Choosing non vs. profit status?

Well I am in the process of forming a NPO right now. There's a lot to it. Just because you have a NPO doesn't mean you don't make money. I know someone who has an NPO that makes over $7,000,000 per year. It's more of a tax structure... But being an NPO, you can get "donations" easier.

Good luck - I loved Jimmy Smiths old Blue Note records. I think he died somewhat recently, that whole generation is leaving. I saw Sonny Rollins here last year, he just amazing that at his age he still had the breath.

CoolDog,

Why are you choosing to form the NPO yourself? Why aren't you going under a fidiuciary sponsor? Wouldn't that be MUCH easier and cheaper?

Seth

I have a couple of questions about forming an NPO over an LLC.

Scenario one: I’m an investor willing to put $250,000 into a movie. I narrow it down to two projects I like. Project 1 is a standard LLC asking for an investment. Project 2 is an NPO asking for a donation.

What is my incentive to donate rather than invest?

Seems that if Project 1 fails I can use my investment as a tax writeoff and move on. Same as Project 2.

But if Project 1 turns into Blair Witch or Open Water I see some profit. Do I see profit like that if Project 2 takes off?

Are there any creative limits to starting an NPO? Can an NPO make purely commercial products like horror movies?

directorik said:

I have a couple of questions about forming an NPO over an LLC.

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I've written a little about Non-Profit Corporations... read through this thread.

You can operate under an umbrella production company, but each commercial production should have its own entity. If you are producing "Cyber Killers", you should form an entity for that production, like "Cyber Killers Productions". This way, your personal assets, and the assets of your other films are not at risk. You should look into LLC and S-Corporation.

SPaulovich said:

I've written a little about Non-Profit Corporations... read through this thread.

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I remember that thread, Steve. Very informative.

I am the principle owner of an LLC and a partner in two more. No stock issued. But we do solicit investors which is why I asked my question about donating to a NPO instead of investing in a project under an LLC.

Wondering if there's any advantage to starting a Non Profit when making a movie over starting an LLC.

...first, just because you are a non-profit doesn't mean you don't or can't make money. If the profits are put into the up keep and running of the NPO, then you can make a profit.

Going under a fiscal sponsor or fiduciary(sp) means that anyone who gives you any funding gets a tax write off for the amount given. You retain creative control and have say over where the money goes, but you get it through the sponsor who funnels it to you. Often the sponsor expects a percentage of what you acquire 5% to 10% is what I am finding.

...most likely an investor will be looking for a return on their investment. Not necessarily so with a fiscal sponsor. Also, just because you are a LLC doesn't mean you can't apply for sponsorship or apply to non-profit organizations for funding, I don't think....

...the problem is, and this is the problem I am having, in order to be sponsored, your project must be of a non-profit nature. So, Born Into Brothels will get funded before say Some Kind Of Monster, because of the educational value and the possibility to be used as an educational tool. It would be expected to involved the community, have some standing with the community.

...whereas Some Kind Of Monster would have a more commercial appeal and would look to have a theatrical release and go to theatres. (these are assumptions made to illistrate my example. I don't have any idea as to how Berlinger and Sinofsky went about initially raising money for the film, though Metallica paid for and bought it.)

...as for an LLC, I am going to become one of those in order to contain liability, the way I understand it, if anything happens during the production of the film and someone is in BIG trouble, you are somewhat protected (though I don't know to what extent yet, when I find out I'll post). It means that if something goes wrong, they can't take your car, your house, your personal belongings etc....

when I find out more, I'll post....

--spiner

...BTW, very interesting about the jazz musicians. You will probably get more interest with Jazz than with other forms of music. I am working on a doc on Metal. Much harder to convince the world of its value and worth....

What happens if one goes the non-profit route and then the film actually makes a profit?

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...if you do make a profit, from everything I have been doing my research on for my doc, you are going to be paying off the production of the film, the distribution, the film print, etc (I don't know if you know this already) Whatever profit will probably dwindle down quickly. I am finding that a print can cost about $25,000 for a 120minute feature....

It's my belief that the film would be serving a significant historical need in documenting the lives of this aging group and this fading style of music.

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...when going the non-profit route, the hard part, though I think not so hard for Jazz, would be to convice the organizational umbrella that you are serving a significant historical need in documenting the lives of your group. Once they can see the value in your subject, then it will be easier to get them to sponsor you. Once sponsored you can send applications to any grant provider you want. And remember that investors will probably want a return on their investment....

...if you don't mind, I would like to talk to you about how you went about putting out your first doc and how things are going with Jazz one. I am doing the Metal thing, but I was raised on Jazz and R&B....

--spinner

themonsterlives said:

CoolDog,

Why are you choosing to form the NPO yourself? Why aren't you going under a fidiuciary sponsor? Wouldn't that be MUCH easier and cheaper?

Seth

Click to expand...

