Greetings All, My name is Raymond Jacobs, and I am the head of EDI Games, which is a game development group working on it's first comercial title, Morning's Wrath. We are getting very close to the time when we are going to begin selling this game, so I would like to explain a little bit about our plan, and get some feedback on what steps I need to take to ensure that this endevour wont turn into a dissaster =) 1. We are not an offical company yet, I am leaning twoards a sole proprieter type of business arangement. -what steps should I take to make that happen? -what hurdels am I likely to face? 2. products will be sold on-line via download,with applicable taxes charged as well (based on state). -what kind of records should i keep? -any other pitfalls with this method that I might not know? 3. income will come in as gross payment, at which time it will be devided up between the developers who helped to work on this game, they are not employees, they are more like indipendant contractors. -should I give them gross payments? -what record should I keep as far as payments that leave me (as the owner of the business)? -what problems am I going to potentialy face with making all of this 'extra income' as far as taxes go for this year and the following year(s). That is all I can think of for now, any help is greatly apreciated =) Thanks,

Quote: Original post by EDI
1. We are not an offical company yet, I am leaning twoards a sole proprieter type of business arangement.
-what steps should I take to make that happen?

-what hurdels am I likely to face?
Talk to a local accountant. They will advise you on the best set up for your situation and also on the likely problems

Quote: 2. products will be sold on-line via download,with applicable taxes charged as well (based on state).
-what kind of records should i keep?

Talk to a local accountant.....

Quote: -any other pitfalls with this method that I might not know?

You need to invest in marketing to attract customers, you need payment fullfilment systems (more than one) so that people can pay you, you need cheap file hosting for the files and you need to prevent pirates ripping off your game.

Quote: 3. income will come in as gross payment, at which time it will be devided up between the developers who helped to work on this game, they are not employees, they are more like indipendant contractors.
-should I give them gross payments?

-what record should I keep as far as payments that leave me (as the owner of the business)?
-what problems am I going to potentialy face with making all of this 'extra income' as far as taxes go for this year and the following year(s).
Talk to a local accountant....

Most accountants will give you an hours free consultation on setting up a business and what records tax problems you will face. Talking to a professional is always going to be better than asking in a public forum.

Quote: 1. We are not an offical company yet, I am leaning twoards a sole proprieter type of business arangement.
-what steps should I take to make that happen?
-what hurdels am I likely to face?

While I'm not an expert, I would definitely advise you to consider setting up a corporation or LLC instead of a sole proprietership. While it costs a little more money to setup, your personal assets are much better protected if there are any lawsuits or other legal action. If you set up your company as an S-Corporation or LLC, I believe both act as a pass-through as far as taxation is concerned. That is, any profits/losses are reported on your personal income tax.

From what I hear, you may want to consider setting up in Delaware. Apparently the state laws are quite business friendly. If you search online with the key words (Delaware corporation), you get tons of sites which offer incorporation services for a few hundred dollars US. However, your best bet is to talk with a local attorney to find out what best suits your needs.

1. I recommend developing a business and marketing plan. The business plan is used internally for managing the company and externally for securing financing. The marketing plan is used for producing a strategy to bring your product to your target markets. "Anyone" is not a market. Sole proprietorships work well despite what you may hear about liability and reasons for limitation. My company is a sole proprietorship. Orincon, before acquisition by Lockheed Martin, remained a sole proprietorship operated by the founder, Dan Alspach, who recently retired a multi-billionaire. A sole proprietorship is like UNIX: it's safe and rewarding if you configure it correctly.

If you're not business-oriented, and you're most likely not (no offense), I suggest you find an experienced business administrator to help you get on track. Organizations like SCORE are valuable assets. The SBA also helps with small business issues.

What steps and issues are involved? Buy a small business start-up book kit from Nolo. You can probably find the same information on Inc. and Entrepreneur, but a physical book is more convenient. Starting a business is easy. Managing and growing a successful business is not.

You should also consider acquiring Registered Trademarks for your company and product names. This process requires filling out extensive forms with the USPTO, paying lots of money, and waiting awhile for certification. If you do this, remember--in order to protect your trademark from becoming public domain, you have to use a specific format in all your marketing collateral: "EDI(R) Games". "Morning's Wrath(R) videogame". Registered Trademarks must be used as adjectives. ("(R)" is not valid by the way. The symbol must be used.) You can only use the (R) symbol if you have a Registered Trademark. I think it's actually illegal to use it without registration. The (tm) symbol must be used in the same manner; however, its use is not limited to registration. That is, you can use for non-registered trademarks.

