So, in development you've got legal expenses. Even if your lawyer comes gratis, which I advise against, there are the fees involved in the incorporation or other business entity formation process itself, which you must go through to protect yourself and your film, not to mention your slim chances of finding someone who will put money into a venture that doesn't have a legal corporate structure. And different business entities have different costs. For a lawyer to create an LLC might cost upward of ten grand (inclusive of lawyer fees, federal and state filing fees, et cetera), whereas a Joint Venture might entail an expenditure of less than ten grand. You figure out which entity you should apply for ahead of time, by polling potential investors and seeing at what level they can invest.
With Street Trash, that in-your-face black comedy about melting winos, with no socially redeeming values and a certainty of either an X rating or an unrated release, I didn't stand a chance of raising half a million dollars from thirty-five people or less. What a little investigating showed me was that I stood a reasonable chance of getting the money from middle-income people, for whom a fun risk was going to Atlantic City twice a year for a weekend and dropping a few thousand. So, my goal became to sell two hundred shares at $2500 each. Some investors bought multiple shares; some bought one. We used a Joint Venture for this film.
The Sweet Life, at a quarter-million dollars, with a soft R rating and a broad audience, and at least one notable name in the credits . . . that I could scavenge from fewer than thirty-five people, so we had ourselves an LLC to create.
And Burt's Bikers, an upbeat, comedic docudrama about a big bike race for mentally handicapped children in the Greenwich School System . . . for that I had aligned my nominally for-profit company with a parent-based non-profit organization—The Greenwich Association for Retarded Citizens (GARC)—and it acted as our fiscal sponsor and executive producer, accepting donations (that were tax-deductible) on behalf of the project from major corporations in the area. I had no credentials in the field of special education, but they did. Burt's Bikers was the kind of socially significant film that would attract tax-exempt contributions. IBM, Pepsico, and several others saw the virtue of having their names associated with this kind of subject matter. Street Trash's bubbling derelicts would not have produced the same positive feeling in their wallets. We partnered with GARC and raised all our money in a matter of months, and since these were donations and not investments or loans, none of it ever had to be returned, which led to a relaxed creative situation, one of the best I've ever experienced. Burt's Bikers eventually played on NBC, which gave the investors the kind of exposure that justified their financial gifts, whereas Street Trash has never played network TV or any kind of TV in prime time, and I doubt it ever will. Maybe in a half-hour version . . .
So, there you have three different types of legal structures for three different types of movies. Think out your target market ahead of time, and what kind of investors might like to be involved with that kind of project, and proceed accordingly. I will advise you of this, however: the reason 95 percent of the films made in this country are made with Limited Partnerships is that, by definition, the investors are "limited" to their investments both in terms of their vulnerability to any legal problems the film may encounter, and in terms of the legal damage they can impose on the filmmakers if problems arise. Film budgets are written in water, and the final budget may not resemble the budget the investors originally saw in the Memorandum or Business Plan. This could come back to haunt you with a Joint Venture where, for example, if even five investors become dissatisfied with how they perceive you to be doing your job, and if there are only four of you in the corporation venturing with them, they outnumber you and can take over your production. I found myself writing many more letters to the investors in Street Trash, and inviting them to the set, to screenings, calling them with pep talks, because I didn't want them turning against us for any reason. With a Limited Partnership, you don't have to worry nearly as much about the damage a rampaging investor can inflict. You can spend your time in more effective ways than nursemaiding them through the year or two it will take to get your film into the marketplace.
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