Start my own business?

G'day Chris,

First of all - there's a LOT of information out there about setting up and managing a business and the key to having it successfully run is to research, research, research!

Secondly, all of this depends on where you are.

In Australia, for instance, it's as simple as registering a business name and a business number. Here we have different types of businesses, however; corporations, registered businesses, sole traders etc. The US, for instance, has a distinction between an LLC and other types of businesses. The type of structure you choose will directly affect how your business operates! For instance, a sole trade in Oz means you pay for everything and make all the money... but what happens if you get sued? Well, the lawyers can get their hands on your personal assets in addition to any money you may owe... Limited Liabilites are exactly what they sound like - designed to help limit the liability and to have a clear separation between business and personal.

I won't really comment too much on the actor's contracts. At a minimum, you need a release form. Some areas dictate a minimum payment amount (for instance, I believe in Melbourne there are cases where the minimum is about $100/day and the government dictates this) so you can't just pay them $1 a call it a day. Then you have to worry about dealing with talent who are a part of the union etc. etc. It's very very murky.

Word to the wise: most serious actors won't take just a percentage of the movie proceeds. Blame this on the shady studios who screw over their staff with dodgy accounting. If a casting agent for a movie approached me with an offer like that it shows:
1.) They don't respect me enough to pay me. I'm working, why shouldn't I be making money?
2.) They don't have a large backing or don't have a strong investment in this production.
Personally I would instantly add that agent to my Do Not Call list...

The over-riding important thing is to figure out if what you want to do is going to be viable. I don't really have any idea about what it is that you plan to do... BUT, case in point; I did a marketing launch for a group of guys who wanted to make a T-Shirt company (real original idea... NOT!) I met the entire team. They had 2 artists, with one of the artists doubling as the group leader and 4 other guys who sat around and did nothing... They had no plan for how to divide the profits or how to invest.. There was one guy in particular who never showed up and never did anything, but was a friend of the lead artist who, I guess, must've felt inclined to have this guy on board. I personally think this is a very BADLY designed business which will only be profitable with a god-given miracle.

So my advice is to sit down and work out exactly what you want to do, and talk about the hard questions straight away; if someone walks in with $10 million and wants to give it to you for free, do you guys split it 50/50? How much do you reinvest into the business? Do you have a "buy-out" amount (i.e: you get sick of doing the business, so your partner pays you $X for your stake in the business).

Phew, I could write forever. Anyway, there's a reason making and managing a business is hard - if it wasn't, everyone would be doing it and nobody would buy anything, haha.

Chris, start small. If you're working out of your home you can skip the business license -- you'll be piling up debt with nothing to sell for a long, long time.

With the cast and crew, forget the points and percentage. With your first film, just pay everyone a token amount and you retain complete ownership of the film. Get clearances from everybody BEFORE they step foot on your set. Pay them that token amount AFTER the film is wrapped up.

Depending where you live, you can get most of your cast for nothing (think craigslist).

Finally if you start to sink a lot of money into your film, consider getting a LLC -- maybe $500-$1,000 a lawyer can help you set it up. The main reason for this is it protects your personal property from being touched in a lawsuit.

Later on, you'll have a better feel for what you really need to do business-wise. Just try to avoid spending money at this stage because you'll really need it later.

If somehow someone gives you $10 million to make a film, you can call an entertainment lawyer then to set it up.

Good luck!

Thanks guys.

Josh - Good to know about the actors not liking the idea of a percentage.

GuerrillaAngel - You make very good points. I had no intentions of any of this happening in the near future. I am working out of my home and like you said debts just pile up so easily. I'm just going to start taking so much out of my pay checks and putting it to the side to save for my first shoot. By the time I'm ready I should have a decent amount saved up to pay cast and crew. If not than I'll just find some people who would do it for free. Might take longer to find them but I'll get it done one way or another.

Where there's a will, there's a way!

Most of it has been covered quite well. If you're making films with friends and acquaintances you needn't set up a formal business. But once you start working with serious money and professional people it's wise to set up a proper business structure. If you reach that point I highly recommend consulting a legal professional familiar with entertainment law, and a financial consultant of some sort is important as well.

Keep in mind that once you start a legitimate business you actually have to pay attention to the BUSINESS side of the business - marketing, contracts, payroll (staff or freelance, it's still payroll), insurance, taxes, equipment and dozens of other details you probably haven't thought about. I have my own small business and the running of it (paperwork, etc.), aside from the doing of it (earning the money), does take time out of your life or you need to pay someone to do it for you.

Once you are a real production company you need to isolate your liabilities. That's why, as Josh explained, you have a production company but produce the film under a separate LLC. At worst you lose your business assets but retain your personal assets.

So just go out, have fun and learn. You'll know when to worry about the rest.

Alcove Audio said:

So just go out, have fun and learn. You'll know when to worry about the rest.

