I am curious, what’s everyone’s opinion and set up for your game company/business? Currently I am registered and set up as sole trader. The disadvantage of sole trader is all your liability are directly linked to you. Also, you cannot registered as a company on Apple’s Developer program.
So I am hugely curious, is anyone here who has gone the incorporated route? What’s the advantage?
Doing business in the “sue happy Country” of the USA, it definatly pays of to have a layer of protection.
The setup cost in the UK is pretty cheap, and should you make it big the tax advantage is worth it.
The only thing is that your running cost at the beginning might be higher, but it also allows you to buy stuff internationally without paying VAT buying a new car for example 100 K - 20% is quite nice.
Yeh, the tax incentive is definitely a big advantage, but it also puts pressure on you to make it worthwhile in this form of enterprise. If you don’t make a certain amount back (depending on the tax laws of respective countries), it can actually cost more than being sole trader. For example, the government here tax the enterprise at a flat rate of 30%, while sole trader (same as with employees’s income tax) are on sliding scale - from 12.6% and up to 45% depends on how much you earn.
Another thing that worries me is the amount of paperworks I have to do once you are incorporated.
The setup cost doesn’t worry me that much - its fairly affordable here and can be done in less than 40 minutes online. What worries me is the amount of legworks and paperworks I have to do once going down that route.
What country are we talking about? In the US, most small businesses who incorporate do so to minimize their personal liability in case of a lawsuit and/or save on their taxes. In many cases, it’s a wash. Most good attorneys will be able to go after your personal assets in a lawsuit and the costs to maintain a corporation can be much higher than a sole proprietorship. Some people who conduct business in a tax “heavy” state (like California) try to avoid taxes by incorporating in a tax “light” state like Nevada. The states and Fed are on to this so it can come back and bite you later if you’re not careful. A third option is to form a LLC (Limited Liability Company) which is much simpler/cheaper to manage and limits your personal liability (to a much lesser degree). Most states and the Fed view one man LLC’s as sole proprietors for taxes, so there’s no tax savings.
That’s the thing, what liabilities are there if you are a 1-man studio distributing your game digitally through App Stores, Android Market or Steam?? Unless you are getting sued for copyright/trademark infringement, I don’t see what other potential liabilities exist that would warrant an extra layer of legal and financial protection offer by the corporation.
The main benefit of LTD company isn’t the protection, its the lower taxes. Although barely no-one sues anyone for indie games successfully its still wise to have a layer of protection.
Yes you are 100% liable for anything sold through any appstore. If you infringe on IP it isn’t to anyone’s benefit to take you down, and even courts encourage people to arrange an agreement where you pay royalties.
However LTD company comes with its own problems. Failure to mantain 100% clean books means your business could be absolved. You not only need to have flawless book keeping for companies house, you also need it for the inland revenue. You also need a business bank account, and every meeting you have with the bank or the accountant needs minutes, or a document covering what was said. It’s a big area of expertise.
Shop around and get an accountant familiar with “business startups” in your local area.
A chartered accountant will pay for himself 10 times over. Get one or forget being any sort of sizable LTD company.
I personally do zero paperwork. Thats right, none. I sign the odd document my accountant sends my way. He deals with all my stuff except the bank.
If I had to deal with paperwork it would probably cost me £50k a year in lost earnings just being my own accountant.
LTD company… don’t do it yourself. End of story. The only time you can do it yourself is if you’re earning less than 7.4k a year
you are taxed on every bracket, and bracket therafter. So if you make 150,000 as sole trader you’re not taxed at 50%, only on the earnings above that (yes it goes up to 50% now). Same for every bracket under it. So you need to calculate earnings and tax for each category you’re taxed at, not the maximum.
you are still taxed whenever money moves from the business bank account. So it is taxed 20% at source, but taxed again if you transfer any to you - unless it’s dividends up to 30k.
accountant. get one.
don’t get a cheap accountant. and don’t get one that’s not chartered. you get what you pay for. Don’t get one that requires you send your own book keeping. Get one that deals with that and deals with the registered address of business so paperwork from inland revenue goes to him to chew on.
True, and as I indicated in my earlier email, even though your company is incorporated a good attorney will still try to access your personal assets. Another, lesser, benefit to incorporating is that having “Inc.” after your company name makes your company sound more business-like.
You still haven’t answered the question “what country are we talking about” because every country will be different and I’m only talking about businesses here in the US.
Oh and don’t bother doing any of this until you have at least a free game with ad sponsorship out paying into paypal, plus one paid game ready to roll. There is so much stress involved. So much to learn. So much to deal with. Apple will convert your current developer account to your business if you like.
Then there’s EIN, tax with holding treaties and more to deal with. The business is something that can be all done with within a week if you’re sharp and fast. But it is stressful.
Ensure you have worked out marketing and everything else. You’re not being a LTD company because its fun and less taxes, you’re going to have to treat it like a BUSINESS and run it like one. No screwing around IMHO I would finish a game long before this step.
VAT registration can be done as a sole trader in the UK. You have to over a certain turnover.
Exactly, that’s what I am afraid of - the amount of paperworks require for minutes of meetings and book keeping seems extraordinary to me. It makes me wonder how small indie game studios are able to do this.
I see, I guess that’s the way to go.
Sorry, I didn’t mention the country because I want to get some perspective on the laws regarding this matter globally. I am from Australia, so, from the sound of it, its fairly similar to the UK and some extent the US in regard to the formation of corporation and the related tax laws.
Oh and its up to 45% here 
This thread and the other one about “how to earn x amount in year” really helped on how to grasp this as a business standpoint. Thanks for the information and tips guys
First time poster, long time lurker.
You gotta be a registered company to submit games to the appstore?
No, you can apply as an individual.
No, you can register as Apple developer either as Company or Individual.
The difference is as company, you can add as many team members as you want, under the company name. And of course, as a company, you sound more “legit”, and also it provides some level of privacy. Developers registered as “Individual” have their real name displayed in the App Store .
Prob best to stay sole trader until you hit x monies. If you hit x monies it doesn’t matter, just withdraw it all and flee to cuba.
I am already ahead of you on that one !
I will be operating out on international water where (tax) laws don’t exist.
I will need a boat :-0