The Company as Owner of the Film
Regardless of which business entity the producers ultimately form, the filmmakers must conduct all business related to the making of the film in the name of the company. This means that:
- Everything should be paid for out of a company bank account, not a personal bank account.
- The copyright and other film assets should be transferred to and owned by the production company.
- When making the movie, it is the company that should enter into contracts required for making the film. Make sure to sign all contracts in your capacity as company owner, partner, member, shareholder, and so forth. Do not sign them without indicating your company status.
Example: “Don Simmons, Managing Member, Sprocket Films, LLC”
- The company, and not the individuals who own the company, should rent, own, or purchase all of the equipment.
- The company should hire all performers and crew members.
- Records of membership, partnership, or shareholder interests must be meticulously kept. Each owner’s percentage of ownership must be tracked and records adjusted as new owners join the company. Ownership interest increases and decreases each time owners invest more capital in the company.
Failure to adhere to these and other critical rules could erase the limited liability protections that the company enjoys.
LOAN-OUT COMPANIES
Loan-out companies are often used by actors and above-the-line crew members. A loan-out company is a company formed for the sole purpose of providing the services of an artist to a production company. Loan-out companies are typically either LLC or subchapter S. Corps.
When a production company is hiring an artist who has his or her own loan-out company, the production company is actually hiring the loan-out company, which in turn is providing the services of the artist.
Any contract with that artist must be drafted so that the contracting party is in fact, the loan-out company.
Example:
“Production Company, Inc. agrees to employ Lender, Actor’s Loan-Out, LLC f/s/o the Performer, Andie Actor.”
Additionally, all contracts with loan-outs should include an inducement clause at the end of the contract.
Keep in mind that loan-out companies should still be required to transfer copyrights and other intellectual property to the production company which engages them under production contracts, just as individuals are required to do.
Example:
Davida Director has a loan-out company, Dodo, LLC. Peanut Pictures, Inc. engages Dodo, LLC to provide the directing services of Davida for the film “The Laughing Legume.” Under its director’s services contract with Peanut Pictures, Inc., Dodo, LLC must still agree that all work done by Davida is done as a work made for hire with Peanut Pictures as the copyright owner.
Loan-out company terminology:
- f/s/o is a common abbreviation for the term “for services of.”
- Lender is typically the defined term that refers to the loan-out company.
- Inducement is a promise by the artist that she will perform the services required by the production company as if she were hired directly by the company, rather than through her loan-out company.
THE BOTTOM LINE: Before you open your doors as a production company, you should form a limited liability business to protect your personal assets.
