How To Start A Game Studio (LEGALLY)

Summary

In this informative video, indie game developer Thomas Brush guides viewers through the essentials of forming a Limited Liability Company (LLC) for their game studio. He explains the benefits of LLCs, such as personal asset protection and pass-through taxation, and addresses common misconceptions about taxes and business expenses. Brush emphasizes the importance of understanding legal liabilities and the simplicity of starting an LLC using services like Legal Zoom. With practical insights and a friendly tone, he demystifies the legal and financial aspects of entrepreneurship in the game development industry.

Takeaways

• 😀 Starting an indie game studio can lead to significant financial success, but understanding taxes is crucial.
• 💰 An LLC allows for pass-through taxation, preventing double taxation that corporations face.
• 🛡️ Forming an LLC provides legal protection for personal assets in case of lawsuits related to business activities.
• 📊 Business expenses can be deducted from income, reducing overall tax liability.
• 🚫 Personal expenses cannot be claimed as business expenses, which could lead to audits if misreported.
• 🔍 If you're outside the U.S., research the equivalent of an LLC in your country for similar protections.
• 📝 Starting an LLC is easier than it seems; using services like Legal Zoom can simplify the process.
• 💵 The costs of forming an LLC vary by state, and it's important to check local regulations.
• 📅 It’s essential to maintain accurate records of income and expenses to avoid tax complications.
• 🤔 Always seek advice from certified professionals for legal and tax matters when starting a business.

Q & A

What is the primary focus of the video?

The video discusses the importance of forming a Limited Liability Company (LLC) for indie game developers, covering aspects like taxes and legal protection.

What are the main benefits of forming an LLC?

An LLC offers limited liability protection for personal assets and allows for pass-through taxation, meaning profits are taxed at the individual level rather than at the corporate level.

How does pass-through taxation work for an LLC?

With pass-through taxation, profits from the LLC are reported on the owner's personal tax return, avoiding double taxation that corporations face.

Can you claim business expenses without an LLC?

Yes, you can claim business expenses without an LLC; however, an LLC provides legal protection while allowing you to deduct those expenses from your taxable income.

What is limited liability, and why is it important?

Limited liability protects the owner's personal assets from being seized in case of business debts or lawsuits, creating a 'corporate veil' that separates personal and business finances.

What happens if a customer sues an indie game developer without an LLC?

Without an LLC, a developer's personal assets, like cars and savings, could be at risk if they are sued for negligence or other claims related to their product.

What are some typical costs involved in starting an LLC?

Starting an LLC typically involves filing fees, which can vary by state; for example, the video mentions a total of about $392 in North Carolina.

How can LegalZoom assist in forming an LLC?

LegalZoom simplifies the LLC formation process by handling paperwork and providing guidance, which can save time and reduce hassle, although it may cost slightly more.

Is it necessary to pay yourself a salary from an LLC?

Paying yourself a salary is not considered a business expense; profits from the LLC are taxed as personal income regardless of whether they're kept in the business account or withdrawn.

What should one do if they want to start an LLC outside of the United States?

If you're outside the U.S., you should look up the equivalent of an LLC in your country to understand the structure and benefits it offers.