Company for a short?

[Kevin Lyons]

I did a small fan film last year and enjoyed every moment of it. (Even the bad)

I have been writing for about 7 years now. The first script (feature) I started in the beginning has just been finished about three weeks ago. During this time I can up with an idea to do a short story to tell the backstory of my main bad guy. A few of my friends like the idea so I wrote it. The short script is finshed (rough draft anyway) and some of the things that I looked into last year during the fan film are coming up.

Now, I knew that the fan film would be for fun. No money could be made due to it being another person's idea. So, of course the company thing never really came up.

The short looks like it might run 20 minutes and most of my friends did a wonderful job in my fan film. I hope to use a few of them in this short. The locations will be a friend's house and their families forest.
Some out side help will be needed for some things. But I am lucky to be friends with some talented people. :)

My question is.. Do I need to form a company for this shoot?
I plan to send the short to festivals in the future.

Is it worth forming a company for a short? Should I just plan it, shoot it. have fun and then see what happens?

Still so new to this end of moviemaking.
Thanks, any help is good help!

[Rob Lohman]

I don't think you need to setup a (legal) comapny unless:

1. you need insurance for your people (or to get a film permit)

2. someone wants to buy your movie from you

However, I could be very wrong about this. If so, hopefully someone will
correct me. Pete?

[Matt Champagne]

This is a great question...I'm suprised there wasn't a bigger response to it. Its a really big question that I would hope all indie filmmakers would ask. There are tons of pros and cons to doing it. I assume first off that you mean creating a company for your production company. You will probably eventually want to do this anyway...so it might not be a bad idea just to get it started, since you can start building credit in its name, as well as getting the inner workings of it down. Another interesting option is its possible to start a company for each individual film you create (this has been done before for financing reasons). I must first note I've never done any of this so this is all pretty much book research I'm speaking from.

The pros of setting up a company is primarily ease of financing and limited liability (if you create a limited liability company). That way if your big explosion scene ends up burning the neighbors house down, they can't sue you for everything you've got...just what your company's got. Financing wise you'll be able to get credit cards, and maybe even a line of credit in your businesses name provided you have assets and good personal credit. This can be a huge plus. Also, you can sell shares in your company for even more money in exhange for business equity.

The cons can be pretty daunting however. First off to even set one up you should have $1000 U.S. to pay for all the various attorneys and accounts you have to talk to in order to understand what your doing. Second you are going to have to start worrying about taxes, and if you are hiring people (which you probably are) then you have to worry about FICA, workmans comp, social security, unemployement, disability, and a billion other things. Or you can independently contract people....but if it turns out you are putting people as contractors when they don't fall into the technical definition as the IRS considers contractors then you are going to get in huge trouble.

Another big con to setting up a company is currently hiding as a big 'pro' in your film crew. It is that you are " lucky to be friends with some talented people." So how many of those talented people are going to own shares in the company? How many will be upset if they don't? How many would be willing to go into debt for the company vs. how many want to just say they own a business? Starting businesses can be a major strain on relationships both family and friends since. Its no longer just filming for fun...but its serious with bills and debt on the line...so how many people are you willing to put that much trust in. And if someone isn't an owner...will they still work for free when your an established 'company'?

[Robert Martens]

I believe I'm in the same position as Kevin. The short I'm working on is about six minutes long, and entirely self-financed. There are no shots of any locations but ones owned by friends and family, the only other crew member is a friend of mine, and there are no stunts, explosions, or anything of the sort. Everyone involved (both of us) is willing to sign the necessary forms, but how do I fill the things out if I don't have a company? And though I'd be willing to create a company, I'm not sure I have the time--the shoot is going to be over a weekend or two in July (it's now June 17th), and sometime in August, this friend is leaving for Philly to work on his PhD. For five years. I suppose I could find other people to shoot with, but the whole story was his idea, so...

Do I need a company for this? And if so, what kind? Would a full on corporation be necessary to protect my--and my parents'--assets on a film with no investors to satisfy? Or is the potential for lawsuits the larger concern when limiting one's liability?

Call it naive optimism, but I'd like to be prepared for a best case scenario. I've heard a horror story here and there about people who thought the same thing ("No one will want this film, we needn't worry about it"), only to be thrust into a position where they wished they HAD worried about releases and permissions. I like the story I have, and though I'm rather certain no one will pay for it, or even simply want to see it, if I throw caution to the wind and let the business matters fall where they may, I'm certain to have interested parties by the end of all this. If I take care of things beforehand, however, I'm guaranteed nobody's gonna care. Happens all the time in my father's business--put the large, awkward, heavy tool on the truck and you won't need it when you get to the job, but leave it at the shop, and you'll be screwed.

