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TOPIC: How is your theater set up?

How is your theater set up? 08 Oct 2004 13:45 #9271

  • Moxie
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Sole-proprietorship? LLC? C-Corp? S-Corp?

Just trying to get a handle on how some of the smaller theaters are set up. Any pros or cons for the varying types?
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Re: How is your theater set up? 08 Oct 2004 14:55 #9272

  • Large
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Sonoma Motion Picture Corporation, LLC
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Re: How is your theater set up? 08 Oct 2004 22:21 #9273

  • BurneyFalls
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Mine is a sole proprietorship, only because I didn't and still don't know any better. Interesting question Moxie.
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Re: How is your theater set up? 09 Oct 2004 10:32 #9274

  • muviebuf
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Burney:

There is nothing wrong with a sole proprietorship for a small single screen (or even multi-screen operation) if you are going to be directly involved in the day to day operations and as long as you are leasing the theatre property from another unrelated third party or entity and/or you have no ownership of real estate or other major assets titled in your own individual name (for which you may need liability and/or credit protection). Even this second concern maybe able to be covered by sufficent liability insurance for the theatre business. If you are involved in the day-to-day operations you can keep an eye on the liability concerns (e.g. get things fixed). Also operating as a sole propritorship (while owning real estate or other assets) )assumes that if the theatre business starts to falter you have the common sense to shut it down before you are over your head in debt -and thereby expose your other assets to creditors.

From a risk management standpoint older theatres (those with traditional sloped floors) should not pose a great liability risk as the audience is generally on the premises for less than two hours at a time and sitting stationary in a fixed seat. The cost of liability insurance for an indvidual should be the same as for a corporation so as long as you have good liability limits (with an unbrella coverage) you may be okay as an individual. Same with workers comp insurance - the cost for an individual or a corp should be the same. The major concern becomes one of credit risk (and the common sense not to get in over your head).

Since it is often not advisable to title real estate in a small corporation, where there is theatre real estate involved the real estate (and even the equipment and seats) should be owned individually or a parnership or seperate company and triple-net leased to an operating company which operates the theatre. That way if the business falters only the minimal assets of the operating company are at risk and you can continue to own the building and equipment. For the operating company a corporation (either C or S) or a Limited Liability Company (LLC) are the traditional methods.

If you have multiple business locations and/or employees that you don't directly supervise all of the time, and/or employees travelling in motor vehicles or other situations where there is exposure to death or serious bodily injury then you must have corporate protection for the liability situation. You may also need an LLC or some other entity if you have partners and/or investors.


Just some general thoughts and concerns. You would be well avised to contact a good business lawyer (Yes those scoundrels whom you all revile !!!!!!) and have him review your individual situation.
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Re: How is your theater set up? 12 Oct 2004 21:25 #9275

  • Moxie
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Thanks for the lengthy explanation, Muviebuf. I think we're going to go the LLC route, but right off our taxes as an S-Corp... or so says my CPA. Wish us luck!
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Re: How is your theater set up? 13 Oct 2004 14:53 #9276

  • Mike Spaeth
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Spotlight Theatres, Inc.

Anyone who sets up a business as a proprietership nowadays is asking for trouble in today's lawsuit-ridden environment. Why not incorporate? One would be an idiot not to.

[This message has been edited by Mike Spaeth (edited October 13, 2004).]
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Re: How is your theater set up? 11 Nov 2004 02:18 #9277

  • BurneyFalls
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Okay. You convinced me to look at the alternatives to sole propriertorship. I own and operate a single screen theatre and own the real estate. I also own the parking lot (2 parcels) across the street and its adjacent lot and building. I am considering the purchase of a second single screen, (not in my town) which also includes the real estate. I cannot be in both places all the time, but will be involved in daily operations of both.

I spoke to my accountant today and he said either an LLC or S Corp would be the way to go. Is one better than the other for tax or liability protection? I am still fairly new to the business and liability world. This is my second career.
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Re: How is your theater set up? 11 Nov 2004 11:33 #9278

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LLC's came about in the 80's as a result of some of the restrictions on C & S corporations. Many of the S corp restictions were later changed. For a small, nonprofessional operating business there really isn't a whole lot of difference today between an LLC and an S corp. Generally an LLC is a bit better both for pass through of items and tax return filings (e.g. a single member LLC may file a Schedule C propritorship federal return.)

If you are going to incorporate then it is still better to seperate real estate ownership from the operating company. This way (other the whatever personal guarantees you have to a financial institution) the real estate is not exposed to the trade or other creditors of the operating business. The buzzword today is "bankruptcy remote subsidiary" meaning that you isolate each piece of the business. Many business put each seperate piece of real estate into a seperate entity and lease to one or management companies (depending how involved they want to get).

[This message has been edited by muviebuf (edited November 11, 2004).]

[This message has been edited by muviebuf (edited November 12, 2004).]

[This message has been edited by muviebuf (edited November 12, 2004).]
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