October 21, 2022

Producer’s Guide to Paying Loan-Outs

Loring Weisenberger
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Understanding how to pay a loan-out company is essential knowledge for the professional producer. Without it, a small error could lead to serious financial or legal trouble. 

To keep your production in compliance and out of hot water, we’ve put together this handy guide to paying loan-outs. We’ll tell you everything you need to know about how to pay loan-out companies and give you a free payroll compliance checklist to help you protect your production as thoroughly as possible.

We’ll even show you why Wrapbook’s compliance features make the whole process easier than ever. 

Let’s get started.

How to work with a loan-out company

In film production, loan-out companies are common. Established actors usually hire out their services through a loan-out, as do certain below-the-line crew members who work under special circumstances. 

For production companies, working with loan-out companies mostly means making slight adjustments to the payroll process. Loan-outs require documentation that you won’t find in a standard employee startwork packet and are subject to a different set of payment regulations. In fact, payroll for loan-outs is more akin to paying a vendor than it is to hiring traditional crew.

While the process of paying a loan-out is not complicated, the blurry line it creates between employee and vendor does increase the importance of due diligence. When working with loan-out companies, it’s critical for a production to remain payroll compliant.

Why is payroll compliance important?

Compliance with payroll regulations is important because non-compliance is very dangerous. That’s the single most important lesson of Payroll Compliance 101.

A failure to comply with payroll laws can lead to serious legal and financial consequences. Not to mention the incalculable amount of damage that such failure would inflict upon a producer or production company’s professional reputation. The consequences of payroll non-compliance can range from fines to audits to lawsuits, depending on the exact nature of the offense. Criminal charges are rare but not entirely off the table. 

In short, maintaining payroll compliance is always in a producer’s best interest, whether they’re paying employees, loan-outs, or anyone else. The trick, of course, is in knowing how to maintain payroll compliance. 

Let’s talk about compliance with loan-out companies next.

Download the Payroll Compliance Checklist

Now you know why staying compliant is important, but it’s not always easy to know how to do so. Download Wrapbook’s free payroll compliance checklist to help you maintain compliant processes in any payroll scenario.

Our compliance checklist can help you to correctly classify workers, maintain adequate records, file documents on time, and more. You can use it in conjunction with this post to protect yourself from every angle.

How to stay compliant when paying loan-outs

The path to setting up a loan-out company can be treacherous, riddled with perils of paperwork and opportunities for error. Fortunately for us, we don’t have to care about any of that, at least not for the purposes of this specific post.

When it comes to payroll compliance, knowing how to get a loan-out company up and running is not a priority. Instead, we need to focus on how to protect ourselves from compliance errors that might be caused by individuals who have not set up their own loan-outs correctly.

Think of payroll compliance for loan-out companies like defensive driving. It is simply not in your power to control other drivers on the open road. However, it is in your power to drive in a way that minimizes the risk of an accident due to those other drivers’ mistakes. 

You can’t set up a loan-out company for one of your crew members, but you can make sure you only work with loan-outs that have been properly set up. 

To that end, there are three fundamental steps to managing compliance when working with loan-outs. Let’s start with the most basic.

1. Check the loan-out company’s articles of incorporation

If an individual wants to structure their business as a corporation, one of the first steps they’ll need to take is to file a corporate charter document with the relevant office of state government. In most states, this document is known either as the “articles of incorporation” or the “certificate of incorporation”.

Articles of incorporation contain basic information about the corporation being formed, and their essential purpose is to establish the existence of the company on paper. Without filed articles of incorporation or a filed certificate of incorporation, your crew member’s loan-out does not technically exist.

As a producer, you cannot pay a company that does not exist. Attempting to do so will inevitably create problems with your production’s tax filings and push you into a state of non-compliance. 

Therefore, the first task of issuing compliant payments to a loan-out company is to collect copies of their articles of corporation or certificates of incorporation. 

