First and foremost, filmmakers need to form an entity to distinguish themselves—and their personal activities—from the business aspects of making their film. An entity can take many forms—including a partnership, a corporation, or a limited liability company (LLC). There are pros and cons to each. An LLC is most common, but you should weigh different factors: whether you’re working solo or with others (individuals or entities); how you want to structure ownership; if you want to share decision-making or call all the shots; and how you’ll pay taxes.

DO NOW:

• If you’re based in New York, check out the Department of State’s official site to learn more about forming an LLC. It’s a clear and easy to understand resource that includes step by step instructions and information about the fees associated with forming an LLC.
• Find yourself an accountant. A CPA can help you understand the tax implications of different business structures, such as sole proprietorships, partnerships, corporations, or LLCs, and help develop a comprehensive business plan and budget, including forecasting production costs, establishing funding strategies, and managing cash flow.

Filmmakers secures funds for their film in several ways. Beware of the potential pitfalls of each. Credit cards allow you to withdraw funds, essentially buying cash. This is relatively easy but not always prudent. You can take out a loan: individuals can get a personal loan from a bank; a production company can borrow from lenders (usually with a promissory note that involves repaying the principal and interest); or you can borrow from friends and family. Filmmakers can also offer equity in their production; if it does well, so do those with an equity stake. Crowdfunding is another option, but beware of potentially strict SEC requirements.

Entities can also seek fiscal sponsorship from tax exempt organizations; they’ll accept donations on your behalf, manage your money, and issue reports to funders and tax agencies—for a fee.

While you’re busy getting money, remember that certain states want to give it to you—in the form of tax credits. The three types—refundable (the most valuable), transferable (can be sold), and non-refundable and non-transferrable (can only be used by you)—all help cut costs.

Ready for a deeper dive into film financing? We’ve got you:

We engage in negotiation—the process of reaching an acceptable agreement with another party—all our lives. For example, your partner prefers romantic comedies but you love thrillers so ultimately agree on a third genre for date night. Filmmakers engage in countless negotiations—about cast member salaries, distribution deals, and budgets.

There are different negotiation styles and approaches—should you be assertive or accommodating?—and it can be helpful to determine which best suits your needs. Remember: this is a process, with several stages. You should determine what your unilateral options are, and reflect on what you really care about versus what you can forego. Understanding the other side’s interests can help you approximate the arrangement you really want. Generate a list of questions: what do you really want to know about the other side’s needs? What assumptions need to be confirmed? Utilize your time at the negotiation table to ask your questions, confirm your beliefs, and suss out areas of compromise. Then try to make sure all of that gets reflected in your agreements.

Every industry has its jargon. Here are some terms you may hear when working with your FLC team.

 

Assignment: Assignment refers to the transfer of rights or obligations under a contract from one party to another, typically in exchange for something else. For example, an independent filmmaker might assign their copyright to a film to a production company in exchange for financing or distribution support. Similarly, a songwriter might assign their copyright to a musical composition to a filmmaker in exchange for a profit participation.

Chain of Title: When a filmmaker is asked to establish a chain of title, they’re being asked to show (through documentation) that they have all rights to all the content in their film. Rights are established through licenses, rights clearances, life rights agreements, location releases, etc. For example, a distributor will often require a clear chain of title before acquiring distribution rights to a film to ensure that there are no disputes over ownership. Establishing chain of title is not necessarily complicated but it can be relatively tedious, especially if there are many contributors involved and lots of third party content; proper recordkeeping is key!

Copyright: Copyright is a type of intellectual property that gives the creator of an original work a “bundle of rights” to control the use and distribution of their work. The rights provided by copyright include the right to reproduce the work, distribute copies, perform or display the work publicly, and create derivative works based on the original work. These various rights can be retained by the creator or transferred to another party, either as a whole bundle or as separate rights. Copyright protection is automatic and immediate upon the creation of a work in a “fixed form” (e.g., writing it down or recording it) and generally lasts for the author’s lifetime plus a certain number of years thereafter, depending on the jurisdiction and other factors. Click here to learn more about copyright.