That's just the way my family's luck seems to run. :)

[Matt Champagne]

Well the way I see it in your case is that maybe just a DBA (doing business as) filing is enough for what you are doing. If you don't have that many assets to protect, filing an LLC is a good step in preperation for the future but not absolutely necessary. It will not limit your liability in the least to file a DBA, and it will also not limit the liabilty of location owners. But as far as for allowing you to make contracts with by location owners, distrubutors, and music licensees I think that should be enough. You could also create a bank account in your company name which is a big plus. These are relatively easy to file, just check with your local SBA. You still have to worry about taxes, and insurance...but possibly not as much. You can more or less make it look like you are self employeed and that the people you pay are independent contractors.

Now if you are considered a minor you have a different problem...and that is limiting your parents liability. If your parents are the ones whose names are being put onto the contracts (since a minor cannot be legally bound by a contract in many states), then their personal assets are on the line (its called breaking the corporate veil) because if someone can prove in court that any person is involved in the production...and they only need one check with Mr. and Mrs so and so on it...then they can sue them (and trust me, lawyers are more than intelligent enough to know better than to sue a minor and go straight for the person with the most assets).

So I guess the answer to your question is....if you feel like you have any asperations in your wildest dreams of selling this film, putting it on tv, or whatever...its a good idea to start a company and get every licensee and permit you need. It doesn't necessarily mean you can't do so after wards...you just may be forced to shoot the entire movie again if uncle chuck decides he wants a few thousand dollars before he signs over that release form for the location that is 40% of your movie.

[Robert Martens]

Ah, gotcha. I'm actually twenty-one at the moment, I just mention my parents since I still live with them (keep your comments to yourselves, ladies and gentlemen), and it's their location I'd be using. But come to think of it, I'm legally an adult. Am I to understand they'd be off the hook if I got into hot water? I want to protect myself, of course, but they come first, and I don't want to get them in trouble 'cause I didn't think something through. There are enough struggles with the house and the bills, the last thing they need is to get kicked out on my account, you know?

[Matt Champagne]

No comments here...I'm 22 and living with the parents as well. It can vary on a state to state basis I believe. I think in some states for certain types of contracts (like real estate) you have to be 25 even...but I'm not sure if maybe I just misunderstood that.

The main way your parents can get in trouble is if something they own, or otherwise have some sort of control over is used in the process, without them having rented or licensed it to you. So if you film a scene at your parents home or business, and the Audio tech you hired trips and breaks his ankle they will likely go after your parents first as they are the owner of the property (I don't know if being an officially recognized company will prevent this either..but you would have liability insurance in that case).

But lets say your entire movie takes place in a field somewhere, that you paid some guy a small fee to use, and you pretty much use property in your own name (including vehicles to get to the location), there is really no way that a person could justify going after your parents assets since you are an adult. That's just my opinion though, if you are really concerned with it you should always ask a lawyer. I am probably painting a grimmer picture than there actually is, but its best to be safe.

In general it is who signs the checks and the contracts who is held responsible...so make sure you are paying for everything with your own checkbook.

[Will Kennedy]

As a preface, I also have not setup my company yet for filming. But I have been researching this issue extensively out of the same paranoia as the other commentors before. I've phrased these findings as empirical observations, only because they are easier to write that way. These are just my own guidelines for myself:

I agree that the lowest stress company would have zero employees and would hire freelance contractors on a project-by-project basis. Having zero employees means no tax, social security, federal employee identification number, and best of all, no quarterly tax pre-payments. Freelancers are not employees. IRS guidelines are clear here, freelancers should not be equiped with too many resources (office, computer, etc.) or they can be considered employees.
Costs for registering the company should be considered. For example in California they are a minimum of $800 a year.
Depending on state law, Limited Liability Corporations are not the only corporations that shield the owner from personal liability. Traditional corporations also offer this protection. Subchapter-S corporations are preferable to C Corporations to avoid double-taxation. The protection which forming a corporation can offer for your personal finances is dependent on the separation established between your accounts and the corporation. All documents and forms should be signed in the name of the corporation, before and after the corporation is legally recognized. Checking accounts and credit cards in the name of the corporation are advantageous for purchases, though the credit cards are harder to acquire for a young individual with limited credit history. Registration of websites to the corporation instead of individual is helpful. PO Boxes as corporate addresses are an affordable alternative to a home address.
The protection against lawsuit is important even when using "friends and family" assets. Lawsuits can arise from injury on the set, accidental inclusion of trademarked items or unauthorized appearances, claims of libel and slander, and claims of stealing copywrite protected work.
In general, if you don't foresee making a dollar from your short/documentary/feature, there is a very low impetus to spend the money and paperwork to protect yourself. Protection could be covered with producer's general liability and workers compensation agreements; which are decently affordable under many insurance brokers "independent short term" policies. But when/if you make money from your production, you've given bait to the thousands of attorneys whos faces adorn bus ads everywhere.

Good luck,
Will