Get Your Production Company Together

First, a little bit of news: we’ve put some more goodies up on our IndieGogo page – our business plan, topsheet budget, and some more concept art are now online and available for download.

In our last post, we covered the first steps you’ll want to take in starting up the production company for your film. Now we’ll slow down a little and go over a few more steps, and then talk about some longer-term issues.

Getting A Credit Card: It’s important to get a credit card early on, and pay any initial expenses with it (while of course paying it off every month). This will help you establish a credit rating for the company, which may come in handy later, should you need to apply for a loan or a second card. I recommend getting three cards, actually:
— an AMEX card that gives you cash back or miles (you may need the miles to fly actors in)
— A regular business credit card
— A debit card attached to your bank account

It’s a pretty sure bet that the credit card companies will be looking at YOUR credit score when you apply, so now would be a good time to get a credit report via creditreport.com or one of the other services (your bank should also have a credit reporting service).

Figure Out How You’re Going to Pay The SAG Bond and Any Deposits: Chances are, unless you’re film is really, really tiny, you’re going to be dealing with the Screen Actors Guild. And they’re going to want a deposit equivalent to a percentage of the actors’ salaries (there’s a formula but it varies). They’ll want this deposit in certified check or money order form. They will refund the bond once the film is shot and all the paperwork is complete. Of course, this process can drag on, especially if the SAG rep loses your paperwork (always make copies!)

You can lower it somewhat by agreeing to put the actors’ salaries in an escrow account run by their agents, prior to the shoot. But this won’t eliminate the bond altogether. So start thinking about how you’re going to float the money (cash advance, loan, line of credit with your bank, etc.) Don’t wait until the last minute to figure this out.

Likewise, you’ll also want to sort out how you’ll deal with any equipment deposits (which can sometimes be quite large) or credit card holds. Putting that stuff on your production account debit card is a bad idea, especially the holds. And some places don’t take AMEX.

Separate Your Books: It’s important to separate the day-to-day development expenses that are NOT associated with your movie, from the preproduction expenses that are. This is hard to do at first – at the beginning, you may be making a call that could serve as both a development call (hey, look at all my projects) or as a financing call for the current film (hey, look at this one script). But it’s critical to separate as much as possible, for several reasons.

Firstly, it’s honest. If you want your investors to come back again, it pays to make sure they’re not inadvertently paying for calls to your spouse, or a new fancy desk or lamp that isn’t needed on the shoot.

Secondly, it will give you a sense of how fast you’re actually spending the money, whether you need to slow down or not (you don’t want to spend out the budget before you start shooting), and (worst case) whether you should be raising more dough.

Find A Lawyer/Get Your Legal Documents Together: The film business is not known for its plethora of honest, easygoing people. A good entertainment attorney can help you cut through the chaff of wanna-be’s and protect you from the predators. In fact, your attorney may be the most important member of your team. So choose your attorney wisely.

You want someone who’s a clear communicator, has an enthusiasm for their work, and specializes in entertainment law – which encompasses securities, copyright, contracts, labor, intellectual property, and other domains. Look for someone who you can form a long-term relationship with. Ideally, your attorney will work with you all the way through the sale of this film and the next one as well.

Get Your Attorney Working on Offering Documents: This is very important. Anytime you have someone giving you money you can bet they’ll want some kind of contract. For most films you’ll need three documents:
— The Private Placement Memorandum, which lays out the nature of the investment, summarizes the risks, and covers liability, company dissolution, and breach of contract.
— The Operating Agreement, which lays out how the LLC actually… operates, the relationship between the investors and managers, and what rights each party has. You give these two documents to prospective investors. Hopefully they return them to you signed along with a nice big check (that clears).
— A Joint Venture Agreement, which covers you and whoever else you’re producing the film with (if you’re the writer/director, this covers your relationship with the producer; if you and your partner are both producers, this covers both of you… you get the idea). Good contracts make good partners. I can’t tell you how many films I’ve seen burn to the ground because two friends decided to make a movie together, broke up over something at some point during post, then – because there was no contract in place – couldn’t agree on who “owned” the film.

Your investors will breathe easier, knowing that the people in charge have an agreement between them as well.

Okay, that’s about as much business stuff as I can deal with for one blog. Next time we’ll get to some more fun stuff, such as concept art, script analysis, or (hopefully) some big news about the film. Until then, have a good one!

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