Hey everyone. I should have a complete game ready to go in about 1-2 months, and I want to start up on the company side of things. I made one other game about 5 years ago and sold it by shareware simply by having people who wanted the full version write out a check to my name. I now know how bad a practice that is, since people wont trust it as much, and also how very illegal it is since no taxes were really being reported on my end But now for this game I want to do it legitimately, under a company name and be able to accept credit card payments, be it by paypal or by a merchants account I will set up. The question is this, I can''t determine what type of entity to set up the company as. From what I see I have 3 choices: S-corporation: I would choose this because this avoids double taxation since I am really the sole person in the corporation. The problem with this is that Im gonna be running this out of NY which charges a MINIMUM of $400/year in corp. tax no matter what your profits/losses are, and I dont expect to generate too much revenue from this game so that will be a big hit, and not realyl worth it. I read in Andre Lamothe''s teach yourself game programming in 21 days to start up the company as a sole proprietorship, which he says costs about $50, at least back when it was printed, adn should do fine. But what are the possibile liabilities I ahve in releasing a game applicationa dn what posibilities do I have of getting sued and getting my pants taken away from me? I dont really see what damage a game can do, maybe crash the computer, I''m not sure. And would a disclaimer before installation fix that problem? And then there is the LLC, which I dont really understand too much (kind of like the rest I guess ), but I think it gives me more protection from people suing me. My plans for the company, regardless of entity, are this: I plan to release this one game and enjoy the profits. I do have another game that was put on hold a long time ago but can be released in a relatively short period of time as well, so it might be 2 games released within a year. After that I really dont know if I will continue because im starting a full tiem job with a lot of hours soon so I wont realy have time for more. But if the games do well and teh company does well who knows, I may want to go with it and expand it and create a big powerful empire so if anyone could give some advice on this that would be great. oh, one more question, is it necessary to obtain a copyright for the games I will be releasing? - Rob ByteMe95::~ByteMe95() My S(h)ite

Not sure about your company choice as it would seem that licensing fees and tax rates will vary by state and even by specific county/parish and city. Also, the amount of liability that your business would have in regards to being sued would also vary depending on your location.

As for copyright, legally, as soon as you fix an idea to paper, disk or any physical form other than in your head then you have a copyright. However, proving that you have said copyright in a court of law later when someone else tries to sell your idea, will be difficult if you don''t have your copyright registered. This process is fairly simple and cost efficient. Registering trademarks is likewise a good idea if you have anything catchy you don''t want others to use. getting a patent on your software design will take time and probably money and as of recently AFAIK it''s pretty difficult to actually patent a program or a type of code.

The most important advice I could give you is to hire a dreadful attorney, or at least take council with one. Most are willing to give a little advice during a free counsultation, but then again, that amount of advice will be limited. When starting a company an attorney is almost required as somoeone out there for some reason will want to sue you for something.

Either your game will crash at least one system or something else will crash a system and your game will get blamed or the game will be so addictive someone will stop working to play the game and then sue you because they lost their house. Either way, it''s a fairly certain guarantee that in the computer software world, you will at some time or another be sued Get used to the idea. I suppose there are exceptions to every rule and you may get lucky, but in the end it''s more important that you keep your nose and your business clean, and frankly, if you don''t know the difference between Inc. and LLC then I highly suggest an attorney or someone with good experience in the business world. There is a lot more to running a business than just filing tax papers and making a profit (or a loss). As hated as attorneys generally are, they are as helpful to a company as a compiler is to a programmer.

Again, this is just my advice, feel free to jump right in and do your best. To my knowledge, anyone with the licensing fees can officially own a legal business. It is just my opinion to seek council with a professional. Not all people who post here are professionals believe it or not I''m not, that''s for sure!

Take it with a grain (or bottle) of salt.

Webby

Corporation. It''s quick, easy, and (in most cases) cheap.

If you don''t want to do it yourself, just go to one of those places that will incorporate you for $119 (or whatever).

Just incorporate in whatever state you live in.

Buster, I would prefer incorporation. The problem is that in NYC thjere is a minimum of $400 in taxes, no matter what i make. So say I make $1000/year from this, i lose almost 50% of my profits on that.

ByteMe95::~ByteMe95()
My S(h)ite

Hi.

Why are you not considering a sole proprietorship? LLC stands for limited liability company, and if you are not forming a business with anyone else there is no real point. [This is not advice but a fact].

Anyway, some of the questions you have really do require the professional advice of an attorney, not all of whom are dreadful.