2. Transaction records. A competent bookkeeper (or accountant) can advise you better. You don't need an accountant for small business though. Just a bookkeeper.

3. That will not work. Refer to the Separate Entity Concept. The business needs money too and you need to keep the various types of income separate. Again, a competent bookkeeper can advise you better. You may also consider employing the developers instead of treating them as contractors. There are some legal issues with your proposed payment structure as well. Having the developers sign royalty agreements is probably your best option. Consult legal counsel.

When you register your sole proprietorship with your local Assessor/Recorder/County Clerk, you're pretty much all set with the taxes issue. The IRS acknowledges your company's registration and they send you various Forms throughout the life of your company. You also need to file a DBA (Doing-Business-As) Statement with the Assessor/Recorder/County Clerk. Find out who that is and contact them for more information.

I'm no accountant or lawyer or even Obscure [smile]. But word of mouth advertising seems to work well with most companies. Game-related or otherwise. So why not have a demo (interactive or view-only) and spread the love to all the game development and freeware sites. Wouldn't that help your cause? Maybe the staff could give you some ad space here as well.

edit: sorry for not answering your question, and not reading the post very well...

Quote: Original post by EDI
We are getting very close to the time when we are going to begin selling this game, so I would like to explain a little bit about our plan, and get some feedback on what steps I need to take to ensure that this endevour wont turn into a dissaster =)

... income will come in as gross payment, at which time it will be devided up between the developers who helped to work on this game, they are not employees, they are more like indipendant contractors.

Who owns this game? Do you have a contract with the developers that states how much they will get and gives you ownership of the IP? If not then selling it would be a breach of their copyright.

I own the game, all of the developers have signed a contract stating the monies they will get as a result of game sales. The contract states that resources created for the game are owned exclusively by me.

I am a 'little' shakey on the contract thought so i am going to have everyone sign a new one before we actualy sell it, so i feel a tad bit more legaly secure.

Talk to a lawyer and an accountant. Lawyer can help with the contract/vendor license (if needed in your state), acct with the bookkeeping, whether or not to incorporate, how to pay/report taxes, etc. Check out the Small Business Administration for starters.

Good luck with your game. Screen shots look cool.

Well you have the legal/IP side covered (or at least you are aware of it) and you are also smart enough to keep watching out for other things that might trip you up so you seem to be off to a good start.

If you go the download/self publish route I would recommend joining the ASP (www.asp-shareware.org). It costs $100 per year but the private news groups are worth that on their own. Loads of memebers willing to offer excellent advice on all the issues relating to shareware. Everything from marketing to pricing, contracting, tax, international trading, fullfilment services etc.

I don't do shareware but I joined to find out what it was like and I would recommend it to anyone interested in self publishing/downloading.

thanks to all who have replied =)

I think the biggest thing that worries me here is this.

It looks like it is going to require a potentialy large heap of cash to get things going. Given that we arn't 'positive' that anyone is even going to purchase our game, that makes me want to start things out with as little overhead as possible.

Technically we dont have a budget, anything that needs to be paid for is coming out of my personal funds, so we need to be able to sell this game legaly for as little up front cost as possible; I dont want this project to put me in the 'hole' so to speak.

That being said, we dont have money for accountants and lawers, we simply can't justify it, so I am in need of somthing like a 'turn-key' "start your company" solution, that isnt going to cost me my life savings. Here are a few things that come to mind.

1. I've seen a AD on this site called 'The Kit', and from what I gather it is a kit for game developers starting a business, Has anyone looked into this? Would you recomend it?

2. There is an organization near where I live that gives free consoltation and materials, to those wishing to start a small business. Has anyone used somthing like this before? is thier help ususaly helpful?


So i guess here is the bottom line:

-We are going to have a game to sell
-I will need to be able to sell it legaly online via download
-I need to pay the people who helped make it (% of sales)
-I need to make sure I dont piss off Uncle Sam
-I cant spend every waking hour filling out paper-work
-This all needs to be done on a next-to-nothing budget

I'm sure it sounds like I'm being unreasonable, but I'm not a business man, nor do I want to be, nor do i want my 'company' to be focused just on money, since that is not why we started this.

I'm just a guy with somthing to sell, if you get what I mean =)