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How and Why to Set Up a Production Company
On the set of one of Miranda Kahn's production In today’s entertainment industry, owning a production company has become synonymous with having a trainer, manager or overall deal—no celebrity can be seen without! But what exactly makes owning a production company such a crucial and sought-after asset? How can aspiring producers, particularly those who are young and not yet famous or well-established, go about creating one? What are the key factors that contribute to making it successful? Drawing from a decade of observing producers, learning from their triumphs and setbacks, as well as my personal experiences, here I explore the anatomy of a production company, the elements that lead to its success and why it is worth considering for aspiring producers.
Defining a Production Company
In its essence, a production company is a legal entity established to undertake the operations of a film- or video-making business. It is responsible for producing movies, commercials, television shows and music videos. When setting up a production company, various structures can be chosen, the most common options being S-Corp, C-Corp or LLC. Each structure will incur a different tax obligation for the state and federal government. While dealing with taxes can be quite daunting, it is an important part of a business owner’s yearly obligations. Choosing which type of operation you plan to set up, and knowing the tax benefits of each, is crucial in mitigating any unforeseen challenges.
S-Corporation (S-Corp)
An S-Corp is a great choice for small businesses, individual producers or freelancers. One advantage of an S-Corp is that profits and losses flow directly to your personal taxes, allowing you to benefit from writing off allowable expenses. However, these profits and losses cannot be carried forward from year to year.
The S-Corp is useful for smaller jobs or continuing overall operations as opposed to specific larger projects with multiple investors. For example, a lot of the commercials and music videos that my company, MIRMADE, produces begin and deliver within a month or two. It is common for me to run these types of projects through my S-Corp. At the end of the year, most of my business expenses are put toward offsetting my personal tax obligations, which has helped me save thousands of dollars each year.
C-Corporation (C-Corp)
A C-Corp is subject to corporate taxes on profits. This structure may be more suitable for larger production companies with significant earnings.
Limited Liability Company (LLC)
LLCs are commonly used for feature films and projects that are longer term. They provide limited liability protection to the owners while offering flexibility in terms of taxation and management. They are the most common ongoing entity used. As a “pass-through” entity, the business’s profits and losses are passed through to the individual owners or members, who report them on their personal tax returns. Thus, they are great for independent films that involve a number of investors and entities.
Choosing the Right Structure
The decision of which structure to choose depends on various factors, including individual circumstances, the nature of the projects and the state in which the business will be registered. Consulting with accountants and lawyers who specialize in entertainment business structures is highly recommended! While professional advice is valuable, online resources such as legalzoom.com can provide guidance for those starting out on a limited budget. I personally used legalzoom.com to set up LLCs for feature films early in my career.
Legal Requirements and Official Registration
To establish your production company, it is essential to ensure proper registration at both the state and federal levels. Achieving this requires obtaining Articles of Incorporation and a Federal Tax ID number, also known as an EIN. These documents confirm your company’s legal status and enable you to operate. Once you’ve got them, voila, you’re official!
WHY WOULD ONE DO THIS?
There are numerous compelling reasons that can drive the decision to start a production company. For some, it’s primarily a practical choice aimed at mitigating tax obligations, which is especially useful for freelance workers. Others embark on this journey to secure insurance coverage for individual projects. Additionally, there are those who aspire to establish a recognizable brand, foster core values and form alliances with like-minded companies. MIRMADE was founded with a vision that encompasses practicality and branding aspirations. Both aspects carry important purposes that may help with the decision to create.
PROTECTION
Production companies play a crucial role in providing protection through insurance. While anyone can create a corporation, production companies are essential for producers because they enable us to obtain insurance policies. Once you progress beyond the initial stage of borrowing equipment and asking friends to work on passion projects pro bono, you’ll likely want to rent equipment from rental houses, shoot at beautiful locations and provide workers’ compensation. However, these activities require having insurance policies in place, which can vary in price depending on the length, duration, scale and scope of the shoot.
The primary reason I formed MIRMADE in 2019 was to address this practical need. At that time, I was producing numerous music videos, and label executives started approaching me directly to create content for their artists. Because I didn’t have my own entity, I relied on a friend’s company to provide insurance in exchange for providing him with executive producer and company credits. This arrangement worked well as I continued to develop my career and save money. Then, in August 2019, I received a call from Weezer’s management about producing a video for the debut track on their upcoming album. Thrilled at the opportunity to have this as MIRMADE’s first-ever production, I quickly established my S-Corp and secured an insurance package through a broker; within two weeks, MIRMADE was contracted by Crush Music for its inaugural project.
