Movie-Making Partnerships

Often when filmmakers begin their first movie, it is with a partner. It might be a film school classmate or a friend with a similar vision. If you’re in this situation, be sure you understand what you’re getting into.

A partnership is legally very similar to a marriage, except that no one has to pronounce you partners. Because partnerships don’t require any government filings or certification, people working together are sometimes surprised to learn they in fact have a legally binding general partnership. Some of the legal implications of partnership are:

Unlimited Personal Liability

Perhaps the thing that most business people think of first is the element of liability. In a partnership, your liability is unlimited not only for your actions but also for your partner’s.

Partners are legally responsible for each other’s obligations incurred in the course of the partnership. For example, if your partner makes purchases on credit for the movie, you are obligated to pay the bill. This is true, unfortunately, even if you aren’t aware of the debts, so be sure you can trust your partners before you agree to work with them.

Even if you have a partnership agreement that states clearly limitations on spending, third parties who aren’t aware of your arrangements aren’t bound by your agreement.

Fiduciary Duty

Each partner has a duty of loyalty and good faith to his partners. In simple terms, that means you can’t engage in business transactions that hurt your partners, financially or professionally. Examples might be making a competing film yourself or taking other work that interferes with your scheduled work on the partnership’s film.

Share in Income & Losses

All partners share equally in the income and losses of the partnership, even if they are not contributing equally to the business. If your partner only shows up half the time or finds extra work for you to do while she takes off, you may get angry when she takes half the profits.

Worse yet is a partner who is absent for most of the work and only shows up to claim his share when the film starts making money. (Did you say “lawsuit”? Even more time and money down the drain.)

Of course, you may divide things up different in a written partnership agreement. If you do, be sure to get a lawyer who understands partnership law to draft it for you.

Ownership of Property

Conversely, all property acquired with partnership funds or brought into the partnership belongs to the partnership and not the individual partners. This is true even if an individual partner contributed the property.

In the case of a movie, it might the script that one partner contributed, set decorations another contributed, equipment purchased, or some other type of intellectual or personal property.

Partnership Agreement

What I discuss above are the default rules for general partnerships, and they are pretty universal in the United States. You can change the rules by having a partnership agreement, which I would highly recommend, setting out what is expected of each partner and their respective rights.

Again, a partnership agreement does not need to be filed with any government agency and you don’t need anyone’s approval. The only time it might become public is if you go to court to settle a dispute.

For More Information

In the video on Setting Up Your Company, volume 1 of the What Every Filmmaker Needs to Know About the Law series, I discuss partnerships and other types of business entities in great detail. If you don’t already own the set (which is available at a discount to my readers), go to WhatEveryFilmmakerNeedsToKnowAboutTheLaw.com to get your copy at a Special reduced price.

If you’d like my help with your production or your agreements, click the “Production Counsel Website” link above.

© Keith E. Cooper. All rights reserved. You may freely link to this post, but please do not copy (in whole or in part) without permission of the copyright owner.

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