Copyright Infringement: Copyright infringement refers to the unauthorized use, reproduction, distribution, display, or performance of copyrighted material without the permission of the copyright owner or a legal defense (such as fair use). Examples of copyright infringement in filmmaking include unauthorized distribution of films online, plagiarism in screenwriting, adapting copyrighted works without permission, using copyrighted music without licensing, and replicating visual elements from other films without authorization.

Creative Commons: Creative Commons is a licensing framework that is intended to simplify the licensing of copyrighted material through a set of standardized (non-negotiable) licenses. The Creative Commons licenses allow authors to license their work broadly without the need to negotiate one-off licenses, and provides to third parties clear conditions for reuse/distribution. There are several types of Creative Commons licenses that establish predetermined conditions of use and distribution. The licenses are set out here.

Defamation: Defamation refers to the act of making false statements that harm the reputation of an individual. For example, if a documentarian were to portray an individual in their film as saying derogatory statements, knowing that such individual never said such statements in real life, and the individual’s reputation was damaged as a result, the filmmaker could be held liable for defamation.

Derivative Work: A derivative work is a new work that is based on or derived from an existing work such as adaptations, remixes, visual collages, sequels, prequels, and spin-offs. The right to create a derivative work is one of the exclusive rights reserved to a copyright holder so a third party cannot adapt an original work – for example create a translation – without obtaining permission from the original author.

Distribution Agreement: A distribution agreement is a contract between a filmmaker and a distributor outlining the terms and conditions under which the distributor will distribute the filmmaker’s film.

Distribution Rights: Distribution rights refer to the rights granted to a distributor to distribute and exploit a film in specific territories or markets. These rights can be as broad or as narrow as the parties want. For example, a filmmaker might grant a distributor the exclusive distribution rights for their film in North America, but not Europe. Alternatively, a filmmaker might grant a distributor the exclusive distribution rights for their film worldwide, but only for theatrical releases.

Errors and Omissions Insurance (E&O): Errors and Omissions Insurance (E&O) is a type of insurance that protects filmmakers against legal claims arising from unintentional mistakes or omissions in their work. For example, if a filmmaker inadvertently uses copyrighted material without proper clearance, E&O insurance may cover any resulting legal expenses. E&O insurance will not protect filmmakers against legal claims arising from reckless or intentional mistakes or omissions, however, so it is crucial that filmmakers still exercise due diligence when using copyrighted materials.

Exclusivity Clause: An exclusivity clause typically refers to a contractual provision that grants one party exclusive rights or privileges while prohibiting the other party from engaging in similar activities with competitors. For example, a distribution agreement often includes an exclusivity clause granting the distributor the exclusive right to distribute the film in a particular channel or for a particular territory.

Fair Use: Fair use is a legal doctrine that allows for the limited use of copyrighted material without obtaining permission from the copyright holder. It is a flexible concept that must be applied on a case- by-case basis and serves as a defense to claims of copyright infringement. To determine whether a particular use is “fair,” courts consider factors such as the purpose and character of the use, the nature of the copyrighted work, the amount and substantiality of the portion used, and the effect of the use on the potential market for or value of the copyrighted work. Learn more about fair use.

Festival Rights: Festival rights generally refer to the right to exhibit a film as part of a festival run (as compared to broader distribution). When a filmmaker uses third party content in their film – like music – it may be more economical for them to negotiate a license for “festival rights” since it is a more limited use, and push-off negotiations for broader rights until after the film has been picked up for distribution.

Force Majeure Clause: A force majeure clause is a contractual provision that excuses parties from fulfilling their obligations under the agreement due to unforeseen circumstances beyond their control, such as natural disasters or government actions. For example, a force majeure clause in a production contract might protect filmmakers from liability if filming is disrupted by a hurricane.

Indemnification: Indemnification refers to a contractual obligation where one party agrees to compensate the other (“indemnify”) for any third party losses, damages, or liabilities incurred as a result of certain actions or situations. For example, a filmmaker might agree to indemnify a location owner against a claim brought against the owner that a person was wrongfully cast in the film.

Intellectual Property: Intellectual property (IP) refers to works that are a result of human creativity. Examples include literary works, music, art, films, software, and other forms of creative expression such as sculptures, designs, symbols, names, and images. In the media industry, Intellectual property is protected by law through copyrights and trademarks, which enable creators and owners to benefit from their work or investment in various ways.

