Small Indie: Who controls the money?

[Tom Lowe]

yeah i don't think there are any completion bonds in our 200k prospectus.

 

[Keith Nealy]

That's not a bad idea curran bu shouldn't yu have made the actual production a "C corp" instead of your studio?

That way the investors only have a piece of the film and not your studio assets, etc.

just a thought.

Keith

 

[Mark L. Pederson]

yeah i don't think there are any completion bonds in our 200k prospectus.

you would not use a completion bond on a $200K budget.

The lowest film I ever saw bonded was $500K and I think that's kind of insane. I have made films up to $2.5M without completion bonds.

If it's under $4M and you know what you are doing, and have the right team, and the financiers do not require it - don't do it. It is expensive, and they approve all key crew, schedule, budget, etc.

But anything under $1M in my opinion shouldn't be bonded unless you have no choice - and for a $200,000 budget, it's not possible anyway.

 

[Keith Nealy]

Tom there are many ways to work this. You may want to go on record as being producer but then hire a line producer to do all the work. Or you take on the role as Exec Producer responsible for all the money. You set up a corporation with investors and stipulate that you have complete creative control.

This usually a stcky point based on how much clout you have and how savvy your investors are.

Steven Speilberg has a lot of clout and can demand almost anythng he wants. You and me... less so.

You can make your investors Executive producers in title only with no voting rights on creative decisions. This is a vanity title and can be very effective at attracting investors. After all, everybody wants to be in movies. So give them a credit - just not control.

On Broadway they are called "Angels."

Contracts get interesting and creative when it comes to profit sharing. You may opt to take a larger share but take it off the back end if it is successful - deferring your payment to allow more money for production. For taking that risk, you demand a bigger share.

Many name actors work that way in indie films knowing they can't command a big salary up front but that their name alone may be the thing that makes the movie a success - therefore they take the money off the back end at a bigger share.

What ever you do, don't sign any contracts with any investors or production group that says you are "work for hire." If you sign that, you sign away all rights to everything. You're just a hired gun.

You may have to accept more responsibility than you want just to get what you need. Remember, you can - and probably should - hire experienced line producers to control everything and help you get things done in a timely and business like fashion, leaving you time to make all the creative decisions.

Producers get involved in creative decisions when it involves money.
You: "Can we afford that effects shot?"
Producer: "Hell NO."
You: "Ok I'll rewite the scene so we only blow up one car and we just IMAGINE that the Golden Gate Bridge collapses. We can do that with sound efx and cutaways of people's faces. See, i just saved us 100 Million. Now can I have that 10K for that crane?"
Your producer smiles.

Hitchcock would be very proud of you.

It's all about negotiations.

Good luck, Tom

Aloha,

Keith

 

[Jonathan L. Bowen]

haha, nice Keith, very good advice.

Heck we had a car crash scene in a no-budget short and we recorded a car swerving (from the back of another car), veering off, then fade to black and some great sound effects for car crashes we mixed together (from an SFX library I have) and it sold it well, I think. Yeah of course it'd be cool to have the actual crash, but plot-wise it wasn't necessary at all. It was an afterthought, really, just to tell audiences how this guy died. Sometimes you have to be more creative without a big budget.

 

[mdo]

i don't think they do 200k budgets ?..

It would not make sense to pay $100K for a completion bond on a 200K budget. I should have been clearer about the point, which is that one of the factors that makes investors reluctant to give up control is concern about whether or not the film will be completed. This concern is typically addressed with a completion bond. Since your investors can't indemnify against that concern through a completion bond, you can make them more comfortable about giving you full control by bringing someone on board who can virtually guarantee completion. Just a thought.

 

[Tom Lowe]

Yeah, I won't be taking any money at all for myself in terms of pay. In fact I plan to be one of the investors. I will be providing the script, a professional crew willing to work cheap and travel, location scouting, direction, and editing.

I think its a good idea to list myself as a producer, then hire a badass line producer and AD. Letting top investors have Exec Producer credit is a good idea, as well.

