As much as possible you should have completed all the modules that preceded this one before starting to fund your film.
Many filmmakers upon having a great idea for a film will immediately go from concept to “how can I get money for this film?” it’s a natural progression and an important question. However, there is much work that should be done before you start seeking those dollars, yen or rupee, which will give your project the best chance for fiscal success.
If you skipped the previous modules and jumped straight to funding then we recommend you go back and go through the process of completing them before attempting to fund your film.
Do it! Trust us it’ll be worth it.
What You'll Need:
1. Documentary Film Proposal
How can you ask someone else to give you money for your film if you are unsure of what you are making and how you are planning to do it?
Not to scare you, but we agree with Morrie Warshawski says “What the filmmaker must ask before going to fundraise is:
* Do I know everything I must know about this project before I approach a funder?"
* Can I answer any potential question about my project that anyone might ask?"
We believe that having as much clarity over your project as you possibly can builds an energy and a confidence that will reward you massively over the duration of making it.
By completing your documentary film proposal you will have gained clarity and be able to competently orally and textually present that to others.
2. Documentary Film Budget
How will you raise enough if you don't know how much you'll need? How will you manage it if you don't have an idea of when you'll need certain amounts at certain stages of the process? How can you expect others to give it to you if you don't have a handle on what to do with it?
The answer, of course, is you can't.
We believe one of the big reasons documentary filmmakers have so much fear surrounding sourcing funding for their film, especially the in person ask or individual donation, is because they are afraid they will be asked something about their project that they don’t have the answer to.
If you’ve watched the programs Dragon’s Den or Shark Tank you would have seen hopeful entrepreneurs confidently pitching their projects to potential investors only to be picked apart because they don’t know their numbers, they haven’t done their research and haven’t laid a strong enough foundation on which to build a business.
The combination of your documentary proposal and documentary film budget will give you a very comprehensive and realistic idea of your 'business', how you are going to make your film and what you need to be able to do it.
3. A Financial System
Now this is an aspect of your film's financial structure that you may not have considered or put a lot of thought into, but if you do you could potentially save yourself some issues later on down the road AND make your film financial management and budgeting a lot more efficient and effective.
You are going to have money coming to you from various sources and expenses that you need to pay at various times throughout your film's life cycle. Having all that information clearly and distinctly outlined and accounted for is essential.
Consider opening a separate bank account for your film, either in your film's name (if you have registered it as a business entity) or in your name, as long as its sole use is for film finances - income and expenses - and no other use. It is important that you keep your film and your personal accounting separate so you can track and allocate funds and keep clear and concise records.
Regardless of how you do it, ensure you have a very clear structure and accounting system where the money from your film has come from and where it has gone. You do not wish to find your film finances in disrepute should they need to be reviewed for any reason.
It is your choice as to whether you obtain a financial software program or use an Excel spreadsheet which clearly defines all relevant financial movement.
4. A Payment System
We've mentioned this already, but from as early on in your project as possible you must have a way for donors of your film to give you money in an easy and efficient manner. A great idea is to have a donate button on your website, preferably within your main menu or prominently placed on your home page, as soon as you have the site up.
In order for those donations to be processed and for you to receive them, you will need to be connected to a payment system that processes the payment for you and gives you access to it.
You will want to sign up for a payment system through which you can either create the donation button within their site and then post it to your own site or link your payment system to a widget on your website.
5. A Business Entity
Why You May Want To Consider Forming A Business Entity
You may or may not have considered setting up an LLC for your film. It’s not something that every filmmaker thinks about doing or knows is recommended to do. So we’re going to look at why you may wish to set one up and how you can go about doing it. Here are some thoughts and resources we'd like to share.
Note: This information is for reference only and does not in any way constitute legal or financial advice. To learn more about forming an LLC ,or other business entity structure, you should seek counsel from your lawyer and/or accountant. |
What is a Limited Liability Company (LLC)?
A limited liability company is the United States-specific form of a private limited company. It is a business structure that combines aspects of a partnership or sole proprietorship with the limited liability of a corporation. |
Let’s break that down. What does this mean for you, the filmmaker?
What Are The Benefits of Forming An LLC?
Offers limited liability protection, protecting your personal assets
The big draw of forming an LLC for your film is that it offers you, the filmmaker, limited liability protection or in other wordsprotection from personal liability.
So say, your film were to accrue debts or perhaps it were sued, then you would not be personally responsible to repay that debt or financial compensation.
For example, if one of your interviewees was to decide that they felt you had portrayed them incorrectly or in a misleading manner and decided to sue you, then they would only be able to go after the assets of your film, if you set up an LLC specifically for your film, and not your personal assets, such as your home, car or cash.
Can be beneficial to distributors & funders
Forming a business entity may be a requirement of some distributors and for others it may just be more inviting for them to work with you if you do. In a few cases you may also find that some funders may require you form a business entity also. While other corporate structures are available to you – such as s corps, c corps, sole proprietorships and partnerships – most filmmakers find an LLC to be the best choice for meeting their requirements.
Pass-through entities/ tax implications
LLC’s are not corporations, which makes them pass-through entities in the world of taxation. In other words, any income your film receives is considered your income and should be taxed on your personal tax return and in addition, any profits or losses. You don’t even need to file a separate tax return because ‘the company’ is not paying any tax in and of itself. You are then taxed at your personal tax rate, rather than at a corporate rate. For further information on the tax implications of forming a business entity we recommend you consult an accountant who can advise you.
Ability to open a bank account
Another perk of forming an LLC is that it gives you the ability to open a bank account under the company name. We highly recommended that you do this. It is very important that you keep any and all production or film funds separate from your personal monies.
You may choose to have all your film funds go through your production company bank account, if indeed you have one, and that is absolutely fine, but you must ensure that you have a very clear structure and accounting system that shows where that money has come from and where it has gone. As we said, you do not wish to find your film finances in disrepute should they need to be reviewed for any reason. Plus it makes it much easy for you to track and allocate funds if you keep clear and concise records and structure. You may need to obtain a Tax ID Number for your company before you can open an account. Again we would advise you to discuss this with your accountant to ascertain the best route for you.
How To Form An LLC
If you do decide to form an Limited liability company for your film then watch this video as we have chartered out the steps for you.
Disclaimer: We are not legal or accounting professionals and would recommend that you speak to a lawyer or accountant for further clarity and advice on the legal and financial aspects of forming an LLC or any other business entity.
Key Resources:
Limited Liability Company - An article on the benefits and disadvantages of forming an LLC.
Directory of Secretary of State Offices and Websites - Find your Secretary of State information here.
Filing & Annual Fees by State - A comprehensive list of filling and annual/biannual fees of each US state.
Form an LLC with Legalzoom - Don't wish to file yourself? You can have Legalzoom do it for you.
Why do film companies for an LLC for a movie - Looking for more reasons to form an LLC. Check out this article.