Getting Down to "Business"

[Matt Gwinn]

Well, as Gencon approaches and I prepare to send Kayfabe to press I thought I should clear up a few things before I end up screwing myself.

At what point does an independent game design company need to become official, meaning having a tax number and all that?  Do you have to make a certain amount of profit first?  And how do you go about doing it?  And what does it cost?

I'm guessing that Errant Knight Games needs to do something before I can start selling Kayfabe, but I haven't heard anything on the Forge about doing such a thing.

I assume Adept Press is an official business, but what about Momento Mori, Spectrum Game Studios and other indie publishers that are currently selling game for a profit?

,Matt G.

[Jared A. Sorensen]

I assume Adept Press is an official business, but what about Momento Mori, Spectrum Game Studios and other indie publishers that are currently selling game for a profit?

Well, I can't speak for everyone but I'll tell you this: the Memento Mori Theatricks legal team will now be charging $.05 every time someone adds an extraneous "o" to my name or to the name "Memento Mori."

Expect to see a bill in the mail shortly.

[Gordon C. Landis]

Here's some previous articles/discussion on this issue:

http://www.indie-rpgs.com/forum/viewtopic.php?t=244

http://www.rpg.net/news+reviews/columns/nov98.html

http://indie-rpgs.com/forum/viewtopic.php?topic=95&forum=12&11

A key point here is that some of the tax number/how much profit issues vary by state, so some quick research at your local library, chamber of commerce or the like may be needed.

Gordon

[Clay]

Matt,

Since you're here in Michigan, I can speak directly to your needs.

To register your business as a sole proprietorship, all you need to do is head down to the county clerk's office, pay $10, and you get a nifty piece of paper with your company's name saying that you own it.

Since you are selling a physical product, you also need to get a sales tax license from the state Treasury department. You must charge 6% sales tax on any products sold to anyone in the state of Michigan.  There used to be a quarterly filing requirement, but if you have a low volume you may be allowed to use a loser filing schedule.  Be warned that the state is serious about checking for these things, and they do spot audits at cons, where you'd best have a copy of your license or you'll be paying a hefty fine in lieu of tax.

The good news is that you won't have to pay the Single Business Tax as a sole proprietor, and your business income will be taxed on your regular 1040.  The bad news is that your 1040 is going to be a bit harder to figure out, since you just added a fine collection of new schedules to your taxes.

So long as you register your business as a sole proprietorship, you won't need any taxpayer id number.  As soon as you head down that route, you have to file taxes separately for your business, and life gets more fun.

You should also make sure that neither Ann Arbor or Washtenau County have their own separate sales or income tax requirements.  Those can make an ugly suprise, and because these entities aren't as on the ball as the state or federal governments (who let you know almost immediately if there's a problem), it can be years before they tell you about problems.

[Seth L. Blumberg]

So long as you register your business as a sole proprietorship, you won't need any taxpayer id number.

Unless you hire employees. In that case, you need federal and state taxpayer IDs, and you get into income tax withholding, which involves a whole buncha forms. (I used to use QuickBooks Pro from Intuit to handle this stuff; it worked pretty well.)

Having employees is a real nuisance. As soon as you employ even one person, you have to do withholding, unemployment insurance, OSHA and MIOSHA (in Michigan) reports, Wage and Hour posters, and many other silly bureaucratic requirements. Hiring people as independent contractors is much simpler, though you still have to file 1099s.

You should also make sure that neither Ann Arbor or Washtenau County have their own separate sales or income tax requirements.

Speaking as someone who used to do the books for a small business in Ann Arbor, I can tell you that they don't.