I am in the process of finishing a game and one point confuses me.

If you get your game published by say real.com, how do they get the money to you? I am not talking about the mechanics of them sending you money, but rather what I need on my side. Do I need to have a registered company or is a personal bank account enough?

What if I were to self-publish? Do I need to register a company and then get a license? Or can I just use a personal bank account?

I have looked at the sign ups for various sellers, and I know that atleast Regnow's form indicates that you can use a personal bank account.

Any links to information on this would be greatly appreciated. I think there was a thread on this board that dealt with this issue, but I haven't been able to find it.

I'd really like to know if the personal bank account is possible, if I don't want to go to the hassle of setting up a company just to sell a game.

Hopefully someone who knows for sure will answer (hint hint Steve) but my understanding is that you don't have to set up a business if you are the only developer. If however there is more than one person involved (partners and/or employees with whom you work) then that formality becomes necessary.

Either way however you will need to take account of earnings on tax forms for self-employment AND small business.

Obviously, this info is for the US only but...

You can set up a sole proprietorship with almost zero paperwork in most states. A few, like Illinois, will make you announce it in a newspaper or something silly like that. You just report the earnings on your personal taxes. Very nice and easy but.... (there's always a but) you will be personally liable for all actions of your company. If someone sues your company, they are going after you personally.

The second option is a corporation. This provides protection from liability, but requires fees, filing, and detailed record keeping. The corporation pays its own taxes and you receive your earnings from it in the form of dividends or wages. The problem here is that the corporation gets taxed, then your income from the corporation gets taxed too. No small business owner wants to get taxed twice. Almost every states allow a corporation to only have one person, so a one-man show is fine to use it.

An addition to the corporation is the s-corp. This allows what they call "pass through taxation". With this, your money is only taxed once, and you file a different tax form than a standard corporation (aka c-corp). My company, Retro64, Inc. is an s-corp.

The last, and probably best, business structure for a one-man show is the limited liability company (LLC). An LLC offers nice pass-through taxation just like an s-corp, but without all the other complicated record keeping. If I had to do it again, I would go this route for sure. In Illinois, an LLC is about 500$ to file, while an s-corp is only 100$. It was silly and short-sighted of me to go with the s-corp.

These days, it's mostly my accountant's problem though :) You should also find an attorney to do the filing for you.

Also, this is an excellent book to explain all this easier:

Small Time Operator: How to Start Your Own Business, Keep Your Books, Pay Your Taxes, and Stay Out of Trouble, 27th Edition (http://www.amazon.com/exec/obidos/tg/detail/-/0917510186/qid=1046141852/sr=8-1/ref=sr_8_1/002-7874599-7464008?v=glance&s=books&n=507846)

As for the bank account, you have to apply for a tax ID for your new company. This is similar to a social security number, but for the business. A bank will require this to open the account.

Hope that helps :)
-Mike

Someone asked about business registration before, I believe Steve suggested http://www.bizfilings.com/ they seem to be a good way to go. And yeah from what I learned in school and heard from people, the best type of company to register is LLC. It's a fairly new type actually, only 20-30 years old or something. One thing with LLC though is that some states require at least one partner (co-owner) to have an LLC. But it's well worth it since you don't have the liability of a sole proprietorship, or the taxation of a corporation as Mike said. In fact, LLC is taxed as a partnership or a sole proprietorship.

You should also find an attorney to do the filing for you.

Or a company like bizfilings.com would be an alternative to that.


I just read on bizfilings.com site that only Massachusetts requires at least 2 partners for an LLC. I previously thought it was more than one state.

Anyway you can read more here http://www.bizfilings.com/learning/llcfaq.htm

There is also mycorporation.com, but a good amount of the filing still has to be done by you. A lawyer isn't expensive for this kind of thing, which is why I would go with that.

-Mike

I wonder: What happens to company assets if you decide to close shop? Assuming you're the company's only owner, what happens to the company's non-human assets (such as money, property and IP) after closing? Can you as the company's owner transfer any of the company's assets to your name?

I would recommend registering a company simply because it's a smart business move which gives you access to lots of tax write offs (your computer, a percentage of your rent, web hosting costs, etc.). All you have to do is conduct your business with a reasonable expectation of a profit and you're considered legit.

In my case (Canadian) I was able to register my business over the internet and paid the fee ($80 bucks, I think) with my credit card.

Just register as a sole-proprietorship, you and your business are one and the same = one tax return.

If you are a sole proprietor (or the only member of an LLC), all assets (both tangible and intellectual) belong to you upon dissolution of the company. If you have some sort of partnership, the assets would be divided based on your partnership agreement (if there is one) or however you agree to do it (if there isn't one).

Originally posted by KNau
I would recommend registering a company simply because it's a smart business move which gives you access to lots of tax write offs (your computer, a percentage of your rent, web hosting costs, etc.). All you have to do is conduct your business with a reasonable expectation of a profit and you're considered legit [in Canada].


The United States has rather strict rules about writing off expenses that could be considered a hobby. If you want to write off business expenses, you need to meet certain criteria to prove that your business is not just a hobby. Here's what the IRS has to say about what you need to do to distinguish your business from a hobby:
*You carry on the activity in a business-like manner.
*The time and effort you put into the activity indicate you intend to make it profitable.
*You depend on income from the activity for your livelihood.
*Your losses are due to circumstances beyond your control (or are normal in the start-up phase of your type of business).
*You change your methods of operation in an attempt to improve profitability.
*You, or your advisors, have the knowledge needed to carry on the activity as a successful business.
*You were successful in making a profit in similar activities in the past.
*The activity makes a profit in some years (and the amount of profit it makes).
*You can expect to make a future profit from the appreciation of the assets used in the activity.

I got this information
here (http://www.irs.gov/businesses/small/article/0,,id=99239,00.html) .

I had quite a long conversation with my CPA about that list of requirements from the IRS at one point. Essentially, what it boils down to is that you have a couple of years while you can still claim it as a business, even while losing money. The first two years you can have huge losses, which is expected when starting a company. Over time though, the IRS expects those losses to decrease more and more, hopefully to the point of non-existence.

The rules are there so that you don't abuse the fact that you own a company. For example, when buyingcomputer equipment at your local computer store, they are required to collect sales tax. If you buy something from them with the intention of reselling it, you can submit to them a copy of your reseller id number and not have to pay sales tax on what you buy.

The expectation is that you are going to be reselling it later on to someone else, and the government is going to get their sales tax anyway, but they're not supposed to double tax things, which if you didn't show this form, that's what would happen.

It's possible to abuse this by buying all of your new computer stuff without paying sales tax, letting it 'sit on your shelf', and then later write it off as unsellable because it is out of date. If you contintuously do this for several years, they will revoke your reseller ID, since you're obviously using it for personal gain.

Now, this is just an example and only shows sales tax, but it does extend to other parts of a business. Essentially, they just want to make sure that your business eventually either does well or dies a miserable death. They don't like to see tons of businesses just floundering about and barely making it. It's bad for the economy.

@pangyan: You can just use a personal bank account, but the tax benefits from having a business far outweigh the minimal paperwork that something like a sole proprietorship can get you. Given the time of year, you could probably get a free tax consultation somewhere in your area and that would answer a lot of your questions. While my example would serve as a good rule of thumb and personally if I were you I'd file a DBA form, you should really talk to a Certified Public Accountant(CPA) who would know his stuff. He can explain it all a lot better than we would be able to, and chances are he'd be much more accurate since he does that stuff for a living.