Note that this is not a legal requirement for working with a loan-out, but it is a best practice. Collecting articles of incorporation ensures that the individual whom you’re paying through the loan-out has performed due diligence on their end. Doing so also provides you with documentation that could help you in the event of fraud or other malfeasance. 

By collecting proof that the loan-out’s owner has done their due diligence, you are essentially collecting proof that you have done your due diligence. 

Producers Guide to Paying Loan-Outs - Wrapbook - Articles of Incorporation
Wrapbook makes it easy to collect articles of incorporation and other critical documents.

With Wrapbook, you now have the option to collect articles of incorporation as part of your standard onboarding process. With just a few clicks, you can require the appropriate documentation and ensure that your production is as safe as possible when working with loan-out companies. 

2. Pay loan-outs properly

The most essential element of maintaining compliance when working with loan-outs is paying them properly. While that might sound like a gigantic task requiring the dark arts of production accounting, rest assured that it’s actually not all that complicated and requires approximately zero sorcery. In truth, the process of properly paying a loan-out company comes down to a simple principle:

Make sure you’re paying a fee to the loan-out company, rather than a paycheck to the worker. 

Producers Guide to Paying Loan-Outs - Wrapbook - Add Invoice
With Wrapbook, you can separate loan-outs from employees by changing a few basic settings.

The tricky part of this process is not so much in making loan-out payments as it is in integrating those payments into the rest of your payroll process. Of course, a qualified payroll company can make this challenge significantly easier by tackling some of these issues head-on. 

Wrapbook, for example, is designed from the ground-up to minimize these types of risks and maximize compliance protections. 

3. Consult with legal and tax professionals

Making movies is rarely simple and never predictable. Productions are bound to run into strange or anomalous circumstances eventually, some of which may impact how you work with loan-outs. For that reason, if you’re ever unsure about your compliance status when working with a loan-out company, the best course of action is always to seek professional advice. 

Legal and tax professionals are paid to help you understand what you’re getting into. They can help your production manage, mitigate, or even avoid risks entirely. Before leaping into legal or financial danger, always make a point of seeing what your entertainment lawyer or production accountant thinks.

(Though, ironically, you may have to pay them as a loan-out.)

Bonus: Wrapbook makes paying loan-outs easy

Production companies who use Wrapbook can pay their workers as employees, contractors, or loan-outs. Our digital payroll platform makes it faster, easier, and more efficient to pay your crew under any professional classification.

The flexibility of Wrapbook’s onboarding features integrate with the organization of its digital document storage to craft a streamlined approach to payroll for personnel with loan-out companies. 

You can collect articles of incorporation and issue payments through a single interface, combining ease-of-use with stronger compliance features.

Producers Guide to Paying Loan-Outs - Wrapbook- Project Dashboard
Wrapbook makes production payroll faster, easier and safer.

Wrapbook also enables productions to issue, track, and record payments with as much transparency as possible, which makes it easier to prevent and correct payment errors both before and after they occur. Wrapbook strives to put as much power as possible directly into the hands of filmmakers.

Produce your next project with us. 

Wrapping up

Whether you’re paying a loan-out company, the process of working with one requires a blend of knowledge and discipline. Be sure to download our free payroll compliance checklist to give yourself a leg up. 

To learn more about the subtleties of production payroll management, check our handbooks on the 4 signs you’re onboarding crew wrong or signs it’s time to find a new payroll company.

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Last Updated 
October 21, 2022


At Wrapbook, we pride ourselves on providing outstanding free resources to producers and their crews, but this post is for informational purposes only as of the date above. The content on our website is not intended to provide and should not be relied on for legal, accounting, or tax advice.  You should consult with your own legal, accounting, or tax advisors to determine how this general information may apply to your specific circumstances.

About the author
Loring Weisenberger

Loring is a Los Angeles-based writer, director, and creative producer. His work has been commissioned by a diverse range of clients- from Havas Worldwide to Wisecrack, inc.- and has been screened around the world. Through a background that blends project development with physical production across multiple formats, Loring has developed a uniquely eclectic skillset as a visual storyteller.

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