How Is Hollywood Accounting Legal
The topic of this article is how movie studios are accounting for their digital assets. More specifically, it looks like some major film companies have been underreporting what they consider to be intellectual property (IP) in their books. This includes things such as screenplays, songs, or even full-length movies that belong to the studio.
By including these materials in their costs but not recording them as revenue, the media company can lower its income statement. A lot of people have noticed a pattern with certain films, so we’ll use Captain America: Winter Soldier as an example here.
Captain America 2 was released in April 2014, which means it is one year old next month. During this time frame, there were several reports about the film being almost impossible to find due to poor word of mouth. Many theaters didn’t want to run it because they couldn’t get enough money for it, and those that did charge over $20 per ticket.
A little more than a year later, however, the cost of tickets dropped dramatically along with DVD sales. People who already had the movie bought new copies or stole theirs to watch it again. As soon as the film re-entered the market, it became much easier to find. Its overall box office gross rose significantly too, topping the original budget!
Now let’s look at why this is important and what may happen next.
Obtain movie studio accounting licenses
The term “film production” is very broad, which means there are many things that can be considered part of the film industry. These things include sound recording services, screenwriting, directing, producing, and acting. All of these require you to have an appropriate license to do so, however.
Most people know that filming requires a media licensing agreement, but what most don’t realize is just how expensive some of those agreements can get. Filmmakers often are not aware of the costs involved in creating their final product, making it difficult to say with certainty if their budget will suffice.
Fortunately for filmmakers looking to produce a quality work product, there are ways to obtain a low cost production license. Some of the best online resources we found list all of the major studios and their individual licenses, as well as links to their websites where you can learn more about their creative business practices.
These sites also typically offer discount codes or coupons for professional use, too! Having a valid production license is a must when considering investing in filmmaking equipment or marketing strategies. And since everyone’s budgets are different, this way of sourcing income is valuable.
The IRS is watching
With every passing day, it seems like there’s an ever-expanding scandal involving tax shelters in the movie industry. More and more stories come out about big name celebrities and directors using illegal income strategies to reduce their taxable incomes.
It all started back in May when reports surfaced that actor Ben Stiller was paid $5 million for promoting a life insurance policy his company created. This prompted talk of how he may have used this policy as a way to avoid paying taxes by attributing the money he received to “business use."
Many people assumed that since he promoted the policy while working for a large corporation (Red Bull) that he would be able to claim it as business related. Unfortunately, not only does Red Bull know about the policy, but so do legal experts according to Business Insider.
Since getting these benefits requires you to actually use the product or service for work, it makes the policy less legitimate. It also means that Stiller will now have to pay additional taxes because he earned over $20,000 per year and didn’t declare all of his earnings.
This isn’t the first time something has caused this problem for him either. Back in 2011, he had to report nearly $1 million in income after similar accusations arose.
Keep your books and records
It seems like there’s an accounting scandal happening every other week in America! From actors allegedly taking money from their personal accounts to use for professional purposes, to executives using company resources for private ventures, it looks like there are some greedy people trying to take advantage of what we refer to as “loose rules around accountability.”
It is very important that you do not forget about your business’s internal controls when things get crazy. You must maintain adequate documentation, keep up with your tax obligations, and make sure nobody is abusing their position to benefit themselves.
When something appears fishy or illegal, most likely someone will try to cover their tracks by looking through documents and emails. Make sure you have all the materials needed to defend yourself, and always be careful with how you manage paperwork and email correspondence.
I hope this article inspired you to stay on top of your financial responsibilities and put in place more rigorous systems to protect yourself and your team.
Recording and documenting movie studio financials
As mentioned before, recording and documenting movie production costs is very important to determine how much money your film has made or lost. Studios keep records of their expenses for several reasons- not only do they want to know if you were paid for all your efforts, but also to prove compensation in case things go south financially later!
Another reason why it’s so crucial to record these numbers is because studios have legal obligations to report them. Starting this year, every major studio in America must file annual reports with the Securities and Exchange Commission (SEC) disclosing certain information about their business.
These documents include detailed accounts of what the company spent money on producing and marketing the film, as well as an estimate of how much debt was incurred during filming.
This new rule applies even to smaller companies that may or may not be considered “major” by media standards, so everyone should make sure they are complying with regulations - especially since investors look at these disclosures when deciding whether to invest in a company.
Document everything
The accounting practices of most major film companies have been in question for some time now, with many people accusing them of illegal activity or unethical behavior. While there is no clear cut definition of what constitutes legal business practice, it’s important to be aware of the laws that govern your investment as a consumer.
A few examples include: misrepresenting the cost of producing a movie; failing to disclose money being spent on marketing and publicity strategies; falsely inflating ticket sales numbers; and even paying excessive amounts of money to influencers and celebrities to promote a product.
All of these things can influence how much you feel like you are investing into a project financially, and they can be done without anyone ever knowing about it. It becomes more difficult to trust the company if something comes to light, right?
Legal actions take place quickly so everyone needs to do their due diligence ahead of time. Make sure to stay up-to-date on what has been going on and make notes to yourself to remember anything suspicious. You want to be able to describe exactly what happened and who was involved so don’t forget any details!
Hopefully you will never need to use this advice, but just because it hasn’t happened before doesn’t mean it can’t - and we all deserve to know what is happening under our watch.
Pay your taxes
It has been well documented how expensive it is to be a successful filmmaker or TV show producer. All too often, however, this success comes with very hefty tax bills. In fact, according as Forbes puts it, being a famous person can cost you more than 30% of your income in federal and state taxation!
This isn’t necessarily a bad thing, but it does mean that we as taxpayers have a right to ask some questions about how these rich people account for their wealth. After all, if they can afford such lifestyle choices, then why can’t we?
There are several ways that wealthy people avoid paying taxes, which makes them even more affluent while depriving our schools and hospitals of needed resources. Some of the most common legal strategies include using limited liability companies (LLCs), offshore bank accounts, and credit card rewards programs.
In this article, we will take a look at some of the things that movie producers do to lower their tax bill, along with some suggestions on how average citizens can reduce theirs.
Look at your financial situation to see if you need a lawyer
If you are in debt up to your ears, it is important to know how to identify legal help for yourself. You don’t have to spend money on lawyers unless you need them, so do not worry about wasting money by trying to handle things on your own first.
In fact, most people cannot afford professional assistance of any kind during these times. It is best to look into free resources or low cost ways to manage your debts before thinking about paying professionals.
Legal action can be expensive, which is why many individuals with credit card debt never really make much progress in solving their problems.
A good way to deal with this is to ask around about loan providers and creditors. People who have used their services will almost always tell you what actions they took and whether or not it helped them.
By doing some research ahead of time, you will know what options exist for you and which ones might work for you.
Get a lawyer if you need one
It seems like every week we are hearing about another company or individual being accused of something related to the movie industry. From allegations of copyright infringement to fraud, there is always an eye opening revelation in what kind of shady practices these individuals and companies used to take advantage of others.
It is very important that anyone who needs help with their legal issues does not hesitate to ask for it. While some of these accusations can be difficult to defend yourself against, having a lawyer by your side can make all the difference.
By having a lawyer, you will have someone who has experience working with cases similar to yours, and will know how to handle them effectively. They may even be able to advise you on whether or not you actually need a lawyer at this time!
Legal action can often times become expensive, which is why it is important to go into it knowing that you are covered. Even though most lawyers advertise themselves as affordable, it is still worthwhile to do your research and see where they fall in terms of affordability before agreeing to represent you.