Libel: Libel refers specifically to defamation through written or published materials, such as newspapers, magazines, or online articles. For instance, if a filmmaker falsely accuses someone of criminal activity in a published script, it could be considered libelous.

License: In the context of filmmaking, a license typically refers to a contract where the owner of a creative work grants permission to another party to use their work. For example, a music artist and filmmaker might use a licensing agreement to outline the terms by which the filmmaker can use the artist’s songs in a film soundtrack.

Moral Rights: Moral rights are a set of rights granted to authors of creative works that are separate from economic or financial rights, such as copyright. Moral rights are recognized in various legal systems around the world, although the scope and extent of these rights often varies from one jurisdiction to another. In the United States, moral rights are recognized for certain works of “visual art” under the Visual Artists Rights Act of 1990 (VARA). These rights are the “Right of Attribution” (meaning the right of the original creator to claim authorship of their work whenever the work is published or displayed publicly) and the “Right of Integrity” (meaning the right of the original creator to prevent any modifications, distortions, or alterations to their work that could be prejudicial to their honor or reputation). Crucially, VARA applies only to works of visual art, which are defined as paintings, drawings, prints, sculptures, and certain types of photographs, and not literary works, music compositions, or films.

Non-Disclosure Agreement (NDA): An NDA is a legal contract that prohibits parties from disclosing confidential information shared between them. Filmmakers use NDAs to openly discuss project details with potential partners, such as investors or crew members, while ensuring the information disclosed remains private.

Option: An option agreement is a contract where a filmmaker pays for the exclusive right to purchase the rights to a creative work, such as a screenplay or book, within a specified timeframe. A producer may want to “option” a screenplay to have time in which to secure financing or partner with a studio. If the option is not exercised, the rights revert to the owner and no sale is consummated.

Permit: A permit is an official authorization typically granted by a governing body that allows filmmakers to carry out specific activities, such as filming in a particular location. For example, depending on the scope or timing of a production, a filmmaker might need a permit from a city government to shoot scenes in a public park or on city streets.

Profit/Revenue Participation: Profit or revenue participation is a contractual arrangement where individuals or entities receive a percentage of the profits or revenues generated by a film. For instance, independent filmmakers with limited funds at the beginning of a production might offer profit participation to investors or key crew members as an incentive to contribute to the project’s success.

Public Domain: The public domain refers to a category of creative works to which no one owns the intellectual property rights, either because the rights have expired, been forfeited by the owner, or been expressly waived by the owner. A work that is in the public domain can be used or adapted without obtaining anyone’s permission (or paying any fees!).  Examples of works in the public domain include literary classics like “Moby-Dick,” artworks such as Leonardo da Vinci’s “Mona Lisa”; and iconic cartoon characters like Winnie the Pooh and Mickey and Minnie Mouse (as depicted in Steamboat Willie).

Release: A release is a legal document signed by individuals or entities granting permission for their likeness, property, or other rights to be used in a film. For instance, documentary filmmakers often strive to obtain appearance releases from key individuals to ensure they have the right to use footage of them in their documentary.

Representations and Warranties: Representations and warranties are statements made by one party in a contract regarding certain facts or conditions, often relating to the validity of rights and ownership to certain materials. For example, in a distribution agreement, a distributor will typically expect the filmmaker to “represent and warrant” that they own the rights to the film and that there are no third-parties who have a claim to the film.

Rights Clearance: Rights clearance refers to the process of obtaining permission or licenses from the right owner of copyrighted material, trademarks, and other intellectual property in a film. For example, if a filmmaker wanted to include a famous mural in their an establishing shot for their movie, they would likely need to obtain rights clearance from the person or entity with rights to the mural (the artist or landlord).

Slander: Slander is defamation that occurs through spoken words or gestures rather than through written or published materials. An example of slander in filmmaking might be if a character in a movie makes false accusations against another character during dialogue.

Work Made for Hire: A “work made for hire” is a work of authorship that has been created by someone – an employee or freelancer – on behalf of someone else – the hiring party. Works created as part of an employment relationship are owned by the employer – provided the work was created within the employee’s scope of employment. The work product of freelancers is considered a “work made for hire” owned by the hiring entity in more limited circumstances. In the context of filmmaking, examples of works made for hire could include many things, including commissions for screenplays and soundtracks, editing services, and the creation of special effects.