The Forge Reference Project

 

Topic: LLC Experiences
Started by: iago
Started on: 7/22/2003
Board: Publishing


On 7/22/2003 at 9:17pm, iago wrote:
LLC Experiences

I've been reading through my ePublisher's Guide off and on over the past month or so, and one bit that's been weighing heavily on me is the whole LLC or not LLC thing. The guide does a good job of discussing reasons, but I'm still left feeling I want more anecdotal exploration of the idea.

So, I come to the forge. Who of you out there have formed an LLC for producing, marketing, and selling their games? What was the experience like? What were the pitfalls you encountered? What would you do differently? And what advice would you give to someone who's thinking about heading that direction himself?

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On 7/22/2003 at 9:52pm, Mike Holmes wrote:
RE: LLC Experiences

I'm going to take a guess and say that very few here have done that. Perhaps GMS, or some of the people in distribution or somebody like that. But in terms of many publishers here, there's no incorporation or charter of any sort. Even when there's a game company name, I think that mostly these are just titles and have no official standing of any sort.

This is obviously the simplest way to go. There are advantages, of course, to going with the other methods, most notably limiting liability. But I'm not sure that they're worthwhile to the small publisher in that we don't risk much to start anyhow. Then again, I haven't read the book, so I may be missing out on some key advantage. What seems to be the bigget benefit of the LLC?

Mike

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On 7/22/2003 at 10:01pm, Valamir wrote:
RE: LLC Experiences

Even when there's a game company name, I think that mostly these are just titles and have no official standing of any sort.


I wouldn't go this far. If there are people who haven't done anything and are selling product for cash, I'd strongly recommend investigating state law. Illinois is pretty strict about requiring a business license even for sole proprietor ships. Other states call this "Doing business as", I forget what IL calls it. There's generally just a nominal filing fee and in IL you have to take an ad in a local paper for 3 weeks (about $100) before they'll complete the filing.

Selling a product regularly for money (as opposed to occasional garage sales type stuff) without having filed this can get you in more trouble than its worth. Since a sole proprietorship doesn't offer any limited liability, both the IRS and the state can come after your personal assets to cover taxes (plus penalties) that they think you owe but didn't claim.

Claiming a business deduction (schedule C) on your federal return without having a registered business with the state is also a good way to get yourself audited.

Every states requirement is different, some probably couldn't care less, others may be more onerous than IL...but I'd definitely check it out.

Ramshead is registered as a business in the state of IL and files our token sales tax returns every month.

Adept Press I believe is a full blown C-Corp. Ron may be able to share why he went C-Corp instead of S-Corp or LLC.

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On 7/22/2003 at 11:21pm, abzu wrote:
RE: LLC Experiences

i went Sole Proprietorship in NYC. It seemed the simplest way for me to get what I needed: State recognition of my business so I could write off expenses (Sched C) and to get bank account in the name of The Burning Wheel, so people could write checks to it (instead of to me).

I had to go to the County Clerk's Office and pay about $130 to have various forms filed.

After consulting with an accountant, I was told that I did the right thing. According to her, for a small business, incorporating can be more expensive than its worth. I don't know from first hand experience, but the numbers she ran past me were ugly. You just have to pay more taxes! And the other small business owners I know agreed that an SP was the way to start out.

-L

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On 7/23/2003 at 12:01am, iago wrote:
RE: LLC Experiences

Mainly I think I'm interested in limiting liability because I'm about to buy a house, and it would really suck to have it sued out from under me. Without a corporate entity to intercept the liability, my personal assets could be seized. Even if the possibility of this happening is remote, the house is just too big of an investment for me to feel like I can proceed without taking the steps to protect it. Ditto for my partners.

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On 7/23/2003 at 5:42am, wraeththu wrote:
RE: LLC Experiences

My group went with LLC for a number of reasons. Chief amoung them - we're a small group. Our Company is a conglomeration of a couple of people, and writing things up as an LLC allowed us to put down on paper how everything was split up.

We could include things like Copywrite assignments, Exit Clauses, Work and Hiring Procedures. yes, hiring procedures for the times when we found an external writer wanting to do some freelance work for us.

If it's just you, then I'm not sure it'd be worth it. But it still might be. Take the time to research it. Afterall, if you're going to be doing something creative that you love - don't you want to protect it to the best of your ability from all angles?

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On 7/23/2003 at 2:40pm, Jason L Blair wrote:
RE: LLC Experiences

My business partner and I went with an LLC because of the limited liability, and to avoid the double taxation inherent in an S-Corp. We flow taxes through per partnership taxation so it only gets taxed as personal income instead of corporate revenue _and_ personal income. Not to mention that there's far less paperwork during start-up and we aren't required to file quarterly BoD minutes with the State of Ohio.

Keep in mind however that the above is _my_ understanding of how things work, and that I'm mostly the creative end here. A lot of our decision also came from the recommendations of a trusted lawyer and an accountant. Come tax time, though, I just sign lines and nod my head.

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On 7/23/2003 at 3:52pm, samdowning wrote:
RE: LLC Experiences

When we started to think about trying to find income for the business, we decided to go from Partnership to LLC. It cost a few bucks, but now we have those three little letters tacked on to the end of our name.

However, we still couldn't get any money for the business unless we put up personal assets and made it a personal and not business loan.

So basically, becoming an LLC didn't make any difference at all. We still pay our taxes the same way as a Partnership, and there are no special perks for being an LLC. Even if you do get a loan for your business and default on it, some places can still take your house because you put it up as collateral.

Definitely check out the laws associated with LLCs and Partnerships. And do get a business license if you plan on selling anything.

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On 7/24/2003 at 3:07pm, Clay wrote:
RE: LLC Experiences

You can get the official lowdown by checking with the state treasury department or your local Small Business Administration office. They will be able to give you the specific information with regards to your state.

The Limited Liability Company, in most cases, only makes sense for partnerships. Structuring a company this way protects the members from the actions of an individual partner. If one partner screws up and gets sued, only their portion of the company and their personal assets are at stake. The tax situation can be harsh though. A former employer structured his company that way, and he paid more in taxes that year than he took home in salary.

Check out the facts in your area though. It's a good idea to check on city and county taxes and the like as well. Some areas have really convoluted taxation arrangements. The local Small Business Administration is probably your best source on this. If you've got the dough, an attorney specializing in this area is good too.

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