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Business Start up model with Freelancer or Contractor.

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Hi There,

 

We are based on Uk and we soon be ready to release our first title. We come to a point now where we want to open a company that is shared between in our team.  We done a bit of investigation and we could potentially all register as a shareholder and go for a limited company. Procedure for this seems simple as we can simply go to the website and fill the necessary forms.

 

What I would like to know is , what would happen if some of the team members decide  not  to become part of the overall company but simply would like a share from the profit we made from the game we worked on together?  Can they become freelancers or contractors who could just ask for a share from the profit made from the game? If so, what sort of Business & law paper works we need to fill in? if its not are there another  ways to do this?

 

Please keep in mind we are from UK. if your not in same region please at least provide us with the information of where you based on.

 

Thank you so much.

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As Tom says, you need to hire an attorney.  Dont just go to a web site and fill in the forms!

 

But you also need to decide what you want :)...

Remember, a lawyer gives you legal advice.  That is different from business advice.

A lawyer explained it to me this way.. Business decisions are yours to make, and yours alone.  What a lawyer will do is explain the legal ramifications of those decisions.

 

So (for example), a business decision might be "2 of us will form the company, and everyone else will be considered freelancers/contractors for the project"

The legal advice might be "well, if you do that, then you need to form the company in such and such a way, and here is an agreement your contractors need to sign, etc."

Of course, a lawyer might also offer up some business advice as well, mainly because they may have seen similar situations before, or because there are very clear legal reasons why you might want to make a particular  business decision...

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If you want to do profit sharing, you can simply distribute the shares of your company between you e.g. you have 50%, two people have 20% each, one has 10%. When the company makes profit and issues dividends, you automatically split them between the shares. This does not necessitate all the people being directors of the company but it does mean they own these shares basically forever and will always get the same % of profit even if you fall out or they decide they don't want to do any work at all... they own that % of the business.

 

You could of course set up a fairly typical contractor/freelancer contract, but stipulate they will be paid a % of revenue taken on the specific games they worked on. Then when they leave after one game, you're not paying them 20% of everything the company ever makes, you can "fire" them, etc.

 

I think you need to agree between yourselves in plain English what it is you actually want - are they partners or contractors working for "commission only", what happens when they leave or you take on more people, etc. And then approach a legal professional depending how things turn out. I disagree with Tom, you don't need a special "games attorney". It's really just a typical small software business setup issue.

 

One thing I can say is that it's much easier if those who aren't partners in the company get paid for their work in the regular way, to separate the company owners from the company workers... much easier to justify working for free when you own 30% of the shares in the company.

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