[Diana Digiano]

Hi, so are you saying you researched both types of corporate options and chose LLC? What do you see as the benefits and/or limitations of both? Thanks for contributing — I’m really looking forward to some good feedback on this topic.

[Diana Digiano]

Thanks, I do know about fiscal sponsorship and have researched that possibility extensively. However, I realized it may be a good idea to consider the option of establishing my own not-for-profit.

I don’t think that the current economy and having to deal with lots of paperwork should be the only deterrents. The economy will certainly change. If that were the only reason, why start a production company at all, with the entire film industry hurting?

In addition, I can’t predict how generous or not people can or will be, but I do know if someone believes in something, they find a way to contribute — whether with cash or in-kind donations to the production. I would request donations on a project-by-project basis (a filmmaker I know just raised almost all the money she needs for her film by circulating a letter to everyone she knows and receiving donations – and she is for-profit, and unable to offer tax deductions for donors). My company would also be eligible to apply for grants that are not available to individuals, if it were not-for-profit.

Anytime you start investigating this structure the first thing anyone tells you is there’s a lot of paperwork. I’d like reasons for or against going non-profit beyond the desire to avoid a lot of paperwork! I’m not totally sold on the idea, so I want input. My concerns are more about managing a not-for-profit, having a Board, hiring yourself out to do work on projects other than your own, can the owner also be the non-profit’s manager, and so on.

[Diana Digiano]

Okay, so I guess my original question was not as clear as I thought it was. I don’t want to just hear from people who knew they wanted an LLC from the get-go, or who don’t really know much about the not-for-profit structure.

I was hoping for responses from people who had researched both types of corporate structures, and who know enough about both to be able to discuss the benefits and/or limitations of either one, which is what I meant when I wrote:

“Any of you choose one over the other when you formed your business? What were the pros and cons for you? Finally, what prompted you to choose the type of corporate structure you did?”

So, anyone out here at the Cow who can answer from an informed viewpoint and tell me about the choice they made?

Maybe I should post this question at the “Indie Film & Documentary” forum?

[Diana Digiano]

Oh my word. Your idea of not-for-profit production companies is really skewed in the wrong direction. There are so many of them in NYC, where I am. Other production companies that would resent a non-profit production company just doesn’t get it, in my opinion.

“Most people perceive a non-profit or not-for-profit corporation as one whose aim is to provide altruistic work to aid others.”

That’s a charity. Not all not-for-profits are charities. For goodness sakes, think about it – most theater companies are not-for-profit. They’re arts organizations and not charities, but they qualify to be non-profit. For film/video production, making historical/educational media qualifies a company to establish a not-for-profit corporation. A non-profit can also have a separate for-profit arm, which can distribute its profits as any normal profit-making corporation and would pay taxes.

Besides, here in NYC with so many production companies around, I highly doubt anyone is going to even know what my company’s status is, nor resent me for the work I intend to do.

Here are a few websites of not-for-profit production companies in NYS that are pretty much doing what I want to do, to give you an idea of what they’re really about:

https://www.outofthebluefilms.com

https://www.firelightmedia.org/

https://www.aubinpictures.com/

https://www.incite-pictures.com/ (For-profit arm of Cin Qua Non, Inc., a not-for-profit)

https://musefilm.org/

[Diana Digiano]

What I really want is to hear from business owners who considered both options, and the reasons why they chose whichever one they did.

[Diana Digiano]

Having non-profit 501(3)c status does give many tax breaks (mostly tax exemptions except of certain kinds of monies coming in), as well as enables the corp. to apply for grants, and ask for donations which are then deductible for the donor.

[Diana Digiano]

Hmm, interesting. Non-profit or not-for-profit does not mean you aren’t allowed to make a profit. It simply means that the profit made, or surplus, cannot not be distributed to owners or shareholders.

Profits have to go back into the company to keep providing the services it is meant to provide. Of course, its management can draw salaries — running a non-profit doesn’t mean you have to be poor and not get paid (of course, any business owner makes a huge mistake if they do not always pay themselves a salary first).

Since my intention is to create educational/historical media, this structure could be right for me. However, I’m curious about your statement about being “properly protected” — how would an LLC be more protected than a non-profit?