ASK & DISCUSS INDEX

6 years, 8 months ago - John Lubran

Presumably you're writing of a limited company? Limited liability protects you personaly from most liabilities that might arise from a number of business problems, especially financially. As a director of a Limited company one can still held personally liable for any gross neglegence or wrong doing. In general though most liabilities are truly limited. There's quite strict accounting requirements but whether or not such is an onerous challenge depends on how basically organised and competent one is. From my perspective assertions suggesting that operating a limited company is particularly demanding are overhyped. The advantages are not just about limiting risk though. There's conciderable tax benefits too. Your accountant will explain.

6 years, 8 months ago - Paddy Robinson-Griffin

Forming a limited company has up and downsides - John mentions the financial upsides, although it's getting more marginal, and you end up paying more or less the same tax but with accounting overheads for most small traders. I do a lot of international and one-off based work, and for me the ease of invoicing that plus carrying over my company name, are marginal but present. It's more paperwork, and you'll need an accountant to talk you through it. It's not *that* onerous, but it does require tending.

There is the limited liability aspect which John also mentions - the protections are only any use in reality if you have a credit account with a supplier and go bust or get sued. Most suppliers will insist on cash upfront anyway, especially for a younger company, for precisely this reason. Business loans and overdrafts are expensive compared with personal ones, too, and frequently require assets as security, so it's not like it opens any magic doors.

The flipside is those blighters at Bestival who haven't and won't pay a soul who worked the festival this year - they ran the whole show on credit from suppliers then went into administration, and the administrators say "the pot is empty, sorry guys". They owe millions. Whether or not the directors will have any implications of trading insolvent is TBC, although in reality the money is gone and hundreds of suppliers are on the hook for it, some suppliers will not survive this. The Bestival directors may be able to get off lightly and keep their houses. This is the kind of financial isolation limited companies can give if you do run up huge debts.

6 years, 8 months ago - Paul Olding

Just a little addition to this discussion, particularly if you work for TV production companies - as a Ltd company you won't get holiday pay. If you are shcedule D (sole trader) you usually do. Now you say to yourself, ok, here is my weekly rate and here is the amount I want to put on top for holiday (PACT suggests 10.77%, Bectu have it around 12%). However, almost certainly when you go to a production company and start discussing rates, they will not acknowledge your rate plus the bit for holiday. I may not be explaining it well, but suffice to say people on schedule D often get offered the SAME rate as people from ltd companies, but then they get their holiday pay on top and ltd company people are told they won't get it. So you get a bit shafted. And 10.77% is a big chunk of money. But you try to explain this, and you get blacklisted for being 'difficult'.

6 years, 8 months ago - John Lubran

Some good points from Paddy and Paul. As I've asserted before though. There's often a difference between accountants and experts. For every negative about being incorporated there's also positives. Putting ones circumstances into an appropriate context is often what defines the difference. One is not obliged to operate in a singular way to the exclusion of all other trading entities. The sort of business described by Paul might not describe the sort of businesses undertaken by others. Where real and significant financial benifits kick in is where the business is actually making money as opposed to just a modest wage. Profits taken as dividens for example are taxed less than as with a salary. Corporation tax is less than personal tax. But the benefits can be a lot more than just that. An accountant who is also a financial expert can save a client many times more than his/her fee. One popular benefit, on a more parochial level, is that one can employ others within your family or 'domestic circle' at £11,700 per year, or whatever the current threshold is, tax free. If ones corporation isn't actually making money then incorporation may not be appropriate. There's many thousands of limited companies, just in the UK; most of them are not crooks seeking to escape with their creditors money. Entrepreneurial enterprise is defined by an element of risk that ought not destroy people disproportionately. However I'm with Paddy in decrying those who recklessly and misleadingly fleece those who had no notion of there being any risk. Banks and financial institutions share risk with borrowers but ordinary businesses and individuals ought not be taken risks with. The law probably needs tightening but not to the point where risk enterprise is stifled altogether.

6 years, 8 months ago - Paddy Robinson-Griffin

I agree that stifling enterprise would be a terrible outcome, however if I were standing now where I was historically, I probably would remain a sole trader instead of incorporating. Corporation tax is lower, dividend tax is lower, but when you combine the two (dividends paid on post-tax profits) the rates are designed to more or less mirror personal tax rates. And the whole in/out of scope for IR35 thing is a bit dry - less applicable to many of us doing multiple shorter contracts of course, but may affect bigger films more.

I keep my limited company as a bit of a hangover from when I was doing IT contract work, and it created a natural firebreak between me and clients, they knew they wouldn't be liable for my holiday pay or pension, etc. It makes it easier for payroll and budgetarily not to have to manage fringes and run payroll, payslips, etc.

6 years, 8 months ago - Vasco de Sousa

If you have to ask, the answer is no.

As far as limited companies go, I've attended all day seminars comparing partnerships to limited companies (and was even invited to give a similar seminar.) Even at the end, people had a lot of questions that the speakers couldn't answer.

Now, if you want to hire someone else to take over, then yes, go for a company. If you want to option screenplays, raise significant amounts of finance (for feature films), and manage a time when you're not working on films, then a limited company might be the way to go.

