Few things are more confusing than taxes and laws. As if they weren’t complicated enough to begin with, they also differ dramatically by country, region, and city. I’m fortunate enough to say that when I made War Co., nothing completely broadsided me during the development process when in came to tax and law. There were, however, some nasty surprises and memorable tax bills that I’d rather have been prepared for. Instead of leaving you to Google and experiment on your own, I’ll share a few experiences I’ve had.
Let’s get something straight first: I’m not a lawyer. This is informal advice based on my own experiences and observations. I’m about to list five things I wish I knew about ahead of time. I want to save you a lot of time digging for the right questions to ask and help you avoid some surprises along the way.
1. You need to open a business and treat it like a separate entity from yourself.
This sounds like common sense when I say it this way. A lot of board game developers don’t treat their projects like businesses, though, and that’s a dangerous thing to do. Even simple board game Kickstarter campaigns involve handling thousands of dollars and potentially much, much more. Because of this, it’s absolutely imperative that you open a business and treat it like a separate entity from yourself.
It’s not as hard as it sounds. For me, in Chattanooga, TN, USA, all I had to do was fill out a form and send it to Hamilton county and then to the city of Chattanooga with small checks attached to each form. It’s pretty similar in different states and municipalities in the U.S.: download a form online, print it out, fill it out, remit a check, send it in, wait a few days.
You’ll be given a few options on which type of business to open. There are two types that stand out in my mind as the most likely to apply to you as a reader, so I encourage you to direct most of your further research to them. They are the sole proprietorship and the LLC. If you’re going it alone and you’re not sure how serious you are about being in business, go with a sole proprietorship. If you are definitely committed or you’re going into business with more than one person, spring for the LLC. It may cost more and come with more paperwork, but it provides legal protection of your financial assets in a way that sole proprietorships do not.
Last but not least, open a separate bank account for your business. Connect it to Quick Books and keep track of how you’re spending your money. If you keep clean books on a day to day basis, tax time won’t be so bad.
2. You need to know who’s taxing you.
Speaking of taxes, they’re unavoidable. In the U.S., you’re likely to be taxed at a federal, state, and local level on your business. You are also very likely to have to deal with sales tax for in-state purchases of your game and customs/import fees if you bring in inventory from other countries.
There’s not a whole lot else I can say here because tax laws are so dependent upon where you live. Now that you know the five kinds of taxes you’ll deal with, though, you’ll have a much better time productively Googling the rates you’ll have to pay and the forms you’ll have to file monthly/quarterly/annually.
3. You need to know how to protect your intellectual property.
If you make a game, you’re making intellectual property. You can’t protect mechanics, but you can definitely protect your brand name, lore, art, and other assets. Broadly speaking, there are three ways to protect your intellectual property: copyrights, trademarks, and patents. This government site does a good job explaining the difference between the three. Long story short, you’ll definitely need a copyright, you might need trademarks, and you probably won’t need patents.
4. You need to know how to write a contract.
Despite having some of the most needlessly obtuse phrases in the English language, I’ve come to love contracts. Sincerely, heretofore, the undersigned in the jurisdiction of…
The purposes of a contract are to document the following information:
- Who is involved in a transaction
- What is expected to be done by each party involved
- How much it costs and when payments are sent
- Quality and time expectations
- What happens if someone doesn’t fill their end of the bargain
A contract tells everybody what they need to know about a project before they start it and provides legal documentation that can be used to enforce it. It’s beautiful.
I won’t tell you exactly how to write a contract since that varies on where you live, what you’re doing, how many people are involved, and how much money is involved. I also won’t tell you that a contract will prevent problems from coming up. Problems will still arise, but the contract gives you a better way to have a conversation about them and protection if you have to take your problems to the legal system. Ultimately, contracts and their enforcement depend upon the goodwill of all parties involved since taking them to courts is an expensive affair. Yet the benefits of clear communication make it worthwhile all the same.
5. You need to know how to reduce the potential for legal troubles.
If you find yourself in legal trouble, I can’t help you. That’s lawyer territory and you need to find yourself a real pro. As they say, though, an ounce of prevention is worth a pound of cure.
If you want to stay out of trouble, here are a few simple guidelines you can follow:
- Get a business license.
- Open a separate bank account for your business. Never mix personal and business expenses.
- Keep clean accounting books weekly.
- Pay your taxes when they’re due. All of them.
- Protect your intellectual property using copyrights and, if sensible, trademarks.
- Write good contracts and honor them.
- Don’t do business with anyone who comes across as seedy.
- Read the previous bullet point again and really let it sink in.
- If you open a sole proprietorship and start making serious money, transfer all your business assets and expenses to an LLC and operate as that LLC.
Tax and law tend to get glossed over in our industry because they’re not fun to talk about. It’s so critical that you develop an understanding of the basics, though, if only to protect your ability to make more games in the future 🙂
Do you have any advice to pass onto new game devs? Let me know in the comments below!