Raising money is one of the biggest challenges aspiring filmmakers face. Unlike other art forms, like painting or dance, it takes money to make films, sometimes lots of it! For someone new to fundraising, it can seem daunting and overwhelming.
Whether you’re just starting out or looking to take your filmmaking dreams to the next level, this guide will provide the necessary steps to successfully fundraise and set the stage for your filmmaking journey.
Raise Money for A Film: Establishing the Foundation
For newcomers to the world of fundraising, this process can appear overwhelming. To help you turn your filmmaking dreams into reality, I want to demystify the fundraising process to equip you with the knowledge and confidence needed to do so.
Setting Up the Financial Framework
One crucial aspect to address before embarking on your fundraising journey is creating a structure to receive and manage funds.
Imagine that you’ve just finished a meeting with a potential investor, and they are really excited about your project. They’ve run everything by their accountant and are ready to hand you a check.
Great news…except that you haven’t done your homework and set up an entity to whom they can write the check. You look unprofessional, and you just killed the deal.
There are two common options to consider when collecting money for your film project:
- Forming an LLC (Limited Liability Company) or,
- Obtaining a Fiscal Sponsorship.
One caveat to mention, I am not a lawyer or accountant. When setting up these structures, it’s essential to consult with a financial professional, preferably one experienced in film financing.
Understanding the LLC Option
An LLC, or Limited Liability Company, is a legal entity frequently used by filmmakers to raise funds for “for-profit” feature films. An LLC is a business structure in the United States whereby the owners are not personally liable for the company’s debts or liabilities.
LLCs are hybrid entities that combine the characteristics of a corporation with those of a partnership or sole proprietorship. Other countries have similar legal entities.
In the UK, the equivalent would be a Private Limited Company, and in Germany, it would be a “Gesellschaft mit beschränkter Haftung,” or “GmbH.”
My experience is with LLCs in the United States, so that is what I will describe.
An LLC can be set up through a lawyer, accountant, or online service, making it a relatively straightforward process. Once established, the LLC becomes the owner of the film and its rights, with both the producer(s) and investor(s) holding shares or percentages in the LLC, commonly referred to as “points.”
Typically, a 50/50 split is adopted: 50 points allocated to the film producers based on their contributions, and 50 points allocated to the investors based on their financial investment as a percentage of the total film budget. However, the specific percentage split can be tailored according to your preferences.
Additionally, individuals involved in the film, such as the director or actors, can be granted points alongside their salaries, with these points deducted from the producer’s share. Points serve as a form of currency, allowing producers to attract talented cast and crew by offering them an opportunity to invest in the project through reduced salaries in exchange for points.
The ultimate goal is for the film to generate significant revenue, ensuring that everyone with a stake in the LLC receives their deserved share.
Exploring Fiscal Sponsorship
With Fiscal Sponsorship, you’re not creating your own legal entity, you are raising money under a 501(c) (3) non-profit corporation that is “sponsoring” your film project. This is typically done for documentary or “non-profit” films where you are raising money from foundations and individuals who are patrons instead of investors.
The money you raise are grants and doesn’t have to be paid back. Therefore there doesn’t need to be an ownership component to the fundraising.
Many film-related non-profits have fiscal sponsorship programs to offer this service to filmmakers. I live and make films in the San Francisco Bay Area, and the best fiscal sponsorship program for us is SFFilm. They are the folks that run the SF Film Festival, and besides offering fiscal sponsorship, they have a ton of grants and other programs to support filmmakers.
Now, whatever non-profit you use, you will most likely need to apply to be fiscally sponsored. Your project is reviewed and vetted, and then once you’re accepted into their program, you can then raise money.
Most foundations won’t give grants to films that aren’t fiscally sponsored. In addition, patrons who give money to a fiscally sponsored film get the tax benefit like giving to a charity. Another advantage is that your film can use your final sponsor’s 50 (c) (3) tax ID number and not pay taxes for purchases.
All of these benefits do come with a price. Your fiscal sponsor takes a percentage of all the money you raise, usually 8% – 15%. They use this to pay for their overhead, accounting, advice, etc. Overall, it’s a fair trade, as your fiscal sponsor can often be a valuable partner in fundraising strategy and general filmmaking support.
Get Started
No matter whether you use an LLC or Fiscal Sponsor (or both), you must get one of these set up BEFORE you begin the process of fundraising. The one exception to this rule is if you are only going to raise money for your film project on a top crowdfunding platform like Kickstarter, IndieGoGo, or Seed&Spark. Money raised from crowdfunding campaigns is like a grant or gift and doesn’t need to be paid back.
Now that you know the importance of how to raise money for your film properly, you can start the process effectively. If you are serious about a career in the film industry, San Francisco Film School offers multiple degrees and certificate programs to get you started!