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jfreedan

Best State to Form Company In

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I'm sorry if this is answered somewhere else...I've looked here and elsewhere on the net, and I cant find out which State(s) are the best to form a video game company in the USA? More specifically, the best to form a game developer whose product is a MMORPG game. I know Washington and California is popular for software...but I cant find the information on why that is either (maybe I'm looking the wrong places, I dunno). Can anyone with any experience help me out here please?

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What are you looking for exactly?? Do you mean best state for labour laws?? Best state for taxitation?? Best state for talent?? Best state for cost of living?? Best state for weather??

Cheers
Chris

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You should form your company near where your people already live, so they don't have to move!

If you're in Vancouver, and the people who'll be working at your company (you already know them because you've come to trust their skills through your having worked together, right?) are also in Vancouver, then Vancouver is a perfectly good place to form your company.

Why would you want to start the company somewhere else?

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Guest Anonymous Poster
You could incorporate in Delaware (http://www.delawareintercorp.com/).

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There are some people who say "incorporate in state X because of taxes" or "incorporate in state Y because of labor laws".

The best answer to this and all other law-related questions is simple -- Go talk to a real lawyer.




Since you will be doing business in your state, you will still have to register with your state. You'll still have to get a business license in your state. You'll still have to pay taxes in your state. You'll have to follow the laws of another state in addition to your own. You might end up with a law suit in the other state rather than your own. You might end up needing to travel to that state multiple times to handle various legal matters relating to a business. And so on.


Just do it all locally, it's the only sane way to go.

The only real exception to this rule is living in Kansas City (MO/KS), St. Louis (MO/IL), Memphis (TN/AR) or some other major city that spans borders. ... [oh]

But since you're in Vancouver, I suppose you know all about spanning borders with the USA/Canada thing. [grin]

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Our development team operates in a 'virtual enviroment'; we do not all live in the same State currently (Washington, California and New Jersey).

And my question related to taxation and/or other unique legal protections.

I sent some inquiries of this same question out to some local law firms but havent heard anything back in over a week, which is why I've gotten to the point I'm asking on a forum.....

I'm leaning toward forming a LLC; the question is what State is best for it in the videogame development field?

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Quote:
Original post by jfreedan
I sent some inquiries of this same question out to some local law firms but havent heard anything back in over a week, which is why I've gotten to the point I'm asking on a forum.....


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Original post by jfreedan
I sent some inquiries of this same question out to some local law firms but havent heard anything back in over a week.....
As Frob so eloquently put it - you don't "send" enquiries of this nature you phone them.

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If it's any help, my accountant advised the following (and a local firm of lawyers agreed):

1) Because our turnover is expected initially to not be enough to support the team we do not employ them. Instead we use a consultancy agreement which leaves the people on our team as effectively self-employed. This takes the onus from us of dealing with THEIR taxes (if there's such a thing as PAYE (pay as you earn) where you are). It also allows you to contract for a rate of pay per hour, but not be obliged to monitor working hours or conditions, since your staff are effectively working for themselves. This can present problems (for them) if they can be proven to be working for only one firm (a master-slave relationship) in which case your tax authority may insist that they should be treated as fully employed. In the case of a distributed team, I'm not sure how this would be enforced though.

2) Draft and check any specialised contract clauses BEFORE passing them to a lawyer. If you have a clear idea of what you want (a 'dummy' contract) and everybody's agreeing to it, it's less likely to take lawyer time (and therefore money) renegotiating the contracts later. Plus it gives you a really good chance to get your head around what everybody expects in place to protect their rights. Do compare and contrast to real contracts to make sure you're not doing anything silly.

3) Form the company early and if possible leave it under a certificate of non-trading (allows you to do set-up stuff like bank accounts, putting in start up capital) until you're ready to trade (which means paying money out), or pay for the contracts etc. This step has taken a lot longer than I expected it to - E3 slowed things down a bit, as did my general tardiness over approaching lawyers and chasing them up. Over here, non-trading companies basically don't cost you anything - it's only when you start to shuffle money through it that you're liable for taxes etc. etc, so delays aren't crippling to the company at this point (providing you're not relying on it for income).

I know these points aren't what you were originally asking about - but they're definitely helping my firm get on its feet, and has allowed a more formalised profit sharing arrangement, which means we can throw money at advertising and upkeep rather than the team at first to stand a chance at gaining customers. Useful, when you don't have a pet millionaire handy. Edit: Yes, the specialised contracts do cost more to set up, but if they give you more stretch in your company budgets early on, they're worth the investment in my opinion.

In terms of location though (especially for an MMO) it doesn't matter. Your product is globally accessible. Any license agreement has to be applicable and binding whereever you market your game. You can theoretically expect lawsuits from anywhere you market your game. Similarly, any contracts you make with your team have to be applicable and binding to the locations of your team members. Typically either UK or California state laws are used (according to my lawyers) and either are considered usuable in a worldwide setting (typically EULAs include a clause agreeing to be bound by a set of laws for the purposes of the agreement).

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Quote:
Original post by jfreedan
Our development team operates in a 'virtual enviroment'; we do not all live in the same State currently (Washington, California and New Jersey).

And my question related to taxation and/or other unique legal protections.

I sent some inquiries of this same question out to some local law firms but havent heard anything back in over a week, which is why I've gotten to the point I'm asking on a forum.....

I'm leaning toward forming a LLC; the question is what State is best for it in the videogame development field?


Definitely get a lawyer. I know it costs money, but will cost less than screwing up. Not sure why yours aren't answering inquiries. I've had very good service from Chris Hoyt and Thomas Buscaglia, as far as answering light inquiry. but as far as picking the lawyer, don't pick any who don't get back to you, since that's a sign of things to come.

There's no "best state" for videogame companies, unless you're planning to move everyone to a single state and have an office. (Colorado is nice and cheap). Now, I have to register my company in NJ, because I live there and we're forming as an S-Corp, and NJ considers that if you are an S-Corp, the owners are employees, and even if you only have 1 employee in NJ, you are doing business in NJ. LLC is different, and NJ doesn't consider the company owners employees, but if you have a non-owner employee in NJ, you are doing business in NJ. So, NJ's going after its cut, one way or another. :)
But we're in a similar boat. No physical office; entirely virtual. Make sure to do everything so that each person working for you signs a contract and an NDA and so they absolutely count as an Independent Contractor, and not an employee. The lawyer will need to guide you.

Now, as far as registering in a state like Nevada or Delaware, it's not as simple as just saying you're there. You need the registered agent and that state takes its cut, as well.

Good luck!

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