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[@Alex@]

As it comes closer and closer to the time when I release my first of many apps I find my myself wondering if setting up a business would be beneficial. I've been looking at the HM Revenue & Customs website to see what it entails and it seems rather simple. A few forms and weekly National Insurance contributions.

While currently I work with an (unpaid) artist, who is a personal friend who will be working with me for all future products I'm unsure whether I need to register as an Individual and set the artist up as a contractor or a Partnership. Setting myself up as an employer and calculating Pay as You Earn Tax seems a little out of my depth at the moment.

To further complicate matters, I will most certainly be keeping on my part-time job. I cannot seem to find any information on this would affect my annual tax returns, since at present I do not need to fill them out.

I am also interested in the implications of not doing this, and to what extend the mobile market places handle tax. Since presumably it is an income stream I would have to declare and that would likely involve similar, if not identical forms to the ones for setting myself up as an individual business.


I was wondering if any one had any advice for me. I might need to pay a visit to an accountant at some point but I want to have at least a partially informed opinion before doing so.  

[Ironstrom]

This Topic interests me as well I'm from the UK and currently in the same situation I looked into The nature of starting up a business via the same website for the costs, at hand and things you needed to cover.
 Personally I was into looking into forming a company under a joint ownership with me and my lead programmer we haven't done this yet but with potential funding soon this thing is loitering over the head like a bad cloud of rain waiting to burst.
 I took some minor advice from a lawyer via email but it wasn't in depth as it could be it was suggested that starting or looking out into being a sole trader was probably a better starting bet. "Being a sole trader (ie not a limited company or limited liability partnership) does not prevent you from establishing trade names, brands, web presence etc.." You should be firm with this by now but it doesn't seem to have any implications as far as I'm aware. Again I am no expert and I'd like to see the results of this thread as much as you do.
 

[o0Corps0o]

I work in the UK. I have a full time job, but I also work for my own company 'arcticarcade.net' in the evenings, working in Flash games.  I have set up a bank account for arcticarcade so i can keep track of income and outgoings quite easily.  I have to pay National Insurance (i think every 2 months).  I also use the online forms for calculating the tax that i am required to pay at the end of the year... something like 20% (can't remember off the top of my head)  So I keep my money in there and then pay myself the profits

I also work with a guy in New Zealand, so the money we make from our flash games we would split accordingly and he would deal with his tax seperately at his end.

Don't know if that helps any

Cheers,

Andy aka o0Corps0o

P.s. Classed as a Sole Trader.

[@Alex@]

A limited liability company is defiantly not the direction I'd go in at moment, since it involves opening me up to all sorts of different taxes on what is at the moment entirely speculative income.

o0Corps0o , so your registered as a sole-trader and profit share with a partner, correct? If so is there any hurdles with the tax-man to accommodate this, do you declare the whole profits or only your share?

Ironstrom , Sole Trader does seem to be the way I'm leaning at the moment but I do want to know how this affects profit sharing arrangements, if affects them at all. I'll be continuing to do my own research so if I find anything out I'll update the topic.

[bateleur]

I work as a sole trader in the UK and it causes no problems at all for things like profit sharing. Just keep your accounts properly and you'll be fine. Tax is based on income, not on money moving through your bank or PayPal account. If money is transferred to you which is actually someone else's profit share then just send it to them. It does not count as income for you.

[o0Corps0o]

o0Corps0o , so your registered as a sole-trader and profit share with a partner, correct? If so is there any hurdles with the tax-man to accommodate this, do you declare the whole profits or only your share?

Yes, registered as a Sole Trader..

The money we make is split as is comes in... so i would pay taxes on the amount that i recieved (as an income), I would probably have deducted some expenses before it gets to the tax man also.  So to answer your question, I would declare on the amount I recieve (not my partners)

It talks you through most of this online (on the HMRC website).

[@Alex@]

I've been scouring through the HM Revenue & Customs site for a couple hours and so far I've come to the same conclusions as you two have presented. Thanks for the advice.

[Muz]

Making games from the UK must be a bummer, with the really high living costs. $1000 a month where I live is middle class; students live on $500 a month.

[Ironstrom]

I think that partially comes down to how many microwaveable foods you eat whilst crunching on a project. On slightly more serious terms I believe Sweden is a fair site worse then UK. I'm not sure how income is comparable. But For some us working on a pre release I guess it is hard. I pick Sweden specifically because members of my team work there. With the possible incoming tax relief on the games industry in the UK I'm not certain how bad we are off in comparison to the rest of the world.
 I'm partially aware that this is slightly off topic but what the OP said in this thread is a mind sticker that I'd like to see discussed.

[UrbanwarfareStudios]

The benefit of being a Limited company is the limited Liability. If your a sole trader and you get into debt your personal assets are at risk. If you have a Ltd your less at risk (unless you get a lot of debt and do very unscrupulous things and manage to get caught). The downside is you have to get a chartered accountant to do your accounts every year regardless of your income and this costs about £700-£1000 a year minimum

[Muz]

The benefit of being a Limited company is the limited Liability. If your a sole trader and you get into debt your personal assets are at risk. If you have a Ltd your less at risk (unless you get a lot of debt and do very unscrupulous things and manage to get caught). The downside is you have to get a chartered accountant to do your accounts every year regardless of your income and this costs about £700-£1000 a year minimum

Yeah, pretty much this, but it's easy to get investors too. Easy to decide how to split the profits. With sole trader, you're either getting funds through kickstarter or asking for thousands from friends/family/fools and with the dodgy promise of 'paying them back later'. With shares, the legal system handles all that borrowing, repaying, and splitting profits. And don't have to worry about being cheated by someone.

[cliffski]

I've had a LTD in the UK for 13 years now.
I think it's well worth it. people take you more seriously, and the additional costs are trivial. £15 a year to file at companies house. You pay corporation tax at the small companies rate until your profits exceed £300,000 a year, but if you pay yourself a nominal salary + dividend income, and you earn below the 40% tax rate, there is no tax to pay after the corp tax rate because there is an 'implied tax credit' equiv to basic rate tax, or something like that :D

Limited Liability is a nice thing to have. Being threatened by big multinational companies is annoying at the best of times (Yes I've had this...), but the thought that they can take your house and your car if they win a court battle must be way worse.

Also, being VAT registered can be a good idea, because most of your sales will be to the US, with no VAT charged, and yet you get to claim back all the VAT on business expenses such as new PCs, office furniture, even games and game magazines. Oh yes :D

Employing people & PAYE is a whole separate nightmare in the UK. I always use subcontractors. it's not just PAYE, you have the possibility of unfair dismissal claims, have to provide a pension plan yada yada. It's not worth the hassle.

I'd say LTD and VAT are worth it. PAYE is not. Also, an accountant shouldn't be more than £700. If they charge more than that, they are basically ripping you off. Plus you don't *have* to have one at all. I managed my own accounts for 4 or 5 years.