If, however, you are only working for clients, on a case by case basis, and making short films for film festivals, it might just be extra paperwork. You can get fined for filing late.

I only started my main company when I was doing a feature (I used the same name I was using when I was freelancing). The ones I had before were pointless, so I closed them.

6 years, 8 months ago - John Lubran

Here's a little missive just for entertainment rather than because it's likely to be relavent to the circumstances of most subscribers here; but it might put small realities into the context of bigger ones. We're obliged to orientate are souls according to the artificial strictures of those who govern us. So be it, but let's not take it as divine, let alone all powerful. There's more than two sets of rules governing money and business. It's one law for them and another for most folk who live in a parallel bubble created to coral them. It's that ice berg tip thing again. Companies, entities, trusts and internationalisms can and do operate in all manner of ways, much to the pretended chagrin of the British chancellor who can only play lip service to the pretence of making legislation asserted to get control of not only tax avoidance but of business in general. The irony is that it's his own party's MP's who indulge in these devices even more than can be discovered amongst the hypocracies of Labour tycoon politicians

It's a duality that both tickles and annoys me. I'm appalled that avoiding both taxes and the legislative oversight of democratic governance is so readily achieved, to the tune of trillions, but tickled by the sheer audacious piracy of those who anarchically stick two fingers up to the hypocrisy of corrupt, incompetent and unlawful governance pretending to represent the common good through a faux democracy.

What has this to do with companies? Well for most folk it's that tip of the ice berg thing. It's that one rule for them and another for us thing. A company can, and often is, a segway device into that murky domain that exists beneath the observable iceberg tip. This may seem all hypothetical to most but to put into biblical terms "let him with an eye see and him with an ear hear"

The pirates of our pirate island want Brexit because it'll protect that trillion dollar pot that's hidden beneath the iceberg tip. Other Brexiteers imagine some other existential benefit that's not actually going to be tangible to them at best. The anarchic devil and the social angel in me are still fighting over it and able to accuse the other of utter hypocrisy.

The ducking and diving wriggle room that a limited company can provide is only benifitial to those who see it. Other realities are available.

6 years, 8 months ago - Chris Chandler

If you are serious about producing films - even shorts - having a limited company makes it easier and clearer to control the rights situation - chain of title, employment contracts etc etc all held by the company. As and when your film making grows in scale and you wish to attract serious external funding - broadcasters, BFI, equity investors etc. you will find that many or all will ONLY deal with a limited company (or similar legal entity). A sole trader is just too big a risk for them. And in light of some of the comments above, if you do start a limited company for your self-generated producer activities, there's nothing to say that you can't also work as a freelancer when you work for third parties: it will make your tax affairs marginally more complex but not horribly so if you are organised and keep records. And BTW, in my experience the tax situation for company directors IS better - why else do TV presenters want to be employed via their own companies, rather than PAYE like us ordinary mortals....?

6 years, 8 months ago - Derek Hunter

If it's basically "just you" then the tax benefits of doing business as limited company over operating as a sole-trader are marginal. HMRC are constantly reducing the tax loopholes and you are likely to waste a lot of time performing financial gymnastics that make little sense to anyone except a specialist tax accountant.

I'd agree with Chris Chandler that where a limited company *really* makes sense is when it owns stuff; IP (Intellectual Property), physical assets (equipment etc.) and when it employs people. Also, having one limited company makes it much easier to create additional subsidiaries specifically for individual productions. This prevents a successful parent company being brought to it's knees by one bad production.

If you can't see a clear business need to form a limited company then you probably don't need one.

6 years, 8 months ago - Sara Pagliaro

Hi everyone!

Thanks a lot for all your input.

I’m not that worried about intellectual property because I know that anyway if there’s a clear contract in place between me (the producer) and my director/writer/crew/cast, the rights are mine.

The main reason why I would open my own production company, and yes it would be just myself as director, is the BFI and other fundings that want to deal exclusively with production companies and not sole trader.

I could, as suggested by some of you, keep working as sole trader for third parties and produce my own short films through my own production company. My doubt is: is it worth it to open a production company now to produce short films for the next 1 or 2 years, knowing that producing short films won’t make me earn money (if not from awards at film festivals)? Maybe what is not clear to me is how much taxes do companies pay every year - even if they don’t earn money.

6 years, 8 months ago - John Lubran

Companies only pay tax on profits. There are a couple of standing costs though. If you can't submit your annual accounts yourself, which can be self certified if turnover is less than audit level, you'll need an accountant to do it. If you keep a simple ledger of all monies in and all monies out together with invoices and receipts and bank statements, an accountant can be instructed for as little as £400 per year. There's also an annual fee of £15 to Companies House.

Another significant point about our pirate island tradition is that the UK is just about the easiest, least regulated and cheapest place in the world to set up a company. In France for example one has to put up a bond of several thousand pounds. A bankruptcy mitigation thing. In the USA one has to effectively get a qualification licence first that's quite demanding. Here one can by an off the shelf company for less than £20 and your away. Because other countries regard an incorporated entity as having more gravitas and respectability than we do, having a British company can be very empowering on several levels when operating abroad.