Do I need to register with the Security and Exchange Commission?

Question

I'm trying to figure out if I need to register with the SEC... I'm putting together a feature film that will cost 2 million dollars, so I obviously need to be funded by investors. My company will be a LLC that will NOT trade in the public markets. But the way I understand it, I still need to register with the SEC... unless I'm misunderstanding all this? If I do need to register, what is the cost registration?

Answer 1

If you're not selling to the public, you don't need to register.

You can't afford NOT to have a lawyer.  What if LLC is not the best type of organization? Maybe it should be a LP or subchapter C corp or subchapter S corp?  Get this wrong and it could cost you 1000s later.  Do it wrong and it could cost you more because it may not be valid.  Or, you could end up with 1000s in fines.

Answer 2

Your attorney can answer these questions.  If you don't have one yet, you will certainly need one.  There are many that specialize in ventures such as yours.

Answer 3

I've already posted an answer on your other iteration of the same question, which works here as well, but I have a reaction also to the new information in the edit.

If you only have $300, how do you possibly think you're going to raise $2,000,000?

I'm assuming you're looking at this as a business venture, i.e. you are trying to make money for yourself and are trying to find investors who will finance the cost in the hope of making a profit.

Here are three "paradigms" for how such a business might be financed. Some situations may fall in between, or be a combination of, these paradigms (at least the first two):

1 - You have a very rich uncle and a very rich next-door-neighbor who will each kick in $1,000,000. This is a classic pure private placement. You should have no real problems with securities laws.

However, you should use a piece of the money these guys are giving you to hire a lawyer, who will, among other things: make completely sure there are no securities-law issues at all; write up an agreement among you and the investors as to how you'll split profits, decide to make additional investments, control business decisions, etc; advise re tax issues; help you deal with and make contracts with suppliers and people you rent equipment from and hire and who might actually want to show or distribute your film, etc.; advise you about copyright, trademark and similar issues; possibly direct you to some helpful business contacts.

2 - You're writing up some sort of offering memorandum and distributing it to a group of sophisticated and wealthy investors, looking for a group that'll put up chunks of money in the tens or hundreds of thousands of dollars.

You will definitely need legal advice to prepare the offering memo. Also: do you actually *know* a group of sophisticated and wealthy investors? Generally, such people won't invest in something unless they think it'll succeed. To me (if I were asked to invest): that'd mean that the film-maker has a track record of producing -- or at least has been a major creative force (director, possibly writer) behind -- more than one successful movie. Given that, I'd expect him to have (and to be putting into the project) a lot more than $300.

Some (quite a few, I think) movies are financed this way, and for a lot more than $2 million. But generally by people --not only the ones making the movie, but also those raising the money -- who are very experienced and very professional. Many of the limited number of people who might invest in such venture already have an offering memo (or several) for similar plans sitting on their desks.

3 - You're going to anybody you can find, looking for 20,000 people who will chip in $100 each.

This isn't really going to work, either practically (20,000 people?!) or legally. Even if it's 2,000 people chipping in $1,000 each.

Either 1, 2  or a some combination of those two are possible, but you really need one or two initial backers, with some combination of (1) lots of money they're willing to give you or (2) business sophistication and contacts. If you have or get such a backer, the backer should be able and willing to pay lawyers' fees. If you don't have such a backer, the whole plan is really just idle speculation.

The other -- and perhaps more realistic -- alternative, is not to approach it as a business venture at all. Look for money from foundations, film schools, and the like: that is, sources that aren't advancing you money in the hope of making a profit, but simply to support you out of a charitable motive. Money like this does exist. Whether you can get anything close to two million dollars of it is another question, but I suppose that all depends on you and your project. In this case, the legal situation is quite different - and the foundations giving you the money will themselves be well-informed regarding it.

EDIT in response to still more information:

It is highly likely that an LLC taxed as a partnership is the appropriate vehicle for a privately-financed one-off movie production.

The co-production situation makes your fundraising target quite a bit closer, though it's yet another complication that you really need a lawyer to deal with.

The website doesn't look crazy, but you should have a lawyer look at it and suggest some changes.

While soliciting money from investors (people who are hoping to share in profits) raises securities-law issues, soliciting people to chip in money for a give-away or screen credit shouldn't. But - it would be wise to have a few disclaimers on there, in particular: a properly worded statement that the website is NOT an offering of securities, and (I think) something to inform contributors that you are not qualified as a 501(c)(3) organization, so contributions are not tax deductible. There may be more ....

Answer 4

Too much info to post here. You may not have to register with the SEC, but can be required to give the SEC info.

Speak with an attorney that specializes in this field. No one wants to invest with someone that does not have a good team backing them.

I have provided a relevant link with the SEC