How to Start Up an Independent Film Production Company (or Have Your Lawyer Do It)

Indie filmmaking and production companies have drastically changed since the improvements of tech and the Internet. You can shoot an independent film in HD with a high-end DSLR and do your entire post-production on a laptop.  But even if you have the best line producer in New York, you still should have an idea of how to start up your very own independent film production company, with or without the guidance of a lawyer.  An attorney knowledgeable of small business and of the independent media industry will be able to guide you through the pre-pre-production process.  The decisions you make before your first hire will affect the course of an entire production or even a series of productions.

Look into the future!

Ask yourself this: will I want this production company to be all about this particular film I plan to shoot now? Or will a number of projects fall under the auspices of the production company? Do you really want to be a producer and employer, or just an auteur? The answers to those questions will guide your decisions about budget, business entity, and staff. If this is all about the individual film, make the production company one and the same.  If this is all about the business structure responsible for producing multiple productions, you would be wise to create separate business entities.

E-Book: Before You Make a Movie Based on Real Life... Try Not to Get Sued

Also, where will you shoot?  Every state, and some cities, have a film office that will guide you through tax incentives and other resources.  One site for shoots in New York State which also highlights tax incentives is "New York Loves Film."

Draft your budget.

We've come a long way to democratize the filmmaking process.  But the cost of equipment and the relative ease of post-production compared to the negative-cutting of yesteryear is only a portion of your costs.  How big is your production?  Do you plan to have SAG actors or do a completely non-union / non-guild shoot? Do you have a lot of locations, special effects, and studio work?  A good line producer will guide you through the budgeting process, but you should at least know the answers to these questions to have a rough estimate of how much it will cost.  Please keep in mind that the days of 1099 or unpaid internships for everyone on a shoot may be over; lawsuits over misclassification of employees as independent contractors are an epidemic these days, and, if you exercise too much control over a worker for too long a time period, that worker may actually be considered an employee.  And unpaid internships have been virtually outlawed in the United States.

Furthermore, in the wake of high-profile accident disasters such as the horrifying death of camera assistant Sarah Jones, guerilla tactics in independent productions are not looked upon as kindly as they used to be.

Choose Your Business Entity

It seems that film companies these days default immediately to an LLC, and for good reason.  But there are very good reasons for forming an S-Corporation, instead. For instance, if you do not need the flexibility an LLC offers, you may be pleased by the relatively inexpensive nature of an S-Corp.  In fact, if this is a down-and-dirty documentary, and not expected to become a full-fledged production company that creates multiple film projects, when applying for grants or even loans, an S-Corporation may make your life infinitely easier. There are many reasons, but keep in mind that owners of an S-Corporation MUST be individuals and not LLCs. Charities often demand to know the identities of individual investors, and may not appreciate a corporate investor that masks the names of its owners.  However, if you anticipate producing multiple films under the auspices of your production company, or if you plan to pursue corporate investors, or plan to spin off different elements of the film project into discrete companies (e.g. you plan to make the next Star Wars knockoff, and want to have a merchandising company, an online company), an LLC is for you.  You can nest one LLC in another, so the Production Company LLC can oversee the production of the Movie LLC and the distribution of the Merchandise LLC.

Related: Should Your Startup Be an S Corp or LLC?

Finance Through An Offering or Through Crowdfunding

Back in the golden age of indie filmmaking, you really had three options: max out your credit cards, beg/borrow/steal money from friends and family, or do a traditional company investment offering.  Now you also have the option of crowdfunding, which has its own set of rules.

As an attorney, I am not going to speak to maxxing out your credit cards.  Just make sure you pay attention to the terms of the credit cards, and have an exit strategy.

A traditional offering can be structured by your lawyer in a way that suits the nature of your investment.  For instance, let's say you have a low low budget of $250,000, do you plan to get ten investors to invest $25,000 or 100 investors to invest $2500?  Based on your understanding of your pool of investors, tailor the size of each share (or unit, if you form an LLC).  However, you would be wise to have a minimum amount to raise and a maximum amount to raise (yes, you would be dealing with the dilution of investment, but 100% of nothing is still nothing).  A good rule of thumb is to make your minimum amount the amount of your budget that will get you "in the can" or to post-production with a small editing budget so you can have a rough cut or trailer.

Crowdfunding has become a popular choice for filmmakers who are unsure of the size of units they will need, or anticipate approaching a large swath of different investors.  Each crowdfunding company has a different set of rules for fundraising, and, very often, you have to provide your contributors with "rewards" in exchange for their funding.  Kickstarter is the most famous of these companies, but Kickstarter requires the return of monies if a threshold is not met.  Other companies allow you to hold onto the monies raised, thereby allowing you to shoot a trailer, for instance, or get the project in the can.  Here is a rundown of a few crowdfunding companies: 

• Kickstarter projects must reach goal in order for project creator to receive funds. Kickstarter is free to sign up, 5% fee to funds raised, plus Amazon Payments processing fees.
• Indiegogo, on the other hand allows you to choose to get the funds earned for projects, whether or not the project reaches its goal.  Indiegogo charges a 4% fee to funds if the project reaches its goal, 9% fee to funds if it does not, plus 3% credit card processing fee and $25 wire fee for non-US campaign.
• RocketHub is a lesser known crowdfunding site (but appealing for indie filmmakers), which also allows you to get the monies raised for a project, even if you don't reach you goal.  RocketHub charges a 4% fee to funds if the project reaches its goal, 8% fee to funds if it does not, plus 4% credit card processing fee. Also, RocketHub has an affiliation with A&E Networks, which you may find useful.

However you choose to raise funds, it can be relatively inexpensive to have a lawyer draft your vendor, employee, contractor, joint venture, and operating agreements.  There is no such thing as a one-size-fits-all contract, and it is not worth it to "go it alone" with some boilerplates you find on the Internet.