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Need advice on starting a company

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I belong to a group that''s working on a game and we''re getting close to the stage where we''ll be looking at selling it. The members of the group live in different countries (Canada, Britain, USA and Australia). Can anyone give us advice on what we should do? Do we need to set up a company and if so what type and where would we look for more information?

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Depends on what kind of money you want to spend. If you are like me and want to do it cheap, have the guy in the USA form the cheapest corporation he can (you can prolly call five lawyers and get them to give you some free advice for about ten minutes each, they might think you are going to give them the job to write the articles of incorporation), but I would just do a simple incorporation, choose one of you to be the ceo and all four of you are fouders.

The state where that person in the USA lives has limits to the amount of stock you can issue authorized by the boards of directors, whom is just the one person ceo at this point. Whatever amount of stock (in thousands or millions) your particular state law will permit you to issue.

Then, at the first board meeting online (legal by the log file, with ceo in attendence leading the agenda) he elects each of you a board member, and you each get a fancy title, usually Exec VP of IT, of Marketing, of Admin, and a secretary for the corp. The Ceo declars all board members are granted founders stock equal to 25% ownership in the total worth of the gameco. This will be 25% f the legal limit amts in the state of incorporation of the stock.

When you sell the game (take the contract offer they give you and dissect it and rewrite parts of it in your favor so it''s more equitable), this may go back and forth a few times and is standard business most of the time. If they give you take it or leave it, I''d leave it, cause it is written too far in their favor.

Anyway, get the check, deposit it, wait until the funds clear, and divide that amount of money by the number of shares. Take that dollar figure (it will be like .00054 cent/share) and multiply that by the number of shares each founder owns. Have the company buy back the stock at the next meeting, and cut a check to each person for that 25% of stock they will no longer own, with the stipulation in the minutes of the meeting everyone gets a check in USDollars, and they are responsible for their own taxes in the jurisdiction where they reside.

This is a short version of robbing the corporation. Next game, compensate all ppl with the same shares again, and repeat.

Consult a lawyer first and foremost. You might even get one to work on the paperwork for very cheap cause they want to be your atty at rates as you really grow. This is smart, long ball, and don''t think attys don''t think this way and will do some free work up front for a small percentage of ownership in a gameco, given the industry future, and other factors

Another method may to declare one person (I stress again the USA person simply because our laws protect corporations the best, as well as copyright protections and other IP matters) owner of the game as a sole proproprietor instead of a corporation and that person can make all the other three independent contractors responsible for their own taxes where they live, and all they have to do is provide a legal address where to send the check, and then, when the game sells, the publisher cuts a check to a proprietorship, and the proprietorship cuts checks to the independent contractors, who sign and mail back reciepts for the person who cut the check so he does not pay tax for anything but his part of income.

Either way, you have an agreement between the publisher and an entity (corp or proprietorship) and that is the best way to look on paper.

There''s a million ways to skin a cat, but the main thing is to get it in writing that each of you owns an equal share of the game, and when that game sells, each of you own an equal share of the profits.

Good luck, and hope it sells big,

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Hey thanks for the advice AD. That will give us something to think about. If anyone else wants to post feel free. The more info we can get the better.

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Couple of thoughts.

There is a difference between %ownership and number of shares. A company can have 1000 shares, give 50 shares each to 4 founders and each founder has an equal ownership in the company. You can save the other shares to hire people or obtain investors. If you don''t issue all the shares at the first board meeting, then issuing shares from the treasury is possible when investment or new hires are needed. If you do issue all the shares then each of you will have to give up shares to hire or gain investment and it always feels like you are losing something in the process.

Two other things. Get a lawyer. Spend the money on documents that clearly detail the expectations of your partners. Work hours, ethics, property rights... You''ll thank yourselves when one of the founders decides its time to move on before you''ve made it.

Lastly, get someone that knows accounting. If you screw up your books or get into hairbrained accounting, you can get yourselves into deep trouble. Bankruptcy and other laws DO NOT protect you from IRS debts in most cases. I''ve seen companies fall behind in taxes from bad financial planning and have to sell their primary residences to pay it back.

Derek Licciardi
President, Elysian Productions Inc.

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