Should I Do This, Inc.

June 22, 2009 7:31 PM

Please help me figure out whether or not I should start a loan-out company as a working screenwriter.

Background: I've been working in LA as a screenwriter for the past few years, having moderate success and making about 70 to 100 grand a year, though some years it has been as low as 58 grand. I was just hired as a staff writer at a studio for one year, and will be getting paid 150 grand. However it's just a one year deal. They just told me that I need to let them know ASAP if I want to set up a loan out company (for tax protection purposes) for when they pay me my weekly salary.

My question is, is it worth it for me to start a loan-out company? I might not make very much money next year, or the year after that-- this business is hard to predict. My previous accountant told me I shouldn't do it unless I was making at least 200 grand a year consistently, and I don't think that will happen for a couple more years at least, (if it happens at all.) I've heard there is a lot of paperwork, fees, and hassles involved with starting a loan-out, but I am not sure what those actually are and would like to know what I'm getting myself into. I am currently "between" accountants so I'm not sure who to ask.

On the other hand, being unmarried, childless, frequently "self-employed" and not owning a house has put me in a situation where I get taxed like crazy, and I'd be very interested in knowing just how much money a loan-out could stand to save me this year. Especially because 25% of my salary goes to my lawyer/manager/agent and as it is right now, I have to wait until my tax return checks comes in order to get the taxes back that I paid on their salaries.

Can anyone shed some light on whether or not it would be in my best interest to incorporate, seeing how I don't make 200 grand a year and have no way of knowing if I'll continue getting work or not after this year? I realize you are not my lawyer/accountant so no worries. Thanks!

posted by anonymous to work & money (1 comment total)

It's such a tough call. I think the difference would be if you could find a good accountant that will explains things fully throughout the whole process, keep you in the loop, and help you out all year, not just at tax time. This was not the case for me and I had a lot of things pop up like "Can the City of Los Angeles charge me a business tax if I live in Los Angeles but work at a studio in Burbank?" where I was rather lost and confused.

In any case, here's a scanned PDF I have from Written By magazine called Incorpreal Concerns - Everything You Want to Know About Loan-Out Corporations (4pg, 2.5MB by Myreon Hodur). It's from 2003 so some of the tax advice is certainly out of date, but at least it's a overview of issues specific to screenwriters.

(Also: I'm not quite sure about the copyright concerns of posting the article but I believe it follows in the spirit of helping screenwriters figure out tax matters.)
posted by sharkfu at 8:21 PM on June 22