Business Planning Part 2
The Logistics
by Mona Ibrahim

Contents   Introduction   Financing your Company   The Finer Points—A To Do List   Conclusion   Printable version   Discuss this article The Series   Part I: The Building Blocks   Part II: The Logistics

The Finer Points — A To Do List

Once you’ve determined the whys and wherefores of how to finance your business, you need to actually create the entity. Every distinct entity has particular requirements for tax and regulation purposes. It’s necessary to comply with those requirements to ensure proper tax treatment and, in the case of corporations and LLCs, to maintain limited liability.

Before You Get Started

One burden you want to avoid is doing this more than once. Therefore it is important to take the necessary steps to do it properly the first time. That means getting all of your ducks in row as far as figuring out your entity, financing, and business team before you start filing your paperwork with the government. The checklist below is for the formation of an LLC. While the formation of business entities is on a whole fairly uniform, if you elect to organize as another entity you must a) first make sure that your state recognizes such an entity as a valid business form, and b) comply with all local, state, and federal rules and regulations with regard to business formation. Therefore it is always helpful to have a lawyer at this stage in your business planning. Another question you want to ask yourself is where you want to register your entity—while it is typically problematic to organize your small business in a state other than your principal place of business, some states such as Delaware offer tax incentives for entities who register there. Many states do not require that the business members or board live in the state where the entity is registered. A post office box under your business's name may be sufficient. Keep in mind that your business entity is distinct from you (depending on the entity), and your entity can legally exist in two places at once (where it is incorporated and where its principal place of business is).

LLC Checklist

DBA (Doing Business As)

Any business that uses a trade name or name that differs from the name that appears on the Articles of Organization must obtain a DBA. This is the name you want your company referred to in contracts, bank statements, and other transactions and investments. Many banks require that you provide your DBA prior to opening a business account. DBA's have an added benefit for LLCs in that they allow game developers to use a different DBA for each game or website they create without forming an entirely new entity (there may be other reasons to organize each game in development as a separate business entity, however. You can have one LLC and multiple DBAs.

Obtaining your DBA varies from state to state, county to county, and country to country. If you are located in the US, you may want to the contact the office of your Secretary of State or the County Seat to determine how to obtain a DBA. If you are in another country, contact your local authorities (starting at the city level—i.e., city hall, mayor's office-- and working your way up) to determine how to obtain the proper registrations.

Articles of Organization

Your Articles of Organization have serious legal consequences, and should therefore be drafted by or with the assistance of an attorney. Similarly, you must be very careful that your Articles of Organization and your business's Operating Agreement do not contradict one another. Your Articles of Organization may include:

• Your business's name and principal location,
• The duration (or how long you expect to be in business to operate),
• The business's purpose,
• The name and address of the Agent of the company (individual assigned to receive service of process and other legal documents),
• The initial Capital invested by the company and its members,
• Division of Ownership of the company,
• Winding up/Termination of the Company,
• Management of the company—i.e., who is in charge of what,
• Indemnification clause, stating that the entity indemnifies its individual members as to all claims arising from doing business.

Operating Agreement

Your operating agreement will set out the finer points of your company's management, finances, organization, and ownership structure. This is an agreement between the members of the company that sets out how the company is to operate. As a result, it will vary drastically from company to company. As noted above, it is very important that your operating agreement does not contradict the Articles of Organization—a contradiction may cause your operating agreement to be voided unless the particular contradiction is severable from the rest of the agreement. Once again, a lawyer is very valuable at this stage.

Federal Registration

As a business with salaried employees, you will need to obtain Federal Tax ID number and an EIN (Employer Identification Number). You can obtain the forms for these ID numbers at the IRS business portal.

State Registration

You will also need to register with the state where you plan on organizing. Note: This can get tricky if you are registering in a state other than your principal place of business. Before making that decision, consult an attorney and make sure it is in the best interest of your company. Also, read the "miscellaneous issues" section of this IGDA article. To register with a state, you typically need to provide a registration form, a registration fee, and a copy of your Articles of Organization.

County Registration

In many states, you may be required to register your business in the county where you plan on operating. To do this, you need to visit your county seat/satellite office or go online to fill out the registration form. As this may also be the place where you register for your DBA, you may be able to accomplish these tasks at the same time. Different counties have different rules—some may require your Articles of Organization while others do not.

Municipal Registration

You must register as a business within the city where you plan on doing business. This usually means a trip to city hall/town hall or your local court house to fill out the requisite application forms.

Keep in mind that you are accountable for Federal, State, County, and local/city taxes. All of these registrations are almost entirely for that purpose only. However, some locations have specific regulations. Most of the offices where you register will provide you documentation of those specific rules and regulations. If they do not, it is your responsibility to educate yourself about the rules and regulations that apply to your business.

Conclusion