Distribution Should a U.S. citizen register a corporation to release their video games?

Discussion in 'Game Design, Development And Publishing' started by DankMemes, Nov 7, 2018.

  1. DankMemes

    DankMemes Member

    Joined:
    Sep 25, 2018
    Posts:
    34
    Should a U.S. citizen register a corporation to release their video games?
    If so, does an offshore company help lower taxes in this case?
     
    Last edited: Nov 8, 2018
  2. MishMash

    MishMash Member

    Joined:
    Jun 20, 2016
    Posts:
    362
    Not 100% sure on US tax law, but a better option is most likely to look into sole-trader/sole-proprietorship or self-employed avenue's. A corporation is normally only necessary when you need corporate structure, i.e. have employees, directors etc;

    In the UK, the way it generally works is sole traders do not need to pay additional corporation tax, but all the profits off your game would get recorded in your tax return, which you would then pay income tax on. Corporations have one additional layer in that you would have to pay corporation tax, and then you would pay yourself a salary out of that, which would still be taxed. One benefit of having a corporation is if you are making lots and lots of money, and plan on re-investing at a later date, you can pay yourself a limited salary, or acquire value in the company through shares, which would put a limit on your income tax, however the downside is then you still need to pay corporation tax anyway.

    Generally speaking, I would assume its almost always better to just skip the corporation if you are selling on your own and actually want the money in your pocket, even if you were to somehow be able to register offshore, you would then get hammered by other forms of tax related to international payments, and you'd probably find it quite hard to get an exemption on that from the IRS if you live on US soil.

    If I remember correctly, the IRS withholds 40% of game revenue from games sold on Steam by developers outside the US, without the valid paperwork. The paperwork isn't hard to sort out if you genuinly are a registered tax payer in another country, but if you are trying to fiddle the system, you can probably wave that money goodbye :p
     
    SnotWaffle Studios likes this.
  3. Steevo

    Steevo Member

    Joined:
    Nov 6, 2018
    Posts:
    57
    A corporation is a legal entity, a virtual person. The corporation gets the profits from the sales, not you as the creator of the corporation.

    You can draw a salary etc from the corporate funds, but you can't just withdraw the corporate fund and spend it as you own, that is illegal and will end you up in jail as you are performing fraud.

    I'd think careful about choosing this path and get proper financial and legal advice.
     
  4. DankMemes

    DankMemes Member

    Joined:
    Sep 25, 2018
    Posts:
    34
    The 40 percent on developers who live outside the US, does that apply to US citizens living outside the US also?

    Wouldn’t corporate tax be lower in foreign countries such as Ireland or panema or the caymens?

     
  5. sitebender

    sitebender Member

    Joined:
    Sep 13, 2016
    Posts:
    682
    Go for an LLC and not a corporation. Especially if you are small.

    If you go the LLC route, you can pay taxes quarterly at 15%. If you pay annually it's 30%.

    You should consider a company when that company is either A) economically functioning or B) you fear getting sued. You don't have to make money to get sued.
     
    Last edited: Nov 10, 2018
  6. Seabass (The Human)

    Seabass (The Human) Member

    Joined:
    Jun 20, 2016
    Posts:
    334
    If you are a nobody releasing a small game that you feel won't earn upwards of $20k in its life time, just release the game and collect the revenue directly. If you think you're making anywhere upwards of $50k then I'd consider an LLC to protect yourself from legal endeavors. Easy as that. :)
     
  7. dannyjenn

    dannyjenn Member

    Joined:
    Jul 29, 2017
    Posts:
    463
    While this makes sense, I've heard that publishing a game in your own person is a bad idea. Because if somebody sues you, then you'll personally owe the other party all the damages. But if your game was published through your company, your company could just file for bankruptcy, and you'd be more or less off the hook. (At least I think that's roughly how it works...)
     
  8. FrostyCat

    FrostyCat Member

    Joined:
    Jun 26, 2016
    Posts:
    3,240
    "Whether a US citizen in general should register a corporation for tax purposes" is a meaningless question. "Whether YOU in particular should register a corporation for tax purposes" is the question that really needs to be asked.

    Sure, corporations allow you to limit liability and defer income tax, among other financial and legal benefits. But corporations also come with additional red tape and compliance requirements, have potential for double taxation, among other contingent costs. It's not a money-saving silver bullet that broke people and the political far-left make of it, and its practical effectiveness relative to not incorporating varies from case to case. Factors such as the type of business, the amount of revenue, the experience of the owner(s) and the amount of exposure to legal liability all need to be taken into account.

    You can often tell how qualified someone is by what questions they pose and who they choose to pose the questions to. Asking a question that simply cannot be answered without specific context on financial and operational details is already stupid enough. Choosing to ask for an answer from a general audience with no local legal qualifications makes that even more stupid.

    Do the sensible thing, gather your papers and speak to a local tax accountant. I also hope that moderators would do the sensible thing and clamp down topics like this in the future, and recommend getting actual qualified advice.
     

Share This Page

  1. This site uses cookies to help personalise content, tailor your experience and to keep you logged in if you register.
    By continuing to use this site, you are consenting to our use of cookies.
    Dismiss Notice