game studio's legal business structure?

Started by
14 comments, last by Servant of the Lord 10 years, 11 months ago

I'm from Singapore.

Corporations get numerous benefits here I think.

Advertisement
In the USA, there are pros and cons to many different forms of businesses. If there was one 'best' answer, then none of the others would exist.

You actually pay less taxes as a LLC until you reach a certain amount of profits.
Corporations pay a flat 35% in taxes, while LLCs pay from 15% to 35%, in gradually increasing tiers based on profits. Plus, taxes from LLCs (if owned by a single person) can be taxed as-if it were a Sole Proprietorship (while still retaining the benefits of limited liability), so it is (optionally) taxed as if it's your personal profits.

UnitedStates-based Corporations are taxed like corporations: 35%. Then, ofcourse, if you pay yourself a salary as CEO, your salary is taxed as an individual. This is called double-taxation. You get taxed twice as the owner of a corporation (first the corporation's profits, and then your individual salary), while just once as the owner of a LLC. Further, you get taxed less as a LLC in the first place, if you're making less profit than certain thresholds. Further still, you'll have to file two tax reports with corporations, while with an LLC (owned by a single-person - even if you have employees) you can combine it into one to simplify your work.

Again, not a lawyer, this is just what I've read; and this might be changed in the future by the US government.

Overall, from my limited understanding and limited research, I've come to the conclusion that (since I live in the USA) I want to run my own videogame company as an LLC, at least for the first few years and at least for the first few employees. In the US, you can change what form your business is later on, to suit your shifting needs.

Talk to a local lawyer and they can give much better advice, that is much better suited to your country.

LLC is a decent choice for a smaller company or start up without a lot of owners (or only 1 owner). Just my experiences.

Max

_______________________________

Max B. - Game Enthusiast/CEO

http://www.junglefriendstudios.com

From personal experience, if you own the business 100% as in the company. Go for an Scorp. Incorporating is a much smarter idea than LLC.

With incorporation, you have Dividends. you can pay yourself with dividends, not to mention depending on which state you live in, major tax benefits. I know someone mentioned about the 30% tax rate, that's not true at all. There are numerous ways to avoid this. I suggest getting with an account. In my situation because I own the company 100% it was best to get an Incorporation over an LLC

Then, ofcourse, if you pay yourself a salary as CEO, your salary is taxed as an individual. This is called double-taxation. You get taxed twice as the owner of a corporation (first the corporation's profits, and then your individual salary)

I don't know the proper terms in english, but wouldn't your salary be a cost for the company?

At least here, there is no difference between employees who are also owners, so any salary is a cost of doing business, and not counted as a "profit".

Of course, as an owner, you also has an option to pay out the profits to the owners (yourself), and then this is taxed again. But the combined tax is approximately what it would be if you took it as salary. (actually a bit less in many cases, specially with higher salaries, and many employees, which makes this an attractive option here)

This is not "salary" though, but "dividend" (or some such..)

In any case, kind of useless to ask for advice on this in an international forum, since local laws vary so much. I don't even think we have the equivalent of an LLC here... Either you go sole proprietor, or you get an "aktiebolag" with all the bells and wistles. There are some other types too, but mostly cumbersome, and without limited liability...

I'm also surprised to see how much Sweden has fallen in the "worlds highest taxes" legue... Company tax here is 22% now.

Then, ofcourse, if you pay yourself a salary as CEO, your salary is taxed as an individual. This is called double-taxation. You get taxed twice as the owner of a corporation (first the corporation's profits, and then your individual salary)

I don't know the proper terms in english, but wouldn't your salary be a cost for the company?

At least here, there is no difference between employees who are also owners, so any salary is a cost of doing business, and not counted as a "profit".

Of course, as an owner, you also has an option to pay out the profits to the owners (yourself), and then this is taxed again. But the combined tax is approximately what it would be if you took it as salary. (actually a bit less in many cases, specially with higher salaries, and many employees, which makes this an attractive option here)

This is not "salary" though, but "dividend" (or some such..)

I think you're right - employee salaries probably count as an expense. Whether the owner of an LLC counts as his own employee for tax purposes, I don't know.

But, the profits of the company are taxed, then when those profits are passed on to shareholders (as dividends, as you mentioned), the shareholders are taxed on it.

If a CEO owns shares, his salary is taxed (as income), but his profit from the shares is double-taxed (first as the company profits, and then as the shareholder's income).

This may have changed in 2013, I'm not sure. I don't fully understand it, and is something I'll want to talk with a lawyer about when setting up my business before I release my own game.

This topic is closed to new replies.

Advertisement