This is for a non-film related business. It's WAY cheaper to organize the NPO myself than paying a lawyer or someone to do it.

Spinner,

Feel free to contact me directly. I'd be happy to discuss my earlier project with you.

To all,

Here's my current understand: If I go the non-profit/fiscal sponsor route, it's a relatively painless way of ramping up and seeking donations -- foundations, individuals, etc.

But, what if I make a profit? What are my options for distributing that money?

And is there any way of seeking investors as a non-profit entity? I know this runs counter to the definition, but I'm hearing that it is possible if the right vernacular is used. Maybe it's not called "profits" and maybe they're not "investors" but I am hearing that in essence this is being done. Does anyone understand this or can anyone get me to a good resource (no attorney recomendations, thanks) so that I can get a handle on this?

themonsterlives]Spinner,

Feel free to contact me directly. I'd be happy to discuss my earlier project with you.

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...thanks, I'll be talking to you

But, what if I make a profit? What are my options for distributing that money?

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...if whether or not you have to give up any of that profit money, assuming you would like to be able to keep it and say put it into another project, if that is the question you are asking, I don't think you have to 'distribute' that money. I think it may be yours....I'm gonna look into that.....

And is there any way of seeking investors as a non-profit entity? I know this runs counter to the definition, but I'm hearing that it is possible if the right vernacular is used. Maybe it's not called "profits" and maybe they're not "investors" but I am hearing that in essence this is being done. Does anyone understand this or can anyone get me to a good resource

Click to expand...

...when you find a fiscal sponsor, you ARE a non-profit entity. You are a part of the non-profit fiscal sponsor parent organization. The good thing about this is you can apply to GRANT PROVIDERS, like the National Endowment for the Arts. They are your INVESTORS. The money they give you is the GRANT/INVESTMENT.

You may have to give a small percentage of the money raised to MAKE the film to the FISCAL SPONSOR/PARENT ORGANIZATION for their FIDUCIARY services, which means since they are the PARENT ORGANIZATION and they take on the business of receiving the monies and funneling it to you. You DON"T have to give the money/profits to the GRANT PROVIDER/INVESTOR, though since they differ, there may be different requirements for different PROVIDERS/INVESTORS.

I have yet to find anything that says you DON'T keep the profits. Or anything that has ever said that what you make off the project has to go back to the GRANT PROVIDER/INVESTOR, though you will have to acknowledge them publicly in the film and in the informational literature of the film. And like I said, if you are lucky, the money you raise will pay off the costs of making the film and they are going to be HUGE (but you know that)....you are luckier still if you can put a little of that away for your next project....

(no attorney recomendations, thanks)

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...I know, I know but,...um, there is an organization called VLAC...Volunteer Lawyers for Arts and Culture...they sometimes work for free...(I will be talking to someone myself, btw...)

--spinner

And don't forget to include budgeting for your own labor on the piece...many artists belittle their own contribution to a work by not 'paying' themselves. What you choose to do with your 'wage' after the completion (another film, etc...) is up to you.

Some grants even cover capital costs.

spinner

Do you have the website for VLAC?

I'm more of a for-profit guy, so bear that in mind. However...

I have a non-profit. It took about a year of filling out forms with essay questions, and mailing them in.
Just like taking a correspondence course.

The year would have gone by anyway, so I'm not out any time. An attorney would have just filled in boilerplate forms as I did, and it would not have taken him any less time. More money, though.

I recommend these books as the best of many I've read.

Nonprofit Handbook: Everything You Need to Know to Start and Run Your Nonprofit Organization
http://snurl.com/g2zg

Nonprofit Kit for Dummies
http://snurl.com/g2zn

Only Grant Writing Book You'll Ever Need: Top Grant Writers and Grant Givers Share Their Secrets!
http://snurl.com/g2zm

Just a change in vernacular, for the NPO I'm not looking for "Investors," but "Donors."
I'm definitely not "selling" anything, whether NPO or FPO. With a non-profit or for-profit company,
I'm in the "Education" biz. I "Educate" or "Inform" Investors or Donors.

A NPO can do anything a FPO can do, but profit (or whatever you call it) cannot accrue to an individual.
So, yes there can be a profit, it just can't be taken out and spent on me. It should stay in the
company, doing good.

As mentioned above, an NPO is not really the thing to use if you think the project will make a lot of money. It's more for those "starry-eyed" projects, by that I mean "losers." It's going to lose money when I make it, lose money when I distribute it, but it will make me and my Donors feel good.

Your mileage may vary. Remember to consult your attorney and tax person, I am not they.

From "Secrets Of Raising Money For Your Movie" by Sam Longoria
http://secretsofraisingmoneyforyourmovie.com

...I seem to be having some trouble finding the exact website so instead...

enter: Volunteer Lawyers for Arts and Culture. I live in Michigan so its through a Michigan organization, but when looking around I found one I think in Connecticut. Happy surfing

--spinner