How To Start A Game Studio (LEGALLY)

Hey guys, how's it going? My name is Thomas Brush and I make indie games for a living. Okay, so you launch your game and the next day $100,000 slams into your bank account. That's a huge, I don't know, down payment for your house or maybe you can buy a brand new Ford Bronco. Oo, that sounds amazing. Or better yet, maybe you could put it in the stock market because apparently the stock market loves chaos. I don't know what's going on in 2020, but that's what's that's what's happening. But guys, not so fast here. Remember, you need to pay taxes. So, how much taxes do you actually have to pay? It's kind of confusing, right? And what about legal liability? Are you so sure that you're not going to get, I don't know, sued from maybe a customer who played your game? There's a lot of questions in the air. And in the wonderful world of gamedev and entrepreneurship, you may find yourself feeling completely lost when it comes to the legal mumbo jumbo

of starting a business. Guys, I get this. I really do. Without my CPA dad growing up, I'm not sure I would have even known exactly how to start an indie game studio. In this video, guys, I'm going to be the dad that you never had, right? I'm going to tell you all of the wonderful things about limited liability companies, taxes, and I don't know, the corporate veil. All of this super important information is actually not that hard to understand and it's really easy to start an LLC. Guys, it's also easy to click that like button. That would really mean a lot to me. I'm trying to make this channel explode lately. So, please click the like button and the subscribe button and that would really help me out a lot. I really appreciate it. Just know guys, I'm I'm not a lawyer, okay? I'm not a certified public accountant and I'm not recommending anything here based on some kind of certification or whatever. I'm just like you guys. I had to do my own research when starting an LLC and starting a game studio. And I would just say consider this video just a little portion of the research that you're

going to do. All right. So, first guys, let's talk about why you should form an LLC. And that's a limited liability company. An LLC, according to Wikipedia, is a business structure that can combine the pass through taxation of a partnership or a sle proprietorship with the limited liability of a corporation. All this really means, guys, is you're going to get taxed personally because you own the company. And honestly, there's no real tax benefits that I can think of to actually owning an LLC versus something like a sole proprietorship. But you do have protection, and this is what separates an LLC from a sole proprietorship. You do have protection of your personal assets in the event of some random lawsuit as a result of your games or your products. Now, really quick, guys, if you're outside the United States right now, don't worry. Just Google LLC equivalent in whatever your country is,

and you should get an idea of what your country offers. Okay, so first things first, let's talk about taxes and how they relate to an LLC. An LLC is taxed essentially the same as a sole proprietor, but to sound smart, let me just say that an LLC takes advantage of what's called pass through taxation. A corporation doesn't get this. Basically, a corporation is going to be taxed on its profits and then the owners are also going to be taxed and this is called double taxation. Now, to be extra extra clear here, guys, you can claim business expenses without having an LLC, right? However, an LLC allows for legal protection, which we're going to talk about that in a second. While also allowing for pass through taxation. That's pretty cool. Meaning, yes, just like a sole proprietor, you are going to be the owner of your company and you're going to be taxed as the owner, but

you're also afforded limited liability. And who doesn't want that? Now, before moving on to what that liability protection actually is, I want to chat about your business expenses. I think this is really important. Pretty much anyone running a business or an LLC or not can claim business expense deductions. This means whatever you spend from your bank account for your business, guys, it's not going to be taxed as long as it's actually a business expense. And that's actually the catch here. So, if you're planning on going on a trip to the Bahamas and you maybe get a spray tan, you can't just claim it as a business expense unless you're the president, right? True. So, if you make $100,000 on your indie games and you spend 30,000 of it maybe running your business, making another game, fixing bugs, or whatever it is your business is, 25 to 35% of that $70,000 is going to be taxed. So that's like $17,500 in taxes. So the full $100,000 is not going to be taxed.

Hallelujah. If it was, that would be like $25,000 bucks. Obviously, this is just a guesstimate, guys. I don't really know what your tax bracket is. But ultimately, that's like something like $7,500 in savings. And that's pretty cool. This is why when I actually buy something, let's say for my family, I feel like I'm not really saving any money. I'm just spending it. But when I buy something for my business, I feel like I'm saving money. Now, obviously, this is if it's actually needed for the business. So, buying a giant bean bag for my office isn't really saving money. Let's keep talking about these business expenses really quick. Let's just say you pay yourself a salary of like $50,000 as a game developer. Well, you're the game developer, right? So, that means you're a business expense, right? wrong. That's wrong. That's called cheating. And this results in something called, you guessed it, an audit. If you

personally build wealth from your business because you're the owner of the LLC, that's going to be taxed. As the owner of an LLC or as a sole proprietor, guys, you're not an employee. It doesn't work that way. And here's the thing, it doesn't matter whether the profit is stored in your personal bank account or your business bank account or in the basement. It really doesn't matter where it's stored. It's still cash the government thinks that you don't need to run your company, so they want a piece of it. All right. So, what exactly is limited liability? Basically, limited liability creates something called a corporate veil. All this does is shield the owner's personal assets from lawsuits, business debt, and stuff like that. So, let's say you release your game called, I don't know, seizure city, and somebody has a seizure playing it

