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Incorporating GBGames: Overkill?

I finally managed to talk to a CPA about incorporating GBGames. I had done a bit of research, but it seems odd that there wasn’t a simple bullet list of items to look at regarding incorporation. I mean, if the government knows what I need to do, why can’t I find a simple list? File articles of incorporation, send in a check, send a form to the IRS, and then…what? I found that I would need a Federal Tax ID, which I could request, but I also learned that there are certain responsibilities such as recording minutes for meetings and paying for the privilege of filing annual reports. I also didn’t realize that even though I don’t plan on hiring anyone, I would be considered an employee of the corporation. The descriptions of the employment laws that I’ve been ignoring up until now will need to be looked over in more detail. I’m sure there is one or two things I’m leaving out, but suffice it to say that it would cost me money and time to maintain the corporation.

And so the CPA suggested that a corporation would be too much effort and cost for very little gain. I had originally decided not to go for a Limited Liability Company, but he advised that while it cost more up front, the maintence of the company would be a lot simpler in this form.

I am planning on running this business part-time initially with no outside investment. I don’t want to hire employees, although I will contract out certain work. I also don’t believe I’ll be able to make any income for some time (I’ll need a game to sell first), and even then I won’t be able to live off of it for maybe a year or four. For now, an LLC sounds a bit more appealing. I can always form an S Corporation later, specifically when I start looking at much more serious income and/or start running it full-time.

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Posted by GBGames on Thursday, November 3rd, 2005 at 2:00 am.

6 Responses to “Incorporating GBGames: Overkill?”

What’s the point?

So you can write off a few dollars here and there? — That’s not worth the trouble.

So you have extra liability protection? — Protection from whom and for what?

Seems like more trouble than it is worth right now.

Left by Billy Zelsnack on November 3rd, 2005

The liability protection would be important if only because of the absurdity of most software patent claims. I really don’t want to operate as a sole proprietership as I’d like to keep my personal stuff out of my business.

And while it may seem like a lot of trouble, I might as well find out now how much trouble it will be. I have a lot more free time today (even if it might not feel like it at times) than I anticipate I will have in the future, and so I think researching the steps needed to form a company is a good use of my time.

The LLC definitely sounds like a lot less of a hassle and would be more appropriate for me now than an S Corporation.

And of course, the abillity to write off expenses would be nice. B-) I’m already spending money on books, games, and hardware to help me develop better games, and so it wouldn’t be unreasonable to expect them to count as business expenses.

I also think that forming a company, no matter what form it takes, would just be good psychologically. I now have a company so I should think of it as a business a lot easier. I’ve already mentioned here that sometimes the mind still acts like it is 1999 when I was trying to make games in QBasic for the fun of it. It will give me the extra push, I think.

Left by GBGames on November 3rd, 2005

Hi GB.

I think formalizing your company is a good move, for all the reasons you mentioned.

My company is an S-Corp that I formed over five years ago for the purposes of supporting my consulting business. When I founded the company, the lawyers I consulted with strongly suggested S-Corp vs LLC because LLC was not legally testing in Massachusetts yet.

But, after all these years of way too many fees, taxes, forms, minutes, employee audits, blah, blah, blah … I would love to jump back in time and change my decision to LLC.

A simplified life is worth so much more than anything an S-Corp can offer for a small one man shop. Like you said if you start making millions and need to hire dozens of people, then you can afford to reclassify and hire a full-time accountant to manage your company books.

Good Luck!

Disclaimer: I am not a lawyer nor an accountant.

Left by Jon Trainer on November 3rd, 2005

Thanks!

I’ll be posting about any developments with regards to the LLCing of GBGames.

Left by GBGames on November 4th, 2005

Its worth it for the psychological effect alone. Its hard to be dismissive or non commital about your business if you have gone to the trouble of making it a proper legal entity.

Left by cliffski on November 4th, 2005

I’d say its definitely worth it - not just for how it makes you think of the work, but also for how others see you. Most people in the games industry proper won’t take you seriously for doing business with unless you are incorporated in some form. It shows that you’ve put real commitment behind it (even though all it takes is a little organisation and some small up-front cash) and is more than just a ‘hobby project’ for you.

Left by Chris Chapman on November 13th, 2005

Something to say?