I plan to be very generous with sharing the revenue, particularly with investors, because money is not what motivates me in this case. Making a beautiful motion picture and finishing it is what drives me. I plan to give out lots of points to cast and crew as well. Why not? I mean, without them, and without the investors, I don't even have a picture.

 

[Curran Giddens]

That's not a bad idea curran bu shouldn't yu have made the actual production a "C corp" instead of your studio?

That way the investors only have a piece of the film and not your studio assets, etc.

just a thought.

Keith

I have thought about that Keith. I decided to purchase all of the equipment, accelerate depreciation for tax write-offs, and then transfer all the assets out of the company to myself, before I let anyone become a shareholder....

 

[donatello b]

yes INVESTORS want a finished project .. a unfinished project is unfair to cast , crew, investors, everybody involved ...

after throwing $$ into several projects and none completed that is when i started demanding a completion date be put into contracts - not finished by X date - investors can step in to finish or agree to a new completion date ...

points or deferred pay ... here's the way i look at it ... there's a 95+ chance the project will never make a dime ... so if i'm going to get nothing - GIVE me alot of nothing !!

are you going to carry liabilty insurance ? or workmans comp ?

IMO if crew works for free then you must protect your crew and investors from liabilty and protect the crew/cast if any get hurt .. they're working for free so if they break a leg who pays for it ? ...

Calif. is very strick on employee - employer relationships ..you cannot have persons sign a contract that take away their rights under CA state labor laws ( you can have them sign anything but it will not be a legal contract)... speak to a attorney ... from what i recall from a project back in 2000 you can have persons work for free ( internships , volunteers ) and you must carry workmans comp on them ..
then there's the whole other area of when those working own shares etc ( very complicated) ...

 

[Michael Schrengohst]

I have thought about that Keith. I decided to purchase all of the equipment, accelerate depreciation for tax write-offs, and then transfer all the assets out of the company to myself, before I let anyone become a shareholder....

Check with your accountant on that one. I wanted to do the same
thing but my accountant said can't do it.

 

[donatello b]

"I decided to purchase all of the equipment, accelerate depreciation for tax write-offs, and then transfer all the assets out of the company to myself"

it may not be that easy ...
you take the write off that equipment is now a asset of the company ...
if you transfer it out of the company then it is suppose to be at current value.. you'll have to list the transfer/sale on tax returns ...

i just looked into this .. i wanted to take the full write off in the 1st year ... i do business as Donatello DP therefore according to my taxman i qualify for the fast write off ... i own the RED .. i now rent/loan it out to any company formed to do a project .... the other way form a LLC .. LLC buys RED .. LLC transfer/sells to you as individual becomes complicated ... see you taxman for specific advice on your tax situation ...
based on my tax situation -accountant advise = write off RED over 5 years ...

 

[Curran Giddens]

Thanks for the heads up guys. I guess instead of purchasing the equipment under my company name, I should set up an LLC to purchase the equipment. This way I can rent/loan the equipment from the LLC to my company....

I guess I can't use my corp. to accelerate depreciation on the equipment, and then sell it to myself for $1, and then rent/loan it back to my corp. heh heh :whistling:

 

[Rodney Recor]

Hi, boys and girls.

As a producer for over 35 years, this one is an easy one for me. The "producer" (or one of "the producers") usually "controls" the money. The only "control" that I am aware of is the authority to write checks to pay the bills. The producer usually actually signs them himself or just hands the bills to another person who does it. If you are the producer, then you are normally in control of the money. When the checking account reaches "zero", so does your picture. If somebody besides yourself is going to be writing the checks, you must certainly have every detail of your financial responsibilty, and the check writers' responsibility in writing.

If the money is not in a checking account and ready to to spent in this fashion, it means simply that your picture is not really "in production" at all but "awaiting further financing".

 

[Jonathan L. Bowen]

Although we plan to form our corporation soon, and already use a company name, David and I are buying all of our equipment personally because we don't want the company to have any assets right now. It makes more sense for us to have them ourselves.