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So me and some friends are starting to make games and plan to publish them. At what point should we formally file for, and become, a LLC? I'm hesitating to do it now because every dollar spent is a dollar that could be used on the game, so should we do it after we publish? Or will this lead to problems? I've looked on the internet but haven't found a suitable answer as to WHEN, just if/if not. Thanks for any advice.

Few game studios need to form anything much beyond partnerships. An LLC is about mitigating risk away from the owners. It is a step between a partnership and a corporation.

However, what exactly are the risks of creating games? It turns out, very little. There are some businessmen who believe any business larger than a basement operation should take on some form of risk mitigation, but just a simple look around at various game studios (even some fairly large ones) shows that it doesn't seem to hold true in the game industry.

A downside is that the more complexity you have to your company structure, the more complex the law becomes. A simple filed business can almost completely be handled with a dozen different forms or so (including the tax forms). A partnership is about the same (existing really only to legally show that two or more people own the business). An LLC takes the complexity up a bit (taxes can get complicated since you have many more choices on how to file them and would likely require an expert to choose the best one), and a corporation can get very complex, really requiring help from people with experience.

On the plus side, just what the name says, an LLC can help limit the risk of company owners from debt and lawsuits. But really, in my opinion, if you are getting into trouble with those as a game studio, you are doing it wrong lol.

Note: Obviously, this is just my opinion, and I am not really equipped to give legal or business advice.

Financial liability isn't always removed with an LLC. Google "piercing the veil". Estimated taxes need to filed and paid quarterly, whether it is $0 or more.

I guess you can legitimatize more write-offs: office space computers, some travel, etc; but you can do that as a DBA as well, if you don't need a more permanent business presence yet.

I don't see a huge benefit for a game developer as others have stated. Now, if you contract some work to redevelop someones business app, then yes; an LLC and an applicable insurance policy.

Definitely. That is why they are called "limited liability" and not "no liability"

Even corporations don't completely shield the owners from risk. It would be insanity to offer business owners complete immunity to the effects of what their business does.

I established an LLC when I began a premium store in my ORPG. It was primarily to secure myself against whichever legal claim I thought could possibly come out of the fact I was now handling money, but also it was a safety net as I pay and work with many freelancers and independent developers. While I've never had a problem with anyone I've worked with, you never know when someone could decide they have a problem with how a contract was handled. Also being able to write-off expenses involved in the development of my game, such as travel, meetings and other itinerary items. I've probably spent less than six thousand dollars on my game, but I've always felt better knowing there was a limited protection from lawsuits, and my lawyer recommended I take that route as well.

Whats your game V?

Valkyrie wrote:I established an LLC when I began a premium store in my ORPG. It was primarily to secure myself against whichever legal claim I thought could possibly come out of the fact I was now handling money, but also it was a safety net as I pay and work with many freelancers and independent developers. While I've never had a problem with anyone I've worked with, you never know when someone could decide they have a problem with how a contract was handled. Also being able to write-off expenses involved in the development of my game, such as travel, meetings and other itinerary items. I've probably spent less than six thousand dollars on my game, but I've always felt better knowing there was a limited protection from lawsuits, and my lawyer recommended I take that route as well.

Hmmm...I didn't think about working with freelancers. That is food for thought.

Jackolantern wrote:

Valkyrie wrote:I established an LLC when I began a premium store in my ORPG. It was primarily to secure myself against whichever legal claim I thought could possibly come out of the fact I was now handling money, but also it was a safety net as I pay and work with many freelancers and independent developers. While I've never had a problem with anyone I've worked with, you never know when someone could decide they have a problem with how a contract was handled. Also being able to write-off expenses involved in the development of my game, such as travel, meetings and other itinerary items. I've probably spent less than six thousand dollars on my game, but I've always felt better knowing there was a limited protection from lawsuits, and my lawyer recommended I take that route as well.

Hmmm...I didn't think about working with freelancers. That is food for thought.

Everyone dollar spend threw your company that has a transaction ID online (paypal) or writing a company check could potentially be tax write off. I have heard if your a US citizen and if you send someone or if your receiving more then 300$ from same person in a year the government wants to know why. It may be more. Could be concept art, art, programming, web designs or advertising.