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Couldn't have said it better myself!

You will know when you get to that bridge, so for the moment don't stress so much about it as it can (and will) drive you nuts

Being in Texas, it's only like $10-20 bucks to get a DBA/Assumed Name form if you acting as sole proprietor. Basically your taxes don't chance, you use your SSN still but people can write checks to "whatever-name productions" instead of "Chris Wood" or your personal name. Some also argue Taft it's easier for taxes to make a your business purchases through a business bank account because it helps separate from your personal, but i'm pretty sure you don't necessarily need an assumed name to start that if your name is "Chris Woods" and you're starting "Chris Woods Films".

You won't need to have a company LLC and a project LLC if you don't use escrow accounts and business investors. That's the only reason I can see people creating a new LLC for every movie project. The company LLC will protect you from getting your personal assets seized but not your company assets.

It's super super simple to register an LLC through the state you live in. It's like $125 bucks and can be done in no time.

Good luck!

Well, if you have no work experience, I would suggest getting at least two years' experience in making movies, either as an actor, director, or producer. And, if you have no education, you should get one, so you can learn to write and do research, among other things. And this is so much more true if you're young.

Is this one of those "no brainer" things that everyone does? How exactly would you go about doing this? Is it really as easy as just going out and getting a business licence?

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No and no. The purpose of creating a corporation would be to protect your assets (if any and if substantial). Otherwise don't waste your money. Keep in mind that there's much more in expenses than just the registration fee and annual renewal fees. In the eyes of the law you must have a separate phone number. You'll need to file separate taxes, which for you might mean paying for TurboTax each year. You'll need a separate bank account. There's also various corporate "formalities" that you must follow. You'll need to buy one of those Nolo books and read up on the laws. One of the requirements is to record annual minutes of the board of directors and other ponderous paperwork crap. Fail to do these things and a lawyer will be able to go after you PERSONALLY if someone sues you.
Having said all of this, even if you DO have assets to sue for I submit that if you have insurance for all of your shoots and you have signed release forms from everyone involved (creatively in particular) then there really isn't much LEFT to get sued over.

A separate topic that we discussed: When I find the actors that I want to use do I need any kind of contracts or any other legal paperwork done for them? I was thinking of having a contract written up that gives the cast and crew a parentage of any money made off of the film. Is this a good idea?

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ABSOLUTELY! Cast releases AND crew releases. Yes, crew releases are important too because some contribute "art" to the "look" of the movie, which brings copyright issues into play. I've posted a crew release on indie talk before.

DeJager said:

You won't need to have a company LLC and a project LLC if you don't use escrow accounts and business investors. That's the only reason I can see people creating a new LLC for every movie project. The company LLC will protect you from getting your personal assets seized but not your company assets.

It's super super simple to register an LLC through the state you live in. It's like $125 bucks and can be done in no time.

Good luck!

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Hey, just confirmed this advise with a lawyer today. Per project corporations are used for official investing... us small timers can run all our projects, in fact ANY business activity, not only film making, but ebay sales to fishing boat guide trips through the same LLC. The protection is quite profound. Some one gets hurt on your set, they cant take your home, only the assets of the film production company are at risk. Its cheap, its easy, and I cant see any reason NOT to do it, even at the hobby level.

Hey, just confirmed this advise with a lawyer today. Per project corporations are used for official investing... us small timers can run all our projects, in fact ANY business activity, not only film making, but ebay sales to fishing boat guide trips through the same LLC. The protection is quite profound. Some one gets hurt on your set, they cant take your home, only the assets of the film production company are at risk. Its cheap, its easy, and I cant see any reason NOT to do it, even at the hobby level.

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Lawyers don't make money if you don't incorporate.
Insurance protects against injury on the set. Even if you incorporate I think you have a legal responsibility to have insurance, so it's not like you can buy one and save on the other.
As I describe above it's not always as cheap as it seems. One other expense that I missed is that I remember having to pay an accountant $150 to file some papers when I first set up my corp.
You can get sued for getting into a fight with some pushy homeless guy in a parking lot or dude in a bar, but should you get insurance for that? I just think the likelihood of getting sued making a movie if done the right way is extremely low.

Oh and to the tread starter, educated yourself on what things copyrighted and trademarked need to be taken out or approved before using them in your film. That's about it. You'll be fine.

wheatgrinder said:

I cant see any reason NOT to do it, even at the hobby level.

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This will vary from state to state. California, for example, is a terrible state to have an LLC if you're making little money, or as a hobby. There's a minimum $700 tax burden, even if you don't make a dime. Accountants, on top, to file everything correctly... it adds up fast here.

Anyone considering an LLC should double-check with their own state reqs.

Zenstee is correct. I live in Mass. and the expenses for maintaining or starting LLCs or corporations are higher than many other places. For example, found out that it will cost several hundred dollars just to dissolve a non profit corporation.