Although insurance may seem mundane, it has proven invaluable throughout my career, especially for the purpose of workers’ compensation. On one occasion, a skilled drone operator experienced an unforeseen malfunction while filming below the Chesapeake Bay Bridge that resulted in a severe injury involving his hand. Fortunately, he was totally OK after stitching, narrowly avoiding major artery damage. And while he chose not to file a workers’ comp claim, as he had sufficient insurance of his own, this incident could have cost my burgeoning business a substantial sum of money if he had chosen this route and I didn’t have a workers’ compensation policy in place. It also would have caused me a lot of stress, which was completely gone knowing I had a solution regardless of the route he chose to go. Instead, I could focus on caring for him on set and making sure he was OK emotionally.
Besides protecting human beings, insurance also safeguards valuable gear. A few years ago, while producing a music video for H.E.R., we encountered a sudden and treacherous blizzard towards the end of the shoot. To ensure the safety of our crew, I decided to end the shoot early and send everyone home before the roads became impassable. Knowing that we had an insurance policy in place, we were able to leave behind a significant amount of equipment that quickly became covered by the snow. Without insurance, we would have faced either the extreme pressure and danger of bringing the equipment to safety, or otherwise the daunting task of replacing thousands of dollars’ worth of gear. Having a year-long policy that covered our shoot gave us peace of mind to prioritize safety.
FREEDOM
This example I earlier shared of my own company’s formation on the Weezer music video highlights another benefit of starting something on your own: the independence it grants you. Having your own company gives you the freedom to approach artists, bands, filmmakers and writers as your own entity. It enables you to have a say in the type of people you hire, the sort of projects you like to work on and helps you develop your producing style. In other words, you get to be your own boss and fight for the content you believe in and want to see put into the world. In such a cutthroat industry, it can be extremely rewarding to have the option to take the lead on projects and be at the top of the decision-making process, even if just once in a while, as you’re starting out.
Freedom to choose and work on your own projects doesn’t happen overnight. In MIRMADE’s first year, I lived from job to job, surviving on bodega sandwiches for lunch and dinner. Then, just eight months after the company’s formation, the pandemic struck, disrupting our plans. We had two music videos lined up for SXSW and several promising projects in development, but, unfortunately, none of them materialized. During that period, I instead found employment at a hospital in Harlem, working from April 1 to mid-July 2020. Although I couldn’t produce projects and MIRMADE was in a lull, I contributed my producorial skills to helping the hospital staff in many areas of need.
This experience taught me an important lesson: Business freedom is a journey that unfolds over time. While building your own business, it is crucial, I believe, not to shy away from taking on other gigs, projects or “lower-level” positions. Embracing these opportunities can aid in your personal and professional growth. Reflecting on my own journey, I could have viewed my time at Metropolitan Hospital as a setback, but instead I leveraged the skills and knowledge I acquired there to develop COVID protocols specifically tailored for production, drawing insights from my observations on the nursing floor. I was one of the first small production companies back to work that June, producing a music video for Ela Minus of Domino Records. True freedom also arises from transforming challenging experiences into valuable ones that serve you and your growing business.
BRAND BUILDING
The independence that comes with owning your own production company also brings forth the opportunity to establish yourself as a tastemaker. At MIRMADE, our mission is clear: to amplify female voices and provide support to female filmmakers in front of and behind the camera. When embarking on the journey of creating your own company, it’s crucial to reflect on your own values. What types of films and videos do you want to champion? Which creatives do you want to collaborate with? As a bassist myself, my profound passion for music has led me to produce for numerous musicians and labels that I deeply admire. Additionally, comedy holds a special place in my heart, resulting in MIRMADE’s involvement in a variety of feature films, short films and ongoing projects within this genre. We also have a podcast in development, Under the Scene, where I interview women in the field. And on our social media channels, I answer questions young filmmakers have about filmmaking.
Possessing a production company grants you the power to express your unique voice. Once you have identified your brand, fully embrace it and wholeheartedly support others who share your vision and values. MIRMADE has practically become an alter ego of mine, and it has been so much fun developing the intricacies of her personality!
ALLIANCES & MENTORSHIP
Having my own company has been instrumental in connecting me with experienced mentors who have significantly enhanced my skills as a filmmaker. It’s also common for these larger companies to collaborate with smaller ones for many reasons, including lessening liability, especially when there is alignment in values amongst the entities. A few years ago, I was introduced to Epoch, a female-run production company based in New York and Los Angeles. Epoch, a much larger company than MIRMADE, boasts a substantial workforce and substantial revenue. It represents a roster of incredibly talented and experienced directors, consistently earning recognition and awards for their exceptional work. Throughout the years, the executives at Epoch have become invaluable mentors, not only providing company-level support for MIRMADE but also offering guidance and encouragement to me as a professional.
Collaboration between companies does not need to be exclusive. Larger companies can engage smaller ones for “production services,” and executives from other firms can align themselves with projects developed to support your vision. Embracing such partnerships opens up new avenues for growth and mutual benefit.
The same is true the other way around. Oftentimes, filmmakers younger than I am will ask to rent out an insurance policy for their small project. This has become a great way for me to support emerging artists and for them to align with a larger company that has resources they’re not yet able to afford.
