The Business of Gaming

Planning your company

When deciding to create a company making games, there is a lot to consider. You'll need to find a lawyer and an accountant to consult before starting, you don't want any legal or financial issues coming up later that can be planned for now.

Next, you need to make sure you take care of number 1. Yourself. Ensure your company has the cash to pay you a salary you can live on. If you can't afford to take care of your business, no one else can either. Make sure you put away enough money to pay the taxes for your company as well, this money isn't saved or paid to anyone automatically... so make sure you keep it in mind.

Do your research! There are a ton of free resources available on the internet, including all the free information available from the US Small Business Administration, and YouTube. If you have access to the GDC vault, you can find a wealth of talks that give even more information, all specific to the gaming industry.

Lastly for this step, network. Get out to events and conferences and meet people in the industry. Most people are nice, and nearly everyone in the industry wants to play your game. That's why we all do it, we love games.

Choose a Business Structure

Now that everything is planned out (hopefully well planned too), we can start getting the actual administrative work done. The first thing we need to decide is what structure our company is going to take on. There are several common structures to choose from, all with their own pros and cons.

Sole Proprietorship

Pros	Cons
Easy to Form	You are personally liable
Full control	Difficult to raise money
Easy to Dissolve

The sole proprietorship is one of the easiest types of company to start. Many states don't require any paperwork to be filed in order to do business as this type of company, you yourself are just considered to be a company automatically. This means the company is formed when you want to do work, and dissolved when you stop.

The big disadvantage here is that you are personally liable for everything your company does. If someone sues you for an action you took as a company, you are the one ultimately responsible for everything and you can lose your assets in the process. You'll also have trouble raising money to get your business going, you're just a person and no one is going to just give you money for your idea with nothing in return.

Partnership

Pros	Cons
Easy to Form	You and your partners are personally liable
Easy to Dissolve	Difficult to raise money

Also very easy to form, in several states it can be formed with a verbal contract and dissolved with a verbal contract. Most states also do not require paperwork to be filed to work as a basic partnership.

The big problem here is the same as a sole proprietorship. You can think of this as a sole proprietorship with extra people to cause liability issues for you. Anything either you or your partner(s) do can come back on you.

Limited Liability Company

Pros	Cons
Inexpensive to Form	Difficult to raise money
Liability is on the company, not the individual members	Considered self-employed
Pass-thru profits	Difficult to make changes
	Requires following business laws

This, in my opinion, is probably the best company structure to start out with if you don't need heavy investments. It's cheap to form, usually under $50, and most of the legal and financial issues can be sorted out with about an hour's paid time with a lawyer and accountant. You are also protected, personally, from anything your company does. Lawsuits are no longer a big issue, though keep in mind that you must keep your business and personal finances separated, if you cross over your spending between the two you can find yourself liable again!

You're still going to have issues getting investors with this type of company, mostly because of the difficulty in modifying the members of the company and all the paperwork required to do so.

Corporation (C-Corp)

Pros	Cons
Separate entity, no liability on owner	Double taxed
Easy to raise capital	Difficult to start
Retains most rights individuals enjoy	Extensive record keeping and reporting

Finally, we get to the regular company, the C-Corp. This is an entirely separate entity from you, so you have no liability for the actions of the company. This is the company structure most investors are going to require from you before they invest, because you can easily modify the members of the board, and you can sell shares to your company to those investors and giving them ownership and the ability to force changes when needed.

One of the biggest issues you'll face is double taxation. The company has to pay taxes on its profits, then you will individually have to pay your taxes on your income as well. No pass-through profits here. You'll also need to hire legal counsel for this one, it has a lot of paperwork and is costly compared to the other options. Lastly, you're going to have a lot of paperwork to keep up with to maintain the company.

Further Reading

• US Small Business Administration: Choosing your structure
• Forbes: LLC vs S-Corp