How to Form an SPE (Part 2 of 2)

Why You Should Form an SPE

Special purpose entities are game-changers for filmmakers looking for effective and cost-cutting ideas to improve the shooting and production processes. This is why it is important to know how to form an SPE.

The tax, management and accounting advantages that filmmakers can take leverage with SPEs are undeniable. These legal entities are often set up so that filmmakers can reap these benefits while shooting and producing their movies. Filmmakers considering setting up SPEs should keep in mind that the sooner they do so the better. While the reasons for setting up one of these distinctive limited liability corporations may be clear, it is also important to understand the process for doing so.

The process to form an SPE

Before creating an SPE for a film project, read more about the process below:

1. Consult an entertainment law attorney What does an entertainment law attorney have to do with SPEs? Well, these attorneys are likely to know more about the sort of SPE best suited to filmmakers. A production company doesn’t need information on SPEs specific to real estate businesses, only the sort of entity that filmmakers can take advantage of. For this reason it will be helpful to speak with an attorney prior to setting up your SPE. Industry-specific advice on these legal entities can help filmmakers avoid issues down the line.

2. Choose a suitable jurisdiction California, for example, is among the states that offers advantageous tax benefits. Similarly, setting up an SPE in certain jurisdictions can offer varying protections and benefits. It is important to choose a jurisdiction of incorporation wisely. Delaware is an example of a popular state for business incorporation. The First State has numerous corporation-friendly laws, including relatively low taxes. There are other options besides Delaware, though. Consider which states are best for your SPE’s incorporation, or even if moving incorporating outside of the U.S. is a good idea. Again, consulting a legal expert could help with this decision.

3. Dive into the paperwork Paperwork is, of course, a necessity when setting up an SPE. Meet with outside legal counsel to go over the required paperwork for setting up an SPE in your chosen jurisdiction, and then file it. Certain states may have different processes than others. For example, in Delaware, the process requires filing incorporation papers with the secretary of state there, LegalZoom explained. The documents should include the name of the SPE, its purpose, the names and addresses of the incorporators and registered agent and the number of authorized shares of stock.

4. Work out the SPE structure Part of the reason SPEs are so appealing is the concrete hierarchy filmmakers can set up through these entities. It gives everybody involved a sense of their responsibilities and sets up clear processes for management, accounting and other required operations. Draft governing documents to lay out the structure of the SPE. Again, determining how the SPE will pay taxes and what management process should be in place, among other similar decisions, is something that legal counsel should be involved in.An SPE is certainly a helpful entity available for filmmakers to take advantage of, but special consideration should be taken during each step of the incorporation process. Missed details can mean legal trouble later on. This would certainly stunt the movie-making process.