How to Structure Limited Partnerships for Indie Film Financing

 

English Alt Text: Four-panel black-and-white comic titled "How to Structure Limited Partnerships for Indie Film Financing." A woman says, “We need to raise funds for our film without losing control.” The robot replies, “Let’s use a limited partnership—investors stay passive.” The woman adds, “We’ll set up a waterfall to distribute profits.” The robot concludes, “And we’ll follow SEC rules and file the right documents.”

How to Structure Limited Partnerships for Indie Film Financing

Independent filmmakers often turn to limited partnerships (LPs) to raise capital without giving up creative control.

This legal structure allows artists to attract passive investors—called limited partners—while retaining managerial authority through a general partner.

In this post, we’ll break down how LPs work in the film industry, how to allocate risk and profit, and what legal documentation is essential for fundraising success.

๐Ÿ“Œ Table of Contents

๐ŸŽฌ What Is a Limited Partnership in Film?

A limited partnership is a legal business entity that includes at least one general partner and one or more limited partners.

In the film world, it allows a producer or company to manage the production while investors fund it passively.

LPs are especially common in independent filmmaking where institutional backing is limited.

๐Ÿ‘ฅ Roles of General and Limited Partners

General Partner (GP):

- Manages day-to-day operations

- Makes creative and financial decisions

- Bears unlimited liability

Limited Partners (LPs):

- Contribute capital only

- Have limited liability up to their investment

- Cannot participate in management or decision-making

๐Ÿ“„ Key Legal Documents and SEC Considerations

Essential documents include:

- Limited Partnership Agreement

- Private Placement Memorandum (PPM)

- Subscription Agreement

If the offering qualifies as a security, it must comply with Regulation D or other exemptions under the U.S. SEC.

Consult a securities attorney before soliciting investors publicly.

๐Ÿ’ธ Waterfall Distribution: How Profits Flow

The “waterfall” is a financial structure outlining how profits are distributed:

1. Return of capital to LPs

2. Preferred return to LPs (e.g., 8%)

3. Catch-up payments to the GP

4. Remaining profits split per agreed percentages (e.g., 70/30)

Clear waterfall clauses prevent disputes and boost investor trust.

๐Ÿงพ Tax Implications for Film LPs

LPs are typically treated as pass-through entities.

Each partner receives a K-1 tax form reflecting their share of income, deductions, and credits.

Film investors may be eligible for accelerated depreciation under Section 181 or 168 of the IRS Code, depending on production date and structure.

๐Ÿ”— Legal Resources for Indie Film Partnership Structuring

Explore these expert articles to build a compliant and attractive LP film structure:











With the right LP structure, you can align investor expectations, secure funding, and focus on telling the story you’re meant to create.

Keywords: limited partnership film, indie film financing, waterfall distribution movie, SEC exemption media, LP tax strategy