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TIGSource ForumsDeveloperBusinessForming an Entity
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Interface
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« on: October 03, 2014, 07:58:06 PM »

What's the general opinion on forming an LLC or something of the sort? Any benefit of doing it right out of the gate, or would you wait until you really get something going? I'm prototyping some PC stuff with Unity, but was hoping to release some mobile games I'm making as part of learning Unity. Not sure if it's difficult to change mobile store accounts etc later on.
This is all in my copious spare time and weekends, I have a fairly demanding (and well-paid) corporate development job. I'm a ways from quitting my job to go full time indie, but I do hope to get more serious as I get along.
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doihaveto
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« Reply #1 on: October 07, 2014, 12:47:47 PM »

It's probably not necessary to form anything while it's just you doing prototyping by yourself. But if you'll be doing business with other entities (like stores, or paying vendors), bringing in co-founders, or engaging contractors, I'd make sure there's a company first. At that point I'd get a custom domain name and a Google Apps for Work email account, and just run everything completely separately from your own personal stuff.

(Of course this assumes that your day job doesn't use a non-compete agreement that prevents you from running your own company...)

Also do this a few months before releasing the first thing in the app stores. It takes a few weeks to do incorporation. And then in order to get approved for publishing on iTunes you'll need a DUNS number, which also takes a week or two.

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MorganRamsay
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« Reply #2 on: October 07, 2014, 05:44:11 PM »

In California, corporations must pay an $800 minimum franchise tax to the Franchise Tax Board every year after the first year. Other states may differ. Your company will need to find an agent for service of process, which might run you $100 per year, before incorporation. In addition, your company will need to file an annual report, annual statement of information, or biennial statement whose filing will incur another fee. Your company will need to be incorporated to obtain a business bank account. Your company may also need to be incorporated to register with certain app stores. There are other legal and financial reasons to incorporate. You have to weigh the benefits of incorporation against the cost of doing so. Every company is different.
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gmicek
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« Reply #3 on: October 07, 2014, 07:43:55 PM »

The California LLC situation kills me. It's due at the time you set it up, so it's not like you get a buffer.  They've also closed the loophole of setting it up out of state since they base the fee on where you operate, not where you formed.  However, other than the taxable income mentioned before, there's the benefit of legal protection.  If you're running things without some sort of entity and step on some toes you can be held personally liable and then your assets on the line.  The personal asset protection makes it worth it in my opinion.
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Greg Micek
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Interface
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« Reply #4 on: October 07, 2014, 08:05:07 PM »

The California LLC situation kills me. It's due at the time you set it up, so it's not like you get a buffer.  They've also closed the loophole of setting it up out of state since they base the fee on where you operate, not where you formed.  However, other than the taxable income mentioned before, there's the benefit of legal protection.  If you're running things without some sort of entity and step on some toes you can be held personally liable and then your assets on the line.  The personal asset protection makes it worth it in my opinion.

Assuming I will be able to do an October challenge for $1 some day, I'm not too concerned about taxes just yet. Although you never know I come up with the next flappy bird. The protection is something I have been wondering about. I already checked with my accountant on fees and setup etc., doesn't seem like a big deal beyond initial setup. He did say annual meeting notes and other obligations are absolutely necessary to make it legit or the protection is out the window, LLC or not. Just a certificate and a bank accountant are not enough.

I guess I'll wait a bit longer, but if I put anything on an app store or so I'm thinking that may be the time to do it (realizing the time lags there, thanks for the tip). My non-compete is clear as long as it's not related to the products we work with, which it sure isn't.
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MorganRamsay
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« Reply #5 on: October 07, 2014, 11:33:15 PM »

The California LLC situation kills me. It's due at the time you set it up, so it's not like you get a buffer.

For non-qualified corporations, that's partly true, although the tax scales to your company's net income that year.

If your company qualifies, you can get a first-year waiver.
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hagbardgroup
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« Reply #6 on: October 10, 2014, 08:41:58 AM »

In a lot of states that aren't California, filing an LLC is cheap (<$100) and the annual tax is also trivial.

Also keep in mind that CA tax guys may go after you for the franchise tax even if you don't incorporate if you take income.
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gmicek
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« Reply #7 on: October 10, 2014, 08:53:43 AM »

Good info Morgan!  It clarifies a couple things I had heard about but failed to look into.
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Greg Micek
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