Would you form a company before releasing a game?

[Fermion]

So the past few months my wife and I have been working on a MMPORPG of sorts. I am doing the artwork, story, and testing, while she is doing the work of like 10 normal softare devs plus a project manager or two. It is a very different game from anything out there, pulling from our experience in this genre and things we like and don't like about current and past games.

(note this doesn't mean we have come out of retirement, we just got a little bored here in the mountains in the hot weather!)

It is coming along nicely, faster than I thought it would although I guess we are six months to a year from releasing an alpha to a limited test group. If the game works well, we probably will eventually try to get it on Steam for free to play and if it gets popular then we might do some vanity items for a small fee to help pay for servers and such. That is all way down the road.

Since we don't need any tax deductions right now, is there any reason to form a company for this? Would there be any good reasons to do that if we actually get the game released on Steam? Again, we are talking a year or two down the road although the game will be playable in a few months at this rate.

 

[REWahoo]

I had to look it up: MMPORPG = Massively multiplayer online role-playing game

 

[Blue Collar Guy]

I had to look it up: MMPORPG = Massively multiplayer online role-playing game

You saved me the google search.

 

[euro]

I had to look it up: MMPORPG = Massively multiplayer online role-playing game

What, you didn't know that? EVERYONE knows that!

 

[OldShooter]

... Since we don't need any tax deductions right now, is there any reason to form a company for this? Would there be any good reasons to do that if we actually get the game released on Steam? Again, we are talking a year or two down the road although the game will be playable in a few months at this rate.

As a SCORE business mentor I get this a lot.

• Forming an LLC or a Sub S corporation has no effect on your taxes.
• Releasing and selling through an LLC or Sub S provides you with some degree of insulation in the event someone has a reason to sue. It is only "some degree" because in the real world youre company will get sued and they will also sue you as individuals. You will pay to defend as individuals and will probably win. $10-20K later.
• Having your LLC or Sub S own the intellectual property (trademarks, copyrights, design patents, etc.) will probably make things a little bit more tidy if you ever decide to sell the project.
• Usually an LLC is the easiest choice and is adequate. You can probably form your LLC on-line with your secretary of state for a modest fee. You should talk to an attorney in your state first, though, to make sure this is what you want.
• Talk to a CPA tax guy. (Not H&R Block!) Your development costs might be deductible from ordinary income or might be capitalized and used as a deduction if you start getting paid. The IRS has rules to differentiate hobbies from real businesses, so be sure you understand those. Forming an LLC or Sub S corp might help convince the IRS that your project is not a hobby business.

You are putting a huge amount of effort into this project. Don't try to cheap out by getting advice from SGOTI rather than consulting a couple of professionals about getting the project set up optimally.

 

[Fermion]

Sorry about the acronym. You guys toss around things like SWR, DW, etc. so I figured if you can't beat em, join em.

No really I have just been surrounded by geeks my whole life that I actually did think everyone knew what a MMPORPG was.

OldShooter: Jeez, I was not even thinking about liability for a computer game but in this day and age I guess you have to think about everything. I sure hope that would not be a showstopper for creativity considering we may never make any money on this game. I guess we could put up a lot of disclaimers: "Warning, drinking hot coffee while playing the game could cause burns"

 

[OldShooter]

... OldShooter: Jeez, I was not even thinking about liability for a computer game but in this day and age I guess you have to think about everything. ...

Low probability to be sure, but potentially high impact. But even if this were not a consideration, I'd form an LLC anyway. They are cheap and it makes things nice and tidy. But don't forget to consult a CPA and an attorney in your state.

 

[daylatedollarshort]

I would get business insurance and form an LLC if you have personal assets to protect.

 

[CoolChange]

Also Patent Trolls

Low probability to be sure, but potentially high impact. But even if this were not a consideration, I'd form an LLC anyway. They are cheap and it makes things nice and tidy. But don't forget to consult a CPA and an attorney in your state.

I would get business insurance and form an LLC if you have personal assets to protect.

Good advice all around in my opinion.

In addition to the ambulance-chasing spilled hot coffee in my lap when playing kind of actions you should probably worry about patent trolls with any kind of software you are releasing.

I am not trying to frighten you away from this; in fact, I am now very interested in playing your game when it is released, assuming I have finally RE'd. These are probably all low probability events but worth protecting against in my mind.

 

[Fermion]

I do hope we are talking a few hundred dollars here for insurance and not thousands of dollars because there is no guarantee we would make any money at all from this game.

Part of me would just say do it without the insurance if it were more than a few hundred dollars because the risk is so small and most of our assets are in 401K and IRA anyway and would be protected.

In other words, I would not pay $5000 to insure against a 1 in 100,000 chance our game causes carpal tunnel or infringes on a patent (in the patent case I think a lot of times you would just get a cease and desist letter, especially if you have not made any money. If your game was suddenly as popular as Minecraft or something then you could afford to hire a lawyer at that point).

