We started out wanting to make a no-budget horror film—probably filmed in back yards with borrowed DSLR cameras.
"It will be like camp!" Chaleen said!
This was back in 2015 after we came off a project called Legend of the Dark Lake Witch that was being made by Terence Muncy and Black Forest Studios. We were inspired.
By the time we had the screenplay for Sovereign in-hand, we knew the project was going to need to be a more serious endeavor than the no-budget hobby film we'd begun with.
Eventually, we launched our production company. Here's the why, what, and how of what we know about the process so far.
NOTE: I am not a lawyer; this is not legal advice.
Why Incorporate?
You probably heard about the recent shooting tragedy on a film called Rust. Even if he hadn't been the one who fired the gun, Alec Baldwin is the producer of that film, so any liability for that accident would fall on him personally if there was no corporation for the project.
However, he is shielded from that liability by two tiers of nested corporations: Rust Movie Productions, LLC (which was established for the particular movie) and Corporate Capital Holdings, LLC (the parent company that runs it).
This setup ensures that the lawsuits for the accidents could only secure damages from the film LLC itself and not the assets of the parent production company (unless some sort of negligence on their part was demonstrable).
But this sort of nightmare (which could happen on any movie set) is only one kind of liability that incorporating protects you from.
Some protections that come with incorporating include:
Equipment (cameras, supports, printers, computers). If these are damaged, your insurance will cover it. You can write all of these purchases off as business expenses (keep your receipts!)
Intellectual property violations (branding, copyright, trademark, music rights, etc.) If someone sues you for violating these, the corporation is the one who pays—not you and your family.
Errors & Omissions insurance. This covers any sorts of violations of contracts you may have signed and inadvertently failed to deliver upon.
Securities and financing. If you sell shares of your movie to investors and wire it into your personal bank account, you'll run afoul of securities law. Incorporating makes it possible to do these transactions legally.
When Should You Incorporate Your Production Company?
It's a tricky question. If you go too long without producing anything, you'll start paying out more than its worth to maintain the business with the state.
If you have a script in-hand, I'd get incorporated immediately. This way if an investor comes along tomorrow, you're already set up to sign equity agreements.
However, if all you have is an idea for a story, or merely visions of yourself smoking cigars at film festivals, you can reasonably wait until you're closer to the starting mark to get documented.
If you plan on buying a screenplay, I would incorporate and buy it as that corporation.
Beyond that, you can set up your business any time, though January is nice since it is the beginning of the new year in terms of taxes.
Once you're ready, go read the next entry that will be posted soon.
Next Up: How to Incorporate a Production Company
Fun Survey: Which fantasy is the coolest?
PRODUCER: Winning the Best Picture at the Oscars
EXECUTIVE PRODUCER: Being a celebrity amongst the elite
ASSOCIATE PRODUCER: Knowing everyone and their passions
Micah Faulkner is the CEO of Bowling Frog Productions. He currently has multiple projects in various stages of production.
Contact him at micah.faulkner@bowlingfrog to find out how you can be part of our team!