Question about feature film financing

Jaxon Bridge <jxbjxbjxb RemoveThis @NOSPAM.yahoo.com> wrote in message news:<10ackh38d9lm359 RemoveThis @news.supernews.com>...

> My main concern with doing this on my own is whether or not I am
> breaking the law by raising money for something but not registering the
> project anywhere. Can a private offering be legal if it's not
> certified? I don't want to fall into securities fraud just because I
> want to make a movie.

You're in over your head. You need to speak with a lawyer.

First, a partnership is probably the wrong approach to this. You'd
more likely want an LLC, an investment contract or a non-recourse
loan.

Securities law has two branches: registration and antifraud. If this
is a completely private, friends-and-family deal, you probably won't
have to register with the SEC. You may or may not need to file with
your state.

The fraud part is the tricky one: You have to be 100% honest and
realistic with your investors. If you are not, they can sue you. Now,
you mentioned that you'll be shooting a $150K film this summer. That's
an EXTREMELY ambitious timeline. Are you planning on showing at
Sundance? Odds are against it. Do you promise a big return? If so,
you're promising what you can't deliver. And no amount of disclaimer
language will protect you one the offering documents are infected with
unrealistic expectations.

Anyway, you're in dangerous territory. You don't know what to draft,
you don't know how to draft it and if you do anything, you may run
afoul of the law. Film may be a DIY sort of thing, but securities
offerings are not, at least for those without training and experience.

Here's what you need to do: Raise $5,000 for a lawyer.

If you can't scrounge up $5,000, you're not industrious enough to make
a good film. If your family won't loan it to you, they're certainly
not going to invest $150,000.
 >> Stay informed about: Question about feature film financing 

I believe that when you approach people, not strangers, it is still a
securities offering, known as a "private domestic offering" (as opposed
to a public offering), and securities laws still apply.

Robert Morein wrote:
> "Jaxon Bridge" <jxbjxbjxb RemoveThis @NOSPAM.yahoo.com> wrote in message
> news:10ackh38d9lm359@news.supernews.com...
>
>>I am making a feature film this summer and we are hoping to raise
>>between $50,000 and $100,000 from family and friends, which we think is
>>realistic based on the people we know.
>>
>>I am trying to decide the level of formality I should use when raising
>>this money.
>>
>>One option was to draft a Limited Partnership Agreement for people
>>investing in the project. But as I got more involved with my research,
>>I learned that even a small scale private domestic offering such as this
>>may have to be registered with state offices and require legal
>
> consultation.
>
>>Is this true? Is it not enough that I simply draft a contract on my own
>>which covers all the bases of a Limited Partnership but which is kept
>>"unofficial". I realize that it opens me up to potential attack later
>>on by an investor, but the people we are approaching are not likely to
>>behave this way. And even if they did, I'd still have a signed contract
>>(that I wrote) from them which I would think carries some weight in its
>>own right.
>>
>>My main concern with doing this on my own is whether or not I am
>>breaking the law by raising money for something but not registering the
>>project anywhere. Can a private offering be legal if it's not
>>certified? I don't want to fall into securities fraud just because I
>>want to make a movie.
>>
>>Jaxon
>>
>
> The SEC makes a legal distinction between people you know, and strangers.
> If the investors are all people you know, they bow out. There is no
> obligation between the parties, except what you put in the contract.
> If you approach strangers, then it becomes a public offering. It is
> therefore subject to SEC rules.
>
> Many accountants can draft limited partnerships at a fraction of the price
> of a lawyer, and they also know your state's business law as well.
>
>
 >> Stay informed about: Question about feature film financing 

Thanks for your feedback. My financing scheme is not quite as amitious
as you mentioned below -- trying to raise about 1/3 what you suggested.
I am indeed looking for legal assistance. Are LLC, INC, and LP the
sort of stuff that any barred lawyer would know about? I can probably
get some counsel for pro-bono through some friends of mine, but I didn't
know if it is necessary they specialize in a particular aspect of law.

I do realize it is ambitious, but there's nothing wrong with trying, right?

Asbestos Jeff wrote:
> Jaxon Bridge <jxbjxbjxb.DeleteThis@NOSPAM.yahoo.com> wrote in message news:<10ackh38d9lm359.DeleteThis@news.supernews.com>...
>
>
>>My main concern with doing this on my own is whether or not I am
>>breaking the law by raising money for something but not registering the
>>project anywhere. Can a private offering be legal if it's not
>>certified? I don't want to fall into securities fraud just because I
>>want to make a movie.
>
>
> You're in over your head. You need to speak with a lawyer.
>
> First, a partnership is probably the wrong approach to this. You'd
> more likely want an LLC, an investment contract or a non-recourse
> loan.
>
> Securities law has two branches: registration and antifraud. If this
> is a completely private, friends-and-family deal, you probably won't
> have to register with the SEC. You may or may not need to file with
> your state.
>
> The fraud part is the tricky one: You have to be 100% honest and
> realistic with your investors. If you are not, they can sue you. Now,
> you mentioned that you'll be shooting a $150K film this summer. That's
> an EXTREMELY ambitious timeline. Are you planning on showing at
> Sundance? Odds are against it. Do you promise a big return? If so,
> you're promising what you can't deliver. And no amount of disclaimer
> language will protect you one the offering documents are infected with
> unrealistic expectations.
>
> Anyway, you're in dangerous territory. You don't know what to draft,
> you don't know how to draft it and if you do anything, you may run
> afoul of the law. Film may be a DIY sort of thing, but securities
> offerings are not, at least for those without training and experience.
>
> Here's what you need to do: Raise $5,000 for a lawyer.
>
> If you can't scrounge up $5,000, you're not industrious enough to make
> a good film. If your family won't loan it to you, they're certainly
> not going to invest $150,000.
 >> Stay informed about: Question about feature film financing 

