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What Is a Production Company?
A production company is responsible for the physical creation of video content like feature films, TV shows, and music videos. Usually, production companies produce two types of projects: content they develop themselves using their own creative team, and content they're hired to physically produce without any creative involvement in the development process.
How to Start a Production Company
Before you can get your production company up and running, it’s essential to have a clear business plan. Starting a production company can be a daunting task, but if you follow the proper steps, you can set your company up for success.
- Determine your company's niche. What type of content do you plan to specialize in creating? Maybe you want to produce low-budget horror features, or maybe your focus is sci-fi genre projects or artistic independent films. It's important to narrow your company's brand identity to guide you when choosing projects to produce.
- Choose a company name. Choose a name that embodies your company's identity, is memorable, and is meaningful to you. Once you have the perfect name chosen, make sure it's not already taken, and then apply for a trademark
- Draft a business plan. A solid business plan is the key to a financially sound and functioning production company. Start small and employ a business model that lets you gradually build from a small business entity to a larger one. In particular, plan for your startup costs, from labor to office space to state and federal taxes. Draft a mission statement that summarizes your film company's goals and how you plan to profit from your video production business. Then, think about where you want to be after your first year. What business opportunities do you see yourself pursuing in five years? Strike the balance between ambitious and achievable.
- Hire an attorney. The steps necessary to start a production company are complex, so you'll want a small business lawyer or an entertainment lawyer who specializes in production services to give you legal advice throughout the process. Your attorney will review all the documents you need to start your business, and once you're up and running, they can assist you in hiring your staff and creating the contracts for your projects.
- Incorporate your business. If you want to start your business the right way, you'll want to formally organize it as a limited liability company, an S-Corp, a C-Corp, or a sole proprietorship. While a sole proprietorship is the easiest legal entity to establish, the drawback is that as the owner you are legally liable for any lawsuits made against the company. A Limited Liability Company (or LLC) is a better option for most production companies starting out because it provides great flexibility in regards to legal liability and business taxes.
- Seek funding. In order to grow, a production company needs money. Unless you're independently wealthy, you will likely have to use your business plan to secure a small business loan (including a line of credit) or reach out to angel investors (either via crowdfunding or personal connections). Make sure your risk isn't so great that you risk financial ruin if things don't work out.
- Get your paperwork in order. When you're in charge of your own film production company, you're responsible for a lot of workaday minutia. You'll need to set up a business bank account, get an employer identification number from the IRS, and file an operating agreement and articles of organization. Depending on your business location, states and municipalities may require business licenses, and they typically charge annual business taxes.
- Assemble an all-star team of executives. Great ideas tend to come from teams of people, so you'll need to search for exemplary employees to help make your ideas a reality. You'll want to hire four positions for your executive team: a head of development (who decides what scripts to produce and guides the creative team), a head of production (who's in charge of budgeting and the physical production process), a head of post-production (who oversees the editing process), and a head of distribution (who's in charge of marketing and selling your content). Other creative filmmaking positions such as writers, actors, directors, and cinematographers are usually hired on a per-project basis rather than working full-time with one company.
- Hire a production accountant. Entertainment payroll is a complicated job, so you'll need a certified public accountant trained in entertainment financing to take care of your company's accounting. Production accountants are trained to handle the constantly rotating crew that are common to the film production world, along with the various rules and regulations associated with the different entertainment unions.
- Purchase production insurance. Accidents happen in film production—from crew members slipping on set to stunt performers getting injured while filming dangerous feats. In the event any unexpected incidents occur, you'll need a good insurance policy to protect you.
- Produce proof-of-concept projects. When your company is initially starting out, you may want to produce some shorter and cheaper proof-of-concept samples to show off your company's voice and the capabilities of your team. Short films and TV pilot presentations (condensed pilots) can be selling tools for convincing studios and investors to finance full-length projects.
- Build a website and create a social media presence. Hollywood players need to be able to find your company online, so hire a website designer to create a simple but informative website for your company. Less is usually more with production company websites—your contact info and brief examples of your work are usually all you need. It's important to have a social media presence as well, but until your company expands to have a constant stream of content, it may be unnecessary to hire someone specifically to run your social pages.
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