Do a web search on the New York State Bar Association, and then seek out their pro bono (free) resources for small businesses. You may be able to effect the business formation yourself, but you should really consult an attorney for your ecommerce operations on the web, as well as for the licenses you intend to use for your game.

Check the New York state government taxation entity''s website and download their pamphlets on taxation requirements (maybe called the "state comptroller" or something like that).

I''m impressed with the above poster''s knowledge on intellectual property, and agree with the basic assessment. Without more information its hard to say how much trademark registration you should do, but that will not completely preclude you from claiming rights in marks you use to associate with your product in the public''s eye. Copryigts are fairly easy, but the $30 registrations can pile up, select a couple of choice items and register them.

Good luck to you.

quote: Original post by ByteMe95
Buster, I would prefer incorporation. The problem is that in NYC thjere is a minimum of $400 in taxes, no matter what i make. So say I make $1000/year from this, i lose almost 50% of my profits on that.

I believe that delaware doesn''t require a local presence to incporporate. You might look into forming a corporation there, if NY isn''t going to just charge you as a foreign corporation.

quote: Original post by Anonymous Poster
Why are you not considering a sole proprietorship? LLC stands for limited liability company, and if you are not forming a business with anyone else there is no real point. [This is not advice but a fact].

This is NOT true! An LLC exists to separate your assets from the company. This means that if your LLC were sued, all they could take are the assets of the company, not your own...in other words, they could probably seize all income from the LLC, but not get your house or garnish wages from another job. LLCs are also great for separating one business from another...say you own a real estate company and a games company. If they were both LLCs, then a lawsuit against one could not get any money from the other.

With all that said, you have to decide whether an LLC is worth it to you. You seem concerned about paying even $400 a year. It does cost some money to set one up, especially if you do it right and have a lawyer do it. There are some pitfalls in setting up an LLC, and you can wind up losing your limited liability if you screw it up, so it''s probably worth paying a professional to do it.

How likely are you to be sued, and for what? How much would damages be? If you''re just writing a game, I can''t imagine you''re likely to do any damage beyond formatting a hard drive. A simple disclaimer would probably be enough to protect you from liability there.

That is one of my questions, how liable am I exactly?
I am just selling a game, so I dotn know how much damage can really be done (I doubt even a hard disk format is possible), or how much protection a disclaimer gives, and howm much I can possibly be sued for.

ByteMe95::~ByteMe95()
My S(h)ite

You can get an liability policy to protect your company. These are often sold with $1 million protection, at a surprisingly low price. This does not protect you from negligence...you need a different type of insurance for that, called Errors and Omissions, and I believe that is not cheap.

I have to think you''re probably over-thinking this. Yes, some idiot may decide to sue you because their computer caught fire shortly after playing your game. Are they likely to win? I sincerely doubt it. You hear about all kinds of crazy lawsuits, but what people forget is that almost all of those are thrown out by the judges.

Not sure how much good a disclaimer really does, but it certainly can''t hurt to include one. Look at some disclaimers from the big software companies, and then model yours after that.

Better yet, see a lawyer in your local area, pay him for an hour, and ask him all these questions. They should know a lot more about the local city and state laws.

Finally, everyone who thinks about starting a small business in the U.S. should do a lot of reading on the Small Business Administration site:

http://www.sba.gov/

There is an astounding amount of free and useful advice on this site.

E&O insurance is not cheap and is based on your operations and the number of employees you have so it doesn''t scale well either.

Sole Props do not protect your personal assets so anything over the limit of your general liability will come out of your rear.

LLCs and S-Corps are similar in many ways. Typically, if you are going to run a lifestyle business where you will be taking the money out of the company you will want one of these. If your goals are bigger, I''d say go with a C-Corp.

C-Corps are full blown corporations and you will never have a problem conducting business using them. LLCs and S-Corps have investing restrictions and other restrictions. At times that can even have benefit restrictions that will limit your choices that you can use to provide employee benefits. Anyway, C-Corps are always looked down upon as a small business entity because of the dreaded double taxation issue. Most companies will not generate positive income until the 3rd year of operation. If you don''t make money, you don''t pay corporate taxes so the issue is really moot.

Personal addition.
I find that the benefit of drawing a W2 incoming from the company is far more rewarding personally, because the places you go to gain personal credit can''t tell the difference between your W2 and the $500 million dollar company next door. You simply look more legit to the traditional banking types even though you are a small business owner. Ask a divedend drawing S-Corp owner if they have ever had trouble buying a car in the first two years of incorporation?

Derek Licciardi
President, Elysian Productions Inc.