Entertainment Law Types of Business Entities PDF

FTVB 704 ENTERTAINMENT LAW Alicia C. Ramdeo  TYPES OF BUSINESS Sole Proprietor​ Partnership Corporations ​  3 SOLE PROPRIETORSHIPS What is it ? This is when a person conducts business on his own. Advantage...

FTVB 704 ENTERTAINMENT LAW Alicia C. Ramdeo  TYPES OF BUSINESS Sole Proprietor​ Partnership Corporations ​  3 SOLE PROPRIETORSHIPS What is it ? This is when a person conducts business on his own. Advantages - Easy to start, no barriers to entry; - Little or no formalities; - Full control over your business; Disadvantages - Personally liable for everything; - Financing is limited/challenging; - Insurance may be costly; - It may be difficult to get loans (especially without collateral); - Burdensome on an individual; - Succession planning can be challenging. Note: you may hire employees and contractors to help you do the work but that means added liability. In Canada, as a sole proprietor, if your business name is different from your own you need to register the business name.  4 PARTNERSHIPS What it is? This is when two or more persons get together to carry on a business for the purpose of profit. Advantages - Shared liability; - Different expertise to draw from; - Polling of resources – more people to get funding from; - Fair amount of control over your business; Disadvantages - Shared liability including liability for actions of partners; - Financing may still be limited; - Succession Planning may be a challenge. Note: It is VERY IMPORTANT for these arrangements to be governed by a carefully thought out and drafted agreement.  5 CORPORATIONS What is it? Incorporation is when a business is registered as a separate legal entitle from those who own it. Advantages - Separate Legal personality; - Can offer shares to get funding (either privately or publicly); - Limited Liability; - Can hire a qualified board of directors to run company.; - Can allow for succession planning; - Easier selling and Transferring; - Tax Flexibility (get to choose your tax year). Also for Film & TV: - Guilds & Unions; - Tax Credits; - Adds to Professional Legitimacy - Public Funding (most funder require an SPV/SPC)  6 CORPORATIONS Disadvantages - Decision making power rests with the board; - Governed by rules (By-laws); - Need to keep track of paperwork – Minute Book etc.; - More costly and requires more effort to start (costs vary from province to province); - Time consuming requires effort and planning. Advice – if it gets complicated get a lawyer involved. WHAT THE HELL IS AN SPV/SPC ????? In Class Exercise: Other Key/Important Terms: - Parent Company; - Holding Company; - Subsidiary.  AGREEMENTS 8 PARTNERSHIP AGREEMENT SHAREHOLDER AGREEMENT The amount of cash and other contributions The costs and types of shares (preference, non- made by each partner/Capital Contributions voting etc.) and any agreement to exercise voting rights in a certain way. How the partnership income /distributions will be Distribution of profits (rules for dividends etc.) divided. Dissolution and Death – what happens when Conditions under which shareholders can sell their these events occur holdings, restrictions on sale, drag along and tag along rights, compulsory buy-out (shot-gun) clauses. Partnership responsibilities and decision-making Conditions of the shareholding and events of default – who does what. – what will be considered a default of the shareholders agreement. Conditions for the settlement of disputes. Conditions for the settlement of disputes. Always have an agreement !!!!!! QUESTIONS ?