THE VARIOUS TYPES OF PRODUCTION COMPANIES
In an industry that is constantly evolving, with AI-generated scripts, agency mergers and ever-changing networks, determining the type of production company you want to establish can be really challenging. It’s important to understand the different types of companies that currently exist when making this decision.
PRODUCTION SERVICES
A production service company primarily operates as a service provider. This is what my company does. This means that each project can take on a unique shape depending on the agency, director, label or other production company that has hired us. This structure offers remarkable nimbleness and flexibility. For example, as a production services firm, MIRMADE can provide a range of services, such as line producing for larger companies or executive producing for smaller ones. I can either produce a project solely under MIRMADE or collaborate with other firms to assist in executing their work. The production service formation is akin to being a “freelancer” in the industry, fostering ongoing collaboration that is non-binding and project-based. One notable example of another company excelling in this model is Ways & Means, a Los Angeles–based production company. They produce films, commercials and music videos without relying on a fixed roster of directors. Instead, they select directors and creatives based on the specific needs of each production. Ways & Means has been a source of inspiration for me, and I’ve had the pleasure of working with them on multiple occasions.
An example of a time that my company structure has largely benefited me was when I produced a music video for the Safdie brothers. The project was a huge challenge, requiring a build of an entire living-room sitcom set, multi-cam set ups and a mix of older and minor non-union talent. By collaborating with Elara Pictures, we were able to put together an amazing team of creatives and make an extremely challenging and normally quite expensive build happen on a much smaller scale and budget. The result was palpable, and we created an incredible music video that was selected to premiere at the Berlin Music Video awards.
PRODUCTION COMPANY WITH A ROSTER
Some production companies operate with a “roster,” a group of directors or filmmakers they represent. Having a roster offers numerous advantages, particularly in partnering with a sales agent. A sales agent plays a crucial role by advocating for the company and, specifically, the directors. Advertising agencies contact sales agents, who then bring potential projects to the production companies they represent. When a project is awarded to the production company, the sales agent receives a commission, the production company creates exceptional work and the director brings their vision to life—a win for all parties involved.
In addition to the commercial space, having a roster of directors in the narrative realm is beneficial, as it allows you to pitch content to networks, series and executives on behalf of your clients. This approach is an excellent way to support the artists you admire and want to collaborate with in the long run. It also provides an opportunity to nurture and develop promising talent.
Epoch, which I mentioned earlier, is a prime example of a production company with a roster. Another notable company in this category is Smuggler (conveniently located next door to Epoch). Unsurprisingly, Smuggler recently earned the prestigious Clio award for Production Company of the Year for continuously delivering innovative and groundbreaking content.
By understanding these different types of production companies, you can make informed choices about the structure that aligns best with your goals and aspirations in the industry.
INDEPENDENT FILM COMPANY
When you embark on creating an independent feature film or television program, it typically involves the collaboration of multiple entities and production companies. In these cases, there are usually one of two common structures involved: the C-corp or LLC, which serves as both the investment vehicle for attracting investors and the single-purpose entity for the film. This entity acts as the SAG (Screen Actors Guild) signatory, accepts investments, hires the necessary personnel, owns the copyright and handles other related aspects, such as signing distribution deals. Alternatively, a more prevalent and professional approach involves having two separate companies for each film. One company, usually an LLC, serves as the primary entity where investments are collected and which pays out to investors. The LLC then owns or contracts with a second company—a single-purpose entity, often a C-Corp, that is responsible for the film itself and often captures tax credits. With this structure, among other benefits, the various liabilities inherent in film production are removed one further step from the investors.
As an example, we recently produced a film called We Strangers. The film was made in association with MIRMADE. However, the LLC for the project is named We Strangers, LLC, while the single-purpose entity is Pigasus Pictures. These distinct entities worked together to navigate the intricacies of film financing, production and post-production.
THE LOAN-OUT
Another type of company worth mentioning is the loan-out. Unlike the types of companies formed by producers, a loan-out can be established by any individual working within the film industry. In a loan-out, all work and services are billed directly through the company rather than the individual themselves, which means no payroll tax deductions. The company will then pay various ongoing overhead expenses and pay salary to its owner-employees, an arrangement that may allow freelancers greater tax write-offs and benefits in their financial management.
CONCLUSION
The world of production companies is as diverse and intricate as the scripts they bring to life. They serve as platforms for individuals from all backgrounds—whether employers, employees, artists, actors or financiers—to safeguard, create, inspire, uplift and amplify their voices and work. It is a realm where you have the opportunity to shape your own path and make a meaningful impact in the industry.
Owning a production company is a significant undertaking, but with careful planning, strategic decision making and a passion for filmmaking, it can be an extremely rewarding and fulfilling venture. MIRMADE has practically become a part of me, like a home I have bought and continue to foster and build every day. By understanding the different business structures, meeting legal requirements and implementing effective creative and business strategies for success, I believe that anyone can establish a production company that not only survives but thrives in the competitive entertainment industry.
