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The business of game development

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Raduprv

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So, today we went to an accountant, to find out the latest information about this year's taxes and some clarification about our legal status.
He just confirmed what I knew already, and I am going to enumerate some rummors for other game developers:
(keep in mind that this is for US, and the legislation might be different depending on the state)

1. You need a company if you make money.
Bullshit. You don't need anything.
If you operate under your name, and you are the only owner of a game (or if it is a familly business) you can operate as a sole proprietor, and nothing else is required.

2. You need to register with the state.
Not really. Only if you operate under a fictitious name. If you use your real name for the payments, there is no need to register.

3. You need a federal tax ID.
Not if you are a sole proprietor. You can use your social security number.

4. You are not considered a business unless you register with the state.
Not quite. Acording to the IRS, you are a business as long as you start something with the purpose of making money, wether or not you actually make money.


On other news, I am currently working at implementing a guild owned and operated merchant NPC, so that the guilds will be able to have their own ingame shop, with them in control of the items the NPC buys and sells, prices, quantities, etc.
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Thanks for the info Rad!

I was thinking about using one of these online company registration places but now I'll check our state laws to see what I need to get started.

Do you know if you can record losses following what you posted about? Expenses?

Or is it just to record income?

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You can record expenses as evrything that is used for your business. Including part of the rent/mortage if you use your house as a buisness place (ie. work from home).
So if you have 4 rooms, and 1 room is for your business activity, then 1/4 of the rent or mortage can be deducted as business expense.
You cna also deduct the whole ISP fee, some gas for the car, and so on.

As for the loses, if they are related to the game, sure!

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The big problem with a sole-proprietorship is that it is that you and your company are legally the same thing. That means that anyone that has a beaf with your company can come after not only your business assets, but your personal assets as well (because they are the same.)

Setting up a LLC is trivial these days. IMO. There is not any reason to start one before you start taking money from people. Once you do start making money, then it starts making sense and the protection is totally worth the slight expense and hassle.

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It makes sense to have an LLC if you are in a business where people might sue you, such as constructions, medical stuff, etc.
And/or if you make a lot of money.
In our case, however, that is not necesary because we don't yet make a lot of money and we are not in a business where there is a lot of suing going around.

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