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TheMorpheusComplex

What Type of Buisness

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Hello everyone, new guy. I have searched google high and low on the type of businesses there is, Sole-Proprietorship, Corporation, Limited Liability Company. But the problems is that none of them specify what effect these have on a company's development on a video game. Do they even have an effect on game development? Could someone explain? 

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Hi TheMorpheusComplex!
I think the type of company will affect how you can run the company and what your company is allowed to do. What type of company you can start will also depend on the country you chose to start your buisness in. Some forms of companies might not allow you to hire peapole to work for you, wich might be an issue if you plan to do that. There can also be other aspects like how much money is needed to start or if you can sell stocks to get more cache into the company etc. Then athleast in my country you will thell the authorities what kind off buissnes you tend to run and that will be the kind of buisness you get aproved for.
I would try to find a company register and check out a couple of gamedev companies in your country(preferably small) and check what form of company they have and then read more about that one! Good luck!

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Make sure you have a product to sell (a game) before you worry about this.

 

If you're a solo dev, make an LLC in case you get sued.

 

If you have multiple members/potential investors go with a corporation.

 

Never use a sole proprietorship

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Make sure you have a product to sell (a game) before you worry about this.


I disagree. Make sure you have contracts in place with any and all partners or contributors
to your game before you make a product to sell. Make sure you and all your partners or
contributors have a crystal-clear agreement, in writing, as to who owns what and who gets
what out of any possible sales. It may be desirable to formalize a "company" in the process
of making those contracts.

Read this: http://maientertainmentlaw.com/2008/11/collaboration/

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Yeah if you're making a game as a team which everyone will own (working for equity) then you need a company first, and the constitution / share schedule / contribution agreements / etc workes out before you get too much gamedev work done...

If you're paying team members up front, it's less of an issue. Money changing hands is usually indicative of work changing ownership to you, but you should use IP contracts there too just to be safe.

Never use a sole proprietorship

I'm not an "employee" of our LLC/PTYLTD (which has multiple owners) - it only hires contractors. Here in Aus, contractors must be a business, so I'm also a sole proprietor in order to get paid by my company.

But yes, if you're selling a product to the public, don't use a sole proprietorship for that as it gives you no legal/financial insulation from any business mistakes.

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I have searched google high and low on the type of businesses there is, Sole-Proprietorship, Corporation, Limited Liability Company. But the problems is that none of them specify what effect these have on a company's development on a video game. Do they even have an effect on game development? Could someone explain?

 

Assuming the US due to the names.

 

None of them should affect the process of development.

 

They do affect how you operate your business and how taxes are paid.  They are all managed by the individual state, you'll want to talk to your local SBA office for details specific to your location.

 

  • Doing Business As, or DBA. Works well when it is just you. Money goes to you personally. You are responsible to file all tax forms, such as Schedule C and Schedule SE. All profit or loss goes to you personally. Usually inexpensive to establish and requires the least paperwork.
  • Sole Proprietorship. Has its own business entity, but that's about it. Generally requires a single owner. Like above, you are responsible for the same tax forms, single owner. All profit/loss goes to you personally.
  • S Corporation. Business entity that allows for multiple owners. More protections against an individual business owner being liable for business problems. The owners collectively are responsible for the taxes, the business itself is not taxed. All shareholders must be either US citizens or resident aliens who pay federal income tax. There may be some additional government reports due.
  • C Corporation. Business entity that allows for 'big business'. Business handles all taxes, including taxes on profits. There can be many shareholders spread around the globe. More government reporting required. Often requires more expensive government paperwork and fees.

And the trickier one:

  • LLC. Most similar to an S-corp, but allows a wide mix of options between Sole Proprietorships, S-corps and C-corps.  Includes some protections against lawsuits as a business entity, but it is easier to "pierce the corporate veil" than a C-corp, harder than a Sole Proprietorship, and maybe easier or harder than an S-corp depending on the number of owners and how agreements are made. Shareholders must be in the country and the number of shareholders is small. Money must be separated on paper, but can potentially use your personal bank account. You can choose either tax structure (personal taxes or corporate taxes) but it must be consistent between years. Reporting of inventory and assets can be chosen but must be consistent. Management structure can be one of several choices but must be consistent.

 

If you will be hiring people soon, you probably don't want the first two on the list.  You can change to increasing complexity fairly easily from year to year.

Again, talk to your local SBA office or a business lawyer for your specific location.

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