In the old days, live action stories focused on real people while animation focused on things not easily done convincingly such as talking cats or trips to fantastic worlds. However as special effects have gotten better, this distinction has blurred.
Nowadays comic book heroes are appearing on the big screen while in the past, creating such special effects was too expensive and unconvincing. So with special effects improving and Disney making live action movies of their older animated films like “Beauty and the Beast” or “Mulan,” there’s really no difference between animation and live action.
However, if you want to write a screenplay, here’s a good rule of thumb. Make it animated if it involves lots of special effects. That’s because Hollywood won’t invest millions in special effects unless you’re James Cameron or the story is based on an existing franchise that has already proven popular like “Harry Potter” or “Star Wars.”
Animation is best when it involves lots of extreme elements such as talking Yeti, talking cars, or even talking animals. “Babe” was a successful live action film involving talking animals, but “Chicken Run” was a more farcical story about talking chickens trying to break out of their farm that resembles a prisoner of war camp. In general, the more exaggerated your story, the better candidate it is for animation. The more realistic your story elements, the better it might be for live action, provided the story environment doesn’t involve lots of special effects.
Think of the best animated films to see how animation made telling the story far easier because of unusual characters or backgrounds. “Toy Story” is about talking toys, which could have been created with live action but animated characters just look so much better and believable. “Cars” is about talking cars so live action would have been clumsier.
Yet “Up” is mostly about ordinary humans with a smattering of talking dogs. “Brave” is mostly about humans with a woman turned into a bear, so both stories could have been live action. “Wreck-It Ralph” is about video game characters, so it makes sense that they appear animated while “Madagascar” is about talking zoo animals, so animation makes sense there too.
What if “The Godfather” or “Beverly Hills Cop” were animated? Would the animation have made the story more believable? Probably not, so live action is best for those types of stories.
The bottom line is that animation is generally reserved for characters and stories that are mostly fantastic (with lots of exceptions like “Up”) while live action is better for characters and stories that are more about the real world. if you want to write an animated film, make sure your story would be harder to do with special effects for live action. In other words, you only want to animate a story if it involves a lot of non-realistic characters and settings.