LLC Right for Actor/Writer Team?
January 6, 2010 7:32 AM   Subscribe

LLC for a (now) profitable writer/actor team?

I'm posting this here because I cannot find resources on the Internet for mixed entertainment LLC pros and cons and qualifications, but if you know of some please post as would love to read more!

As of tomorrow, I will have an accountant, but did want to ask other writers, entertainment folks, etc. on here about tax and LLCs and stuff because I'd like to go in with a bit more information than I currently have, which is a mixture of non-specific internet research and confusingly differing friend anecdotes.

I am an actress in LA and in my downtime write scripts for pleasure and hopefully profit in the next five years. My husband writes books - fiction and nonfiction, selling one per year on average, for increasing advances.

Last year was the first year out of 3 together where neither of us had "day" jobs and subsided solely off of our dream careers. Due to an early check wired into our account on Dec 30th, we earned way more than usual.

I've just booked something (yay!) and he sold a book (yay!) which means we're at least going to continue earning about the same or more next year, and fingers crossed the trajectory continues. We also plan on producing stuff on our own, too.

But with success also comes taxes! I know that now it's too late to make a difference for 2009 (Am I wrong on this front?) but we'd like to form an umbrella company for 2010 in order to be able to take advantage of health insurance (in case our luck, and thus SAG Healthcare, runs out in 18 months) as well as for the tax benefits, privacy benefits, and liability benefits.

This should be an LLC, right? And should it be in Nevada, like some have suggested, to avoid CA business tax?

We'd like to call it *BLANK* Productions and have all of our checks, etc. for all acting, writing, etc. be made out to it. We are very interested in this for the long haul and hope to be able to hire someone for the company within five years if we can continue our streak of luck=opportunity+preparation.

Thanks in advance for the advice/pointing in direction of advice! Again, we ARE going to an accountant, but would like to have more knowledge before going in.
posted by 2003girl to Work & Money (3 answers total) 2 users marked this as a favorite
My partner is a tax accountant with a lot of experience with people in the entertainment industry. You have a lot of questions here. If you don't get enough responses shoot me one question at a time through Me-fi mail and I will ask him for you if you like.

He incorporates people in Idaho (where we live) to legally avoid California's $800 yearly minimum franchise tax.

When he gets back in I will ask him if he thinks an LLC is best for your situation.
posted by cda at 8:30 AM on January 6, 2010

Response by poster: thanks cda! i suppose an addendum to the question is: if you can recommend someone you trust and respect and who isn't ridonculously expensive, memail me. :)
posted by 2003girl at 10:12 AM on January 6, 2010

I'm a CA attorney that works a great deal with LLCs. I am not, however, your attorney, nor is the following legal advice.

Given a situation in which two CA residents (who work and enter into contracts in CA) form a non-CA LLC to hold their work activities, it will be extremely difficult to avoid having the LLC be obligated to pay CA's $800 minimum annual franchise tax. This is because presumably the CA resident members (the term generally used for a person that holds an interest in an LLC) do not leave CA each time they make a management decision with respect to the LLC or cause the LLC to enter into a contract. Other secondary factors that are relevant in determining whether CA tax should apply are: does the LLC maintain a bank account within CA, does the LLC maintain its books and records within CA, does collection of revenue occur within CA, etc.

Further, unless you will be maintaining a real office outside CA for the LLC, your home or other office space in CA will likely be sufficient on its own for CA to claim that the LLC maintains an office in CA. This would immediately make a non-CA LLC subject to tax in CA.

It's worth noting that there are actually two standards of activity that non-CA business entities need to concern themselves with in CA. The first is the threshold for becoming liable for taxes in CA - that threshold is defined as "doing business in CA." The second is the threshold for requiring a non-CA entity to register with the CA Sec. of State - that threshold is defined as "transacting intrastate business in CA." Both of those definitions are terms of art, but should be of use to the extent that you are researching the issue more yourself.

Based on the hypothetical situation you have posed, it seems extremely unlikely that your non-CA LLC would be able to avoid registration with the CA Sec. of State, much less avoid taxation in CA. Accordingly, forming a CA LLC should be tax neutral to you and save you the hassle of dealing with another state.
posted by dbolll at 10:58 AM on January 6, 2010

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