Have Legal Questions? Ask a Lawyer Now.
Dear Customer, you can create multiple LLCs and structure them however you like. You can own them with your current membership structure (meaning if you personally own 100% of LLC 1, you can also personally own 100% of LLC 2), or you can structure it so that the LLC with the film is owned as an asset by the film production studio (the LLC owns the second LLC).
Usually with structures such as this, it is a good idea to speak with an accountant or a tax attorney to get the best tax leverage out of the business. I cannot give you tax advice through this site, but as far as structuring something so that you can keep the liability for the film separate from your other ventures, that can be done in many different ways (LLCs are designed to be very flexible and you can change them or structure them as they best fit your needs - usually they are set up for the best tax advantage).
I hope that the above information is helpful, if you have any questions, please use the “Reply to Expert Link” and I will follow up promptly. Once you are satisfied with your answer, please rate my service by clicking on the “OK” “GOOD” or “EXCELLENT” buttons, if you believe my service is anything less than “OK” please stop and tell me what additional information or clarification you need to make your experience satisfactory.
If you have any further questions, or if I missed or misunderstood what you were asking, please do ask and I will follow up promptly, You may continue to follow up if further questions arise even after rating my response.
How can LLC 1 (the post production company) sell the asset of the documentary to LLC 2 (a new company I plan to create)?
The LLC can resolve to sell (or give) or otherwise transfer the asset to the second LLC. The only thing it cannot do is transfer the asset in such a way that it appears it is doing so to defraud creditors (either the creditor loaned money for the film based on the film for security, and you are now transferring the asset away from the borrower (LLC1), or a creditor loaned money for some other purpose based in part on LLC1's financial portfolio including the film), but this does not mean you have to keep the film in the LLC just because you borrowed while you were making the movie, it just means you can't move it to defraud your creditors (even if some of them were depending on the film, you still had other ventures going on).
As far as the mechanics go, it is very much like a person starting up their own LLC - if the person owns a farm and wants to transfer it into an LLC, the person transfers the farm into the LLC, and in exchange takes 100% (or whatever share) of the interests in the newly formed LLC. (in your case you would substitute the farmer for your first LLC transferring the film in exchange for 100% interest in the new LLC).
You are welcome (I hope that it is helpful). Is there anything further I can help you with today?
So the Post House does have an outstanding debt that I am struggling to pay. It is from a vendor and the debt is for services that are not directly related to the documentary. However, the vendor in the past did provide services for the documentary. According to my ledger the vendor has been paid for those invoices, though I'm not sure if that means anything since I had an account with the vendor, and lump sum payments were made towards the account balance at times, not payments towards specific invoices.
Having the documentary in its own LLC is something I have wanted for a long time, well before the debt with vendor issue. But I was talked out of moving it into another one by some well intentioned but mis informed accounting folks.
I've been trying to work out a payment arrangement with the vendor, but I can't pay them the entire $6000 balance right away, all at once. And I don't seem to get any response at my attempts to work out a monthly payment schedule of $1000 a month for 6 months, or anything at all really. They just keep asking for "a check."
Not sure what to do, but if it seems the documentary is at risk, I'd rather liquidate some equipment and pay the vendor then chance a seizure of my film project.
The specifics of your debt are something that I can't help you with through this site (I just don't have the information to help you with the quantity or nature of your contracts to help you ensure you are not causing some unnecessary liability for yourself). But the general idea with trying to avoid your creditors by moving your asset from one LLC to another for a legitimate purpose, but moving all of the assets out of your first one, is to ensure you are not defrauding anyone (it is not a set standard, and it is something that is usually defined as leaving the first entity insolvent - but if anyone has loaned money that is contractually secured by the film, that loan must remain with the asset).
Ah, very informative what you just mentioned in the last bit there. Thanks so so much!
As far as the payment of the old debt, that is something you will have to work out with your creditor (I am not sure what you can force them to accept in delayed payments, or prolonging your payment, but there are many things you can do to negotiate your payment around your creditor's legal right to collect).
Can you provide an example as to the many things I can do to negotiate my payment? I make no denial that the debt is a legitimate claim from the creditor. But am stumped as to what to do due to the cash flow problem i currently have
One other question about all of this: I am a bit confused about what you said a bit earlier. Which would be better to ensure that I am not defrauding anyone: moving the film asset alone to a new LLC, or moving all of the assets to the new LLC?
Without reaching an agreement, you can delay making payments, you will continue to be in breach of contract, your creditor will be entitled to bring you to court and pursue a judgment against you (but this usually takes some time). These are generally not advisable paths to take, but it is not illegal to pay your debts (you will however, have to answer for them civilly).
You can move as many assets (one asset or all) to the new LLC. But if you are having trouble with your creditors and move all of your assets, that would have a strong resemblance of attempting to defraud your creditor.
Given the delicate position you appear to be in with a long term investment at stake and a creditor demanding payment, you may want to spend an hour or two consulting with a business law or civil litigation attorney to get a specific legal opinion on your case (they can review your case and facts and give you legal instruction and assistance).
What if there is nothing in writing with the creditor or the account. What if the account was setup in an honor system situation? which it was. I have never signed anything on an invoice, a work order, or a credit app. Nothing.
If someone loaned you money for your business and you have not repaid it, you likely have a creditor problem. I don't have enough information to help you with the honor system that you are describing (usually these types of situations have a more complex set of facts - relationship between the creditor and borrower, past transactions, other business relations, etc.), I would recommend against transferring all of your assets from one company to avoid creditors of another company. I would definitely recommend that you speak with an attorney prior to making a decision such as this as it can have a significant effect on your business.
thanks. you've been most helpful
Thank you for using our service, and thank you for your time. Please let me know if I can be of any further assistance.