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# Loan-Out Company

**Loan-Out Company**

A loan-out company is a corporation or LLC owned by an individual, such as an actor, director, writer or producer, that “lends out” that person’s services to productions. The production company contracts with the loan-out, not directly with the person. It pays the loan-out a fee, and the loan-out pays its owner as an employee or member. Most established talent work this way.

The individual sets one up for three main reasons:

* **Tax planning.** The company can deduct business expenses such as agents, managers, publicists and travel, and can set up retirement plans. It can also pay its owner in ways that may be more tax-efficient. The 2017 U.S. tax reforms reduced some of these benefits, but loan-outs are still standard.
* **Liability protection.** The company stands between the individual and some business liabilities.
* **Payroll simplicity.** The production pays a single invoice with no withholding. Guild pension and health contributions are still paid by the production directly to the guild.

Every loan-out deal has the same basic structure:

1. **Lending agreement.** This is the main agreement (deal memo or long-form) between the producer and the loan-out. The loan-out agrees to provide the individual’s services and assigns all results and proceeds to the producer.
2. **Inducement letter.** The individual signs this personally. It confirms they will perform, that they look only to their loan-out for payment, and that the producer can enforce the agreement directly against them if the loan-out fails.
3. **Certificate of Engagement.** The individual signs this personally as well, so the production holds the rights from the person directly. This keeps chain of title clean even if the loan-out is later dissolved or loses good standing.

Before paying a loan-out, the production should get a W-9 (or the foreign equivalent) and the company’s federal tax ID, and confirm the company is in good standing. Foreign loan-outs add withholding issues. The U.S. withholds on payments to non-residents unless a treaty applies. Canada’s Regulation 105 requires 15% withholding on fees paid to non-residents for services performed in Canada, which comes up constantly on Toronto shoots. Workers’ compensation also needs attention: many productions cover loan-out talent under their own policy anyway, because the loan-out’s own coverage is often missing.