Partnership or S Corp for film production company?
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Partnership or S Corp for film production company?
I’m a resident of CA but setting up my film production company in WY as an
LLC.
I understand the IRS does not recognize multi-member LLCs. I can set up my
business as a partnership or a corporation. However, I don’t understand how my
company could be set up as an S Corporation with the IRS and an LLC in the
state of WY.
Also, I will be conducting business in multiple states – what do I need to do to
make sure I get my taxes done correctly come tax day?
Asked on May 11, 2017 under Business Law, California
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 6 years ago | Contributor
It is unclear why you think the IRS does not recognize multi-member LLCs: they do. I have been part of multi-member LLCs and have worked for others as legal counsel and executive, and there has never been any issue about this. Certainly, there is another tax form to do (a partnership return, which is used for multi-member LLCs as well) and the accounting is more complicated than for single member ones, but they are recognized.
You should have either an LLC which selects "partnership" tax treatment or sub-S corporation: both will provide considerable asset protection for their owner(s) and will avoid corporate double taxation while doing so. As to which to pick, there is actually little to select from between them. An LLC involves less formalities and paperwork, and offers greater flexibility in terms of apportioning ownership, profit, loss, and control among the members (the terms for LLC owners); a sub-S makes it easier to bring in more owners/investors later (you don't need to amend any operating agreements; you just give or sell them stock). Most small to mid-sized businesses find the LLC form a better fit for their needs.
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