Aspiring filmmakers often let the contract and business details of film production be an afterthought, thinking â€œthatâ€™s not fun. Or creative. And I donâ€™t have the budget for that un-fun, un-creative stuff.Â Iâ€™m working with my friendsâ€¦ itâ€™ll all be fine.â€
But theyâ€™re unlikely to do so again after the many problems arise (which they always do) and perhaps render their hard work practically and commercially unusable. Neglecting contracts and business formalities may prevent getting investors for your film, or may cause a host of other problems that mean a film cannot get interest or distribution.
What follows is a brief list of a few critical “what and why” business details that filmmakers must do, from the outset, to minimize obstacles to a film or project’s success.
1.Â Form a Production Company through which the film must be made. Why?
First, that will be the legal entity into which development/investment money is deposited. Why not take money/investments personally? Because of the second primary reason – liability. Liability in film development and production can come from multiple angles – from the U.S. Securities and Exchange Commission for taking investments without the proper paperwork (a “prospectus” or “private placement memorandum” – VERY different from a “business plan”), or from an accident involving the cast or crew on set, or to a bystander not part of the cast or crew (think a lighting element falling onto a passerby), or to the production “losing” funds needed to pay cast and crew.
This “parade of horribles” isn’t fiction – it happens all the time. And if it happens without the legal protection of an LLC or similar legally separate production company, the legal liability will likely fall personally on the producers and those heading up the project, and potentially onto the investors – meaning that personal assets will be responsible for whatever harm or legal claims.
The third reason is that the legal entity will be the “person” (a legal “person” under the law) that contracts with all those involved in the film – from the producer(s), directors, cast and crew, transportation, catering, etc. If anything goes sideways with these contracts, it is the legal person that is held accountable instead of the actual persons heading up and investing in the project.
2. Get a contract with the writer(s) for the legal acquisition of the script or story â€“a literary acquisition agreement (a/k/a an “option/purchase” agreement). Failure to do this means that the production does not have formal rights to the intellectual property it is making – meaning the writer/creator may have the ability to withdraw his material and prevent the production from doing anything commercial with footage already shot. So it is critical that this be accomplished before any production – or even development – takes place.
Think that you are â€œfriends with the writerâ€ and youâ€™re therefore â€œin this together?â€ Are you willing to bet the entire project and all your hard work on that assumption? What is it that they say when you â€œass-u-meâ€ something?
Creative partnerships crumble all the time. Without a written agreement in place from the VERY beginning, the entire project is at risk.
3. Investments â€“ get lawyer drafted investment documents. Or risk having to refund all investments, fines, jail time, and lawsuits by the investors themselves.
Under the SEC and state securities rules, if you have taken someoneâ€™s money and have given them an expectation of a â€œreturnâ€ on that money, youâ€™ve probably sold a â€œsecurity.â€
Yes, even selling shares of your little film may well constitute a â€œsecurityâ€ in the eyes of the federal and state governments. That doesnâ€™t mean you canâ€™t take such investments. But it does mean that if you do so without following the proper legal requirements, you may have to give back ALL of the money taken for the project (yes, all investments â€“ not just the one that the govâ€™ment found out about), and it may mean fines or even jail time.
And independent of those terrible consequences, failing to have the right legal language in investment documents leaves the production open to lawsuits by the investors if they become dissatisfied withâ€¦ all sorts of things â€“ how youâ€™ve spent the money, how long it has taken to get a return on the money, the size of the return (or lack thereof).
Proper investment documents are as much for the protection of the film and filmmakers as they are for the protection of the investors.
4.Â Production contracts â€“ use them â€“ ALWAYS. Without exception!Â Â Like it or not, a film is a business.Â Even the â€œauteur,â€ if he hopes to continue making filmic masterpieces, cannot ignore the business realities that filmmaking is expensive (even in this digital age), it takes money, and money rarely comes to one who does not handle it in a businesslike manner.
So even first effort indie films are a business â€“ a proving ground to show that you can handle the business, artistic and technical demands of being a filmmaker.Â And as such there are contracts that MUST be used in the work of this business; contracts that clearly state who owns what, who has rights to what, profit/interest divisions, etc. The who, what, when, where, why (perhaps) and how much regarding the business transactions involved: the script/story option purchase agreement, cast and crew agreements, talent/interviewee release agreements, name and likeness releases, licensing agreements for use of the intellectual property of others (music, photographs, products, film or video clips (no – YouTube does not mean it’s in the public domain)), location agreements, craft services contracts, transportation agreements, insurance (workers comp, liability, errors and omissions, defamation protection), sponsorship and product placement agreements, distribution (foreign and domestic) agreements, appropriate trademark registrations, and the list goes on and on and on.