Splitting the Profit Pie and Producer Credits

The Investors share from net profits from all the revenue streams is 50%. Each investor is paid pro-rata according to the amount invested.

The other 50% is called the 'Creative side' or the 'Producers side.' From this 50% the Producer pays out shares of net profits to several creative types (Director, Writer, Actors, etc.) and to those who either helped either raise monies or managed the film, including: Executive Producer, Co-Producers, Associate Producers.

A Limited Liability Corporation (LLC) is formed for each film. An LLC is a hybrid of partnerships and corporations, and it provides limited liability for the owners just like corporations but are treated has partnerships for tax purposes.  The members of the LLC are not individually liable for the obligations and liabilities of the LLC. The form of business utilized depends on the individual film situation and would be worked out with the Production Attorney and the Production Accountant.

Producer Credits and Profit Splits - How it works:

Descriptions of the several Production Financing structures for big budget films can be found at http://en.wikipedia.org/wiki/Film_finance

However, Low or Ultra Low Budget Indie Pictures often raise money from family and friends, and often these are first time film investors. The question arises how are the credits determined and how are the net profits shared and what are the priorities.*

The following are various formulas:

1) Executive Producer: If one investor put forth the entire amount of money for a film that investor can be credited as the 'Executive Producer." The Executive Producer would have purchased the script (the 'property'), may hire a 'Working' Producer to manage the production, a Director, cast and crew. Everyone involved in the film could receive a flat fee and the Executive Producer would then be entitled to 100% of all profits. In this structure the Producer has total control and makes all decisions. On the set the Director makes decisions but if the Producer is not pleased the Producer can fire the Director.

2) The Executive Producer invests 100% of the film budget but partners with a ('Working') Producer who organizes and manages the entire production. The Executive Producer receives 100% of the investors share, but shares the 'Producers side' with the working Producer. The share would be negotiated. It could be a 50-50 split of the 'Producer's side, or the working producer could be on brought on the project on a part fee and part profit sharing basis.

3) The Executive Producer invests no money in the project, but raises all the money. In this case the Executive Producer receives no money from the Investors side, but receives a negotiated split from the Producer sides. This becomes more complicated depending upon what important elements the other members of the creative team bring to the production - a big name star, or rights to a brand name property (e.g. Spider Man, etc.)

4) Two or more individual raise money for the production: The person(s) who raises the most amount of money can be credited and share the title as Executive Producers, and those who raises a smaller amounts of money could receive credits as Co-Producers.

5) Associate Producers: Individuals who raise units of money, even from one investor. The Associate Producer receives a 1% share from the profits of the Producer's side for every 5% of the producing company purchased by an investment unit for which the Associate Producer is responsible.

6) Front Money: An individual who contributes money before the production is fully capitalized can receive an additional small share of the producers side (a negotiated percent dependent upon the amount of front money, generally starting at 1%)  as well as a pro-rata share of the Investor's side (the front money, of course, is counted towards the total investment). Front Money is usually used for paying for the option of a script, LLC filing, establishing an office, costs of auditions, script printing, etc.

It should be noted that Associate Producers, Co-Producers, etc. do not have 'voting rights.' Although the Producer would be wise to value their comments and suggestions, the Producer is responsible for making final decisions on the production, just as a Director makes final decisions while shooting on the set and in the editing room. 

* "Net Profits" is all net revenues collected by the LLC from the Project after the payment of all costs of production, sales, marketing and distribution of the Project.

* Distribution of net profits from the Project are typically made by the LLC as follows:

1) Repayment of the principal and/or interest from any bank loan - if any.

2) Payment of any front-end deferrals - if any. (e.g., actors, producers, director may lower their normal fees and defer industry standard fees until a profit is made).

3) Repayment of the cash contribution of each Investor, on a pro-rata basis to each Investor.