Producing is a daunting task that requires collaboration among producers. You may have an idea for a screenplay but may want to join forces with a producer that has access to talent, a director, an agency, or money. You may align yourself with another producer in a variety of ways including the following.
A partnership is formed when two or more people own a business together. In California, a General Partnership is not a separate business entity, so profits and losses flow directly to the partners. You can create a partnership by filing a fictitious business name with the county clerk and securing the requisite business license. Though not required, I recommend that you enter into a Partnership Agreement establishing the rights and duties of each of the partners. I normally dissuade my clients from forming a partnership because, unlike with a corporation or limited liability company, there is personal financial liability: the partners are jointly and severally personally liable for the debt and losses of the partnership.
Business Entities: Corporations and Limited Liability Companies
I advise producers who want to partner together to form either a corporation or a limited liability company. A “corporation” is a legal entity owned by shareholders that limits the financial and personal liability of its shareholders. Any litigant who prevails in a lawsuit against the corporation will only be able to execute the judgment against the corporation. The litigant will not be able to collect the judgment if the corporation has no assets, no income, and no prospect for either. The individual shareholder’s personal assets are shielded from the judgment unless the litigant is able to prove that the corporation was the shareholder’s “alter ego,” or used to perpetrate a fraud. In said case, the litigant is allowed to “pierce the corporate veil” to get to the shareholder’s personal assets. The corporation is the shareholder’s alter ego when she uses the corporation’s bank account as if it was her personal bank account, paying for personal expenses, such as his mortgage, child’s daycare, prescriptions, etc. The shareholders perpetrate fraud when they induce parties to enter into agreements with the corporation on the basis of misrepresentations. For example, the shareholder warrants and represents to the financier that the corporation owns the screenplay when, in fact, the screenplay belongs to a third party with whom the corporation has no agreement. Revenues are taxed at the corporate level and the shareholders pay taxes on their corporate dividends. The corporation’s bylaws are the rules that govern the corporation. The officers of the corporation may not take action that is not permitted by the corporation’s bylaws. I recommend that shareholders enter into a “Shareholder Agreement” to protect their investment in the corporation by limiting how and when shareholders may sell or assign their shares, among other things.
A limited liability company (“LLC”), which is the more popular business entity where the entertainment industry is concerned, is a hybrid between a partnership and a corporation. The members of the limited liability company have limited personal liability, as they do with a corporation, but profits and losses flow to them the way they do with the partnership. The LLC’s Operating Agreement will state the rights and duties of the members of the LLC. As with the corporation, I advise my client’s to enter into a Member Agreement (the equivalent of a Shareholder Agreement).
You have to consider a number of legal and tax factors when choosing a business entity. Prior to forming the business entity, seek the counsel of a certified public account, and an attorney who can help you choose the business entity, draft Bylaws, an Operating Agreement and/or Shareholder or Member Agreement that is specifically suited to your needs.
Shopping and Submissions
You have to shop your screenplay if you are ever going to raise financing to produce it into a motion picture. When you “shop” you contact potential financiers and give them your best logline and sales pitch. A “logline” is a sentence summary of the proposed motion picture. A “pitch” is a three to four-minute oral summary of your screenplay. The executive or producer to whom you pitch your screenplay will ask you for the screenplay (or a synopsis) if she likes the pitch. Leave the door open for future pitches by appreciating her time and opinion.
Writers have an almost impossible time shopping their screenplays because established production companies tend to refuse unsolicited submissions and pitches, and do not want to interact with unrepresented writers directly. When these production companies accept a submission from a screenwriter, they require the writer to sign and submit a Submission Release, which releases the production company from liability if the production company swipes ideas and other public domain type elements from the screenplay.
You are going to have a difficult time getting an executive to take your call if they do not know you, but your situation is not as dire as the writer’s. As a producer, you will have more leeway when you submit, as long as you did not write the screenplay you are shopping for. Production companies may, but should not ask you to execute a Submission Release, since they generally only apply to the writer of the material being submitted.
Protecting Your Ideas
You protect your ideas as a producer, the same way writers should when they pitch to you. I know that you want to take advantage of opportunities that present themselves, but blurting out an idea may cost you your film and will make you seem like just another desperate producer. If you meet a producer or an executive you think can help you, ask to schedule a pitch meeting. I prefer you only pitch during business meetings, so that the circumstances serve to prove that there is at least an implied-in-fact between the other producer and you.
Attempting to attach talent and a director without financing is equivalent of what came first, the chicken or the egg. Though it seems that you cannot secure your principal cast and the director without financing and cannot raise financing without either, know that it can be done if you have a fantastic screenplay, are resourceful, and are able and/or willing to leverage your connections, or create some.
I recommend that you engage a well-connected casting agent to help you open doors if you lack connections and can afford the expense. A good casting agent will read your screenplay and will make casting suggestions. Furthermore, she will submit your screenplay to agents and managers and may be able to get it considered despite the lack of financing.
Contact the actor’s and director’s manager if you are without connections and funds for a casting agent. I suggest the manager over the talent agent because the former is more likely to be receptive to an attachment prior to financing. Agents are more interested in projects with financing that will get their clients working versus those that are not financed and may never get produced. Managers are more focused on their client’s overall career and may submit a screenplay to his client if he believes that it has an award-worthy or breakout role. The manager, unlike the agent, may require that you attach him as a producer as a condition for the submission. I have clients who are opposed to this practice and others who view it as a benefit. I think that whatever helps you get your picture financed is something worth considering.
The manager or talent agent may ask you to submit an offer with the screenplay. Do not make a pay-or-play offer unless you have 100% of your financing in place and have scheduled your production. A “pay-or-play” offer is a guarantee of payment: you will owe the monies offered regardless of whether the picture ever goes into production. I always recommend that you submit offers through legal counsel in order to avoid costly mistakes.
You need to secure a “Letter of Intent” from each actor and/or the director once they agree to be attached. A “Letter of Intent” is not binding, but will let financiers know that the actor or director has read the screenplay and is interested in being involved in the picture, subject to the actor’s and/or director’s availability and negotiation of the deal terms. You will not have a binding agreement that commits the actor or director to your picture until you have negotiated all the major deal terms (compensation, credit, term of employment, etc.), which require your picture to be financed. You want the right to use the actors’ names in order to raise financing, so steer clear of commitments to actors who are not willing to lend their name to your fundraising efforts.
Do not lie about your attachments! It will get back to the talent agents and managers, will sully your reputation, and potentially put you on the losing end of a lawsuit.