I want to start two short film projects but I don't know what equipment I need to get a good professional quality result. I've been saving some money so I hope budget is not a problem. Also, what's most commonly used to record audio in this kind of project? I want to get the sound from two people talking with the camera placed far away from them. I'm trying to make an independent production company so I'm seeing this as an investment. The cheaper the better though.
For videography, the best bang for your buck is, hands down, going to be an entry level DSLR and a decent lens. For audio, if your budget can allow for it, I suggest getting a stand alone multi-track recorder. The Zoom H4n is a particularly popular model with videographers for its low price and decent (though not superb) audio quality. (Update: The H5 and H6 are now available offering significant upgrades over the H4n, but also at a slightly higher price point.)
There are far better options and values as you get more skill in the field, however for starting out, you probably don't want to invest too much until you get some experience under your belt. It's easy to spend upwards of $10 to $15 grand on a nice videography setup as you get more and more professional, but a $1500-$1700 setup with something like a Canon T4i or Lumix G2 with a moderate level lens and an H4n or similar for recording audio (with some basic shotgun or lavaliere mics) is a decent start.
Also, be sure not to skimp on a tripod. You'll want a solid, sturdy tripod (probably aluminum) with a good fluid tripod head to make sure you can get steady shots. Just a solid tripod alone can run you in to the $350 to $500 range.
If you'll be shooting indoors, you may also need a light kit. A cheap 3 point lighting kit can be had for a couple hundred dollars, though depending on what you intend to shoot, you may be able to get by without this initially.
So overall breakdown I'd recommend starting out is around $500 to $600 on an entry level DSLR, $150 to $300 on a lens (if your DSLR body supports video auto focus, such as the Canon T4i, a stepper motor lens is needed), about $280 for an audio recorder, about $100 to $200 on mics, about $400 on a tripod and optionally about $150-$250 on lights. Altogether, that's about $1600 or $1850 and you should be able to make some pretty solid professional looking stuff.
It does add up quickly, but the good news is that you can improve on the gear incrementally over time once you have the basics. If you do have more than 2 grand to start out with, I'd spend a little bit extra on the lens or the camera body to get better low light performance and better background blur. Better mics or mic boom arms also couldn't hurt and if you do go with lights, light modifiers or more powerful lights is also never a bad investment, though the best place to spend any extra money is going to depend on the kind of shooting you are planning on doing.
I would suggest looking into the black magic pocket cinema camera (bmpcc). This camera has a very wide dynamic range which gives you the possibility to record footage that you can color grade. This is an important part of film making.
Also the bmpcc has a 16mm sensor, this will allow you to buy very reasonably priced and very "filmic" looking 16mm lenses from ebay (make sure to always check reviews of a certain type of lens, not all of them work).
If it is for hobby films look into DIY shoulder rigs sliders cranes and lighting, they will look crappy but will work, pvc is your friend!
For audio a zoom h1 will work (it is cheap and records nice stereo sound and clean mics via the input) h4n is the bigger better brother that allows you to record 4 channels instead of 2.
This depends on your budget. I'll assume you have an infinite budget and let you make decisions based on your actual budget.
The first thing you want is a quality camcorder. Some people will recommend a DSLR, but those have issues with color accuracy in film. Get a quality camcorder and make sure it has an external microphone and headphone jack. You may also want something with a hot seat if you want a light or mounted microphone.
When it comes to audio, get a quality shotgun mic. They are very general purpose and work very well if you invest in quality one. The easiest way to record audio is through the microphone jack on the camcorder, but you can also use a separate audio reorder, but this means more work at editing. Some people will tell you to buy a clapboard, but just clapping has always worked fine for me.
Editing is a very important part of the video production process (but remember that doesn't substitute for skill.). Most problems created by cheaper equipment can be fixed more cheaply in editing than by upgrading equipment. My personal favorite programs are Adobe Premiere, which can be expensive, and Lightworks which is slightly less expensive. I've also heard good things about Final Cut and Sony Vegas.
Here is a list of equipments my film-making friends consider very useful.(I own few of them). Budget is $1800, excluding a good computer and post production software.
A decent DSLR camera with kit lens. (eg: Canon t3i with 18-55mm lens - $500)
Prime lens for great image quality and shallow depth of field (Canon 50mm f1.8 - $100). Great for shooting interviews and close shots.
Wide angle lens to capture landscape and real estate (Tokina 11-16mm f2.8 - $500)
A good audio recorder (Zoom h4n - $200)
An image stabilisation device with a gimbal. These are extremely useful to get rid of shakes and obtain smooth, fluid video shots while moving your camera (Glidecam HD2000 is popular and costs $500). A tripod is generally optional once you have this.