and claims it's your fault. This is called tort liability, which is honestly, in my opinion, the scariest form of liability. Basically, if your customer somehow becomes wronged, they can technically sue you for negligence. So, let's say you get sued for half a million bucks and you don't have half a million bucks. Most of us don't, right? But you do own a brand new Honda Accord and you paid for this in cash. And that's important. You actually own it, right? the bank doesn't own it. And maybe you have $10,000 in the bank. Guys, the government and this lawsuit can actually claim that if you don't have an LLC. So, that's the cool thing about an LLC. It acts as a safeguard against your personal assets in the event something bad happens with your products. Guys, this is not full protection, hence the word limited. there's plenty of room to wiggle around

and maybe see that you're personally liable. But I've always said, guys, a little bit of liability protection is better than none, right? But I will say the bigger your company gets, the more money you make, the more money you bring in, guys. That's the more potential for liability, right? Meaning, the bigger you get, the bigger your studio gets, the more valuable an LLC becomes. So, how exactly are you going to start an LLC? Guys, this is where things get really complicated. And I'm not going to lie, you're going to need to go down to your DMV and you're going to need to wait in line for 3 to 4 days. You'll need to fill out 12 pages of paperwork and mail them to the Washington Monument. It's actually insanely easy to start an LLC. So, let's jump on over to Legal Zoom. And by the way, this is not a sponsored video from Legal Zoom because honestly guys, Legal Zoom makes it really easy for you to start an LLC.

You're probably going to spend $100 more than what you would without Legal Zoom. But I would just say Legal Zoom makes it so much easier and they also offer, I guess, some safeguards that I think it's worth the extra fee to use Legal Zoom. All right. The first thing you're going to want to do, guys, is go to legal zoom.com/lc. And it's going to ask you what you want to name your business. So, I'm going to name it Bouncy Ball Games. Let's do a Z. And by the way, guys, you also want to check to see if your URL is available. So, just go ahead and try to see if Bouncyball Games is available. So, bouncyballgames.com looks like it's probably available. A good way to check is to go to your provider and try and buy a new domain, but let's go ahead and just check the availability of the LLC, assuming that the URL is available as well. Let's go ahead and do North Carolina for the state. Good. It looks like it's

available. All right, let's type in my email address, thomasulttimegamedev.com. Um, what's my phone number? 864666 6666. Get my LLC. Um, looks like we want to launch yesterday, so it's already running. And click continue. Is Bouncy Ball Games your first LLC? Uh, sure. What do we do? We create video games, right? Continue. How many employees or will we have employees in the next 12 months? No, it's just me. See essential services. Continue. All right. So, what I would choose if I were you guys, I would choose this one here or this one. Okay. The reason why is because this one includes an EIN. An EIN is an employer identification number, which as you can see here, an EIN is required. Without it, you can't file taxes or open a bank

account. So, you absolutely want this one. This one's not enough here. So, I would get this one or this one. I'm going to click complete coverage, though, because this includes some licenses that I don't even know anything about. I just know that I want as much uh coverage as possible for my business, but the other one would have been fine, too. Okay. Um, let's go back here. This says business services for bouncy ball games. Let's take a look and see what those are. I don't really want any of these right now, so I'm going to click no thanks. They're just trying to upsell me. No thanks. Okay, so here we go. Just select an LLC package below and you're all done. So, I'm going to choose the economy because all this means is we're just going to get this um in 30 days, right? So, if you need it in 10 days, you're going to choose this one here, but we could just choose economy. And as you can see, guys, it's going to throw on the $80 fee for Legal Zoom, but also the $125 North Carolina filing fee.

Now, obviously, guys, you could file for an LLC with North Carolina, and it depends on the state you're in, but in North Carolina, we could file for $125, but I'm also going to pay this $80 fee here, or $79 fee with Legal Zoom, because they're going to handle a lot of the stuff that I don't want to deal with, right? So, that's why we're paying a premium here. But honestly, I would recommend paying the premium so you don't have to deal with all this junk. So, let's click no thanks here. We don't want to worry about a business account. Let's see if we've got some coupons with Honey if you want to use Honey. All right, looks like there's no active codes. Sometimes they'll find one. I found one for $10 earlier today. So, um, let's go ahead and continue to check out. And so, as you can see here, guys, in total, we're going to be paying $392. And this is for North Carolina, right? So, there's going to be difference in prices across states. And obviously, if you're in you're in another country, you know, Legal Zoom, I'm not sure if they offer it for you guys. Um, and it's

might not even be an LLC, right? But for those of you who are in the United States, you're going to see a different price here. Um, but for me, it's going to be $392 and I can continue to check out. So, that's the basic process of creating an LLC with Legal Zoom. All right, guys. Thanks so much for listening to me ramble and let me know in the comments what you thought of this video and if any of you actually have an LLC. I'd love to know what it is. I'll talk to you guys next time. See you. Cheers.