.  If you start with an LLC, you can become an S Corp later.

You want separate insurance policies on yourself and your business, too.  What if you get hurt on the job?  What if you accidentally erase a tape or destroy some equipment?  If you’re working for someone else, put in your contract that you’ll be covered by the employer’s Errors & Omissions policy.

Van Voorhees suggested that you notify your insurance agent “every single time” to be sure you’re covered.  Inquire in writing, and save the reply.

Non-profit organizations with official 501C3 status should be sure to meet qualifications and reporting requirements.

The SBA can guarantee loans for non-traditional businesses, Daiber said; however, you need to be clear about how you’re going to repay the loan.  Most lenders won’t fund you 100 percent.  You’ll put in 10-15 percent of your own money, counting equipment as part of the equity.

Build up your personal credit before you start the business so when you need a loan, you’ll have a good record.  Everything will cost more than you expect.

If you’re seeking investors, Pidgeon pointed out that venture capitalists will want “something in return.”  What strings will they attach?  You’re already working 100 hours a week for yourself, rather than 40 for someone else.

Keep a separate credit card and even a separate filing cabinet for your business, Houlle said.  Especially if your office is in your home, be careful about using that room only for business.

So if you have your own business providing services to other companies, keep clean paper trails.  Are you going to receive a 1099, if someone paid you?  Houlle said if you are “labor” and not “services,” you want them to pay you as an employee, not through a 1099.  A freelancer needs workmen’s comp.

Get a deal memo before you do any work, and include everything you can think of – hourly/daily rates, how many hours in your day, meals, overtime, mileage, hotels, coverage if you’re injured on the job, etc.  You sign, and they sign.  Be especially careful if their company is out of town, because it becomes difficult to collect your pay.

If they insist on paying you as an independent contractor, then figure out how much more you’ll need to add to your rate, to cover the expenses of taxes and insurance.  This is important if you don’t have a representative to negotiate for you.  If they take advantage of you, be smarter next time.

More information:

Steve Pidgeon recorded the meeting, with audio here:  Audio Online

Form and templates:  State websites, SBA, Volunteer Lawyers & Accountants for the Arts

Networking:  MCA (of course), St. Louis Film Network on Facebook, Script Mechanics, Venture Café, Missouri Venture Forum, StartLouis

 

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