"Jaxon Bridge" <jxbjxbjxb.DeleteThis@NOSPAM.yahoo.com> wrote in message
news:10ai1hvqurg0qa3@news.supernews.com...
> Thanks for your feedback. My financing scheme is not quite as amitious
> as you mentioned below -- trying to raise about 1/3 what you suggested.
> I am indeed looking for legal assistance. Are LLC, INC, and LP the
> sort of stuff that any barred lawyer would know about? I can probably
> get some counsel for pro-bono through some friends of mine, but I didn't
> know if it is necessary they specialize in a particular aspect of law.
>
Once again, I suggest you consult an accountant. Any CPA who offers business
incorporation as a service can handle it for you.
 >> Stay informed about: Question about feature film financing 

Jaxon Bridge <jxbjxbjxb.TakeThisOut@NOSPAM.yahoo.com> wrote in message news:<10ai1hvqurg0qa3.TakeThisOut@news.supernews.com>...

> I am indeed looking for legal assistance. Are LLC, INC, and LP the
> sort of stuff that any barred lawyer would know about? I can probably
> get some counsel for pro-bono through some friends of mine, but I didn't
> know if it is necessary they specialize in a particular aspect of law.

With the companies, you're talking about pretty straightforward
business law. Maybe one out of every three or so lawyers would be able
to help you set up a basic company. (The rest could if they wanted to,
but they choose to spend their energy defending criminals and
whatnot.)

Securities law is much more involved. Any lawyer who so much as
touches a securities offering can be held liable for the whole
investment, so relatively few lawyers will touch securities law work.
Maybe one in eight or ten.

Most lawyers prefer to spend their pro bono time on family law or
non-profits, so you may have a little trouble if you're not playing up
the arts angle.

Be very clear in your own mind about who will be in charge. How many
"classes" will their be in the company? Typically, a film company
would include investors with no day-to-day management rights, the
producers with principal management rights and sometimes profit
participants with no management rights. Also work through who gets
paid what and when.

Make sure that you go to the lawyer *before* you hook up with
investors. To avoid a conflict of interest, a lawyer will not
represent both manager and investor in the same transaction. So get
the lawyer on board as YOUR lawyer, then go from there.

Do you need an "entertainment lawyer"?

Probably not for the internal business end of a small venture like
yours--a silent partner is a silent partner, whether the project is a
film or a gravel company. An asset is an asset, whether it's a
copyright or a building.

The outside business of you company IS "entertainment," and you would
be wise to have an entertaiment lawyer in the neighborhood. But the
internal business is just internal business.

If you find a business lawyer willing to help, feel free to contact me
at this e-mail addy (it's real) and I'll help you educate the lawyer.
I have a way of talking to those people.
 >> Stay informed about: Question about feature film financing 

Jaxon Bridge <jxbjxbjxb.TakeThisOut@NOSPAM.yahoo.com> wrote in message news:<10ackh38d9lm359.TakeThisOut@news.supernews.com>...
> I am making a feature film this summer and we are hoping to raise
> between $50,000 and $100,000 from family and friends, which we think is
> realistic based on the people we know.

You have 100 friends who are willing to dish atleast $1,000 for your
project?
How is that realistic? I can't even name 30 people. All of which
wouldnt even pump $250 into such a thing.
 >> Stay informed about: Question about feature film financing 

Clearly, you do not have the same friends that I have.

krakle wrote:
> Jaxon Bridge <jxbjxbjxb.RemoveThis@NOSPAM.yahoo.com> wrote in message news:<10ackh38d9lm359.RemoveThis@news.supernews.com>...
>
>>I am making a feature film this summer and we are hoping to raise
>>between $50,000 and $100,000 from family and friends, which we think is
>>realistic based on the people we know.
>
>
> You have 100 friends who are willing to dish atleast $1,000 for your
> project?
> How is that realistic? I can't even name 30 people. All of which
> wouldnt even pump $250 into such a thing.
 >> Stay informed about: Question about feature film financing 

<< Are LLC, INC, and LP the
sort of stuff that any barred lawyer would know about? >><BR><BR>

Yes, and find an entreatment lawyer. "Inc." is a bit better. Then there is the
S vs. C corporation.


<< I do realize it is ambitious, but there's nothing wrong with trying, right?
>><BR><BR>

Nothing wrong if its all your money. If most of it is other people's money then
you have a responsibility. It makes it worse if they are looking to get their
money back let alone a return on it.

Now if 50 of you throwing $1000 into the pot and if all of you know its too
ambitious given the time frame and dont care, then by all means have a good
time.

Generally I would say, try to be realistic and do it "right." When someone says
that its too ambitious ... pay attention. Why? Try to get something good out of
the project: Even if you dont make money on it, make it a valuable experience
for everyone. Now, that $1000 cant buy.

Best,
Jay Bala.
 >> Stay informed about: Question about feature film financing