 

[daylatedollarshort]

I do hope we are talking a few hundred dollars here for insurance and not thousands of dollars because there is no guarantee we would make any money at all from this game.

Part of me would just say do it without the insurance if it were more than a few hundred dollars because the risk is so small and most of our assets are in 401K and IRA anyway and would be protected.

In other words, I would not pay $5000 to insure against a 1 in 100,000 chance our game causes carpal tunnel or infringes on a patent (in the patent case I think a lot of times you would just get a cease and desist letter, especially if you have not made any money. If your game was suddenly as popular as Minecraft or something then you could afford to hire a lawyer at that point).

It is not how much you make from the game that should determine your level of asset protection but how much you have to lose. If you have over $1M in assets to lose then it doesn't really matter if your game makes $1 or $100K or more a year - you might still be risking your $1M if it is not in asset protected asset classes. There are some federal laws for asset protection like ERISA covered 401K plans, and then other asset classes like personal residences and some types of IRA accounts are left up to state law, and what is protected and what is not vary greatly from state to state.

 

[Big_Hitter]

I'm interested in alpha testing - what platform?

 

[Totoro]

No really I have just been surrounded by geeks my whole life that I actually did think everyone knew what a MMPORPG was.

I knew - but also a total geek .. you misspelled MMORPG

 

[Fermion]

I knew - but also a total geek .. you misspelled MMORPG

There is some debate if multi-player is one word or really two words. I have seen a lot of people use the shorthand MMP which would seem to indicate it is two words, so the full acronym would be MMPORPG rather than MMORPG.

Nobody shorthands it to MM.

 

[Fermion]

I'm interested in alpha testing - what platform?

My wife is writing it in C# I think. She has worked for 25+ years as a dev on MAC, PC, Linux, Xbox, Sega (well that one is a bust), and Android phone. I imagine she will do the first release for PC, windows 7 to 10 although she is having me keep icons and stuff legible down to 1024x768 screen size which should mean the game could run on a high end phone or tablet.

I will definitely be hitting you guys up for alpha testing if you like this type of game. It is more crafting and puzzle solving oriented than a lot of your traditional RPG although it will be RTS and not turn based. A bit slower RTS than typical games to account for the loss of fast reflexes of us older folk (I can't compete with the 12 year olds on World of Warcraft now that I am 47).

 

[CoolChange]

My wife is writing it in C# I think. She has worked for 25+ years as a dev on MAC, PC, Linux, Xbox, Sega (well that one is a bust), and Android phone. I imagine she will do the first release for PC, windows 7 to 10 although she is having me keep icons and stuff legible down to 1024x768 screen size which should mean the game could run on a high end phone or tablet.

I will definitely be hitting you guys up for alpha testing if you like this type of game. It is more crafting and puzzle solving oriented than a lot of your traditional RPG although it will be RTS and not turn based. A bit slower RTS than typical games to account for the loss of fast reflexes of us older folk (I can't compete with the 12 year olds on World of Warcraft now that I am 47).

Count me in too...assuming that I am already RE'd. I love the concept you outlined here; my reflexes are too old to compete with the kids.

It is not how much you make from the game that should determine your level of asset protection but how much you have to lose. If you have over $1M in assets to lose then it doesn't really matter if your game makes $1 or $100K or more a year - you might still be risking your $1M if it is not in asset protected asset classes. There are some federal laws for asset protection like ERISA covered 401K plans, and then other asset classes like personal residences and some types of IRA accounts are left up to state law, and what is protected and what is not vary greatly from state to state.

This!

I do hope we are talking a few hundred dollars here for insurance...

I got a quote a while back for similar business coverage when I was considering a product with potentially higher liability, at least in my mind:

• B2B so any claimant would likely already have a legal department at their disposal

• Providing guidance on issues with significant financial impact to my customers

I do not remember the exact figures; but, it was only a few hundered dollars per year for several $million in coverage. It seems that yours should be even less with a B2C game.

Alternatively, if you really are going to run this as a hobby rather than a business, maybe you could just verify that your personal liability policy would cover you for any claims.

Either way, for me, the cost was definitely worth the peace of mind.

 

[Aerides]

I'd be interested in your beta/alpha. (many-year MMORGP-er here, FFXI/FFXIV)

 

[Fermion]

Thanks for the responses all. I think we will go the LLC route and get one of those $1M/$2M policies which do seem to be really cheap (less than $500 a year). I am not going to do much toward this until we get the game closer to alpha.

Right now I am learning Blender, which seems to be really full featured for a free open source animation package. I had been modeling some early stuff in Rhino Cad but my version was so old it would not do things like transparent png and the new version upgrade is $700 (ouch).