You have a great game idea/design that you have worked for several months perfecting and designing and you are now ready to begin marketing it but realize you must set up a company, obtain intellectual property right protection and determine how to handle all the tax implications.  On first glance this appears to me an extremely complex and detailed task that will require the assistance of professional legal and tax console.  Take heart though, this process is not nearly as daunting as it appears if you simply tap into resources out there.  First and foremost it is not required you obtain the full services of a lawyer although it may be a good idea to find a lawyer to simply review your work while you do all the leg work. 

The very first step you should undertake is setting up your business structure, often you may have partners and it would be tempting to set up a general partnership ¨C its quick easy and takes very little time and effort.  However, it is highly advisable to consider a Limited Liability Company or an s-corporation even if you will be the sole owner.  Both of these organizational structures will offer you protection against lawsuits.  If a liability suit arises the company is liable, not you (except in cases of gross negligence).  In either a sole proprietorship or general partnership it is possible for plaintiffs to sue you and either take or put a lien on your personal assets.  In most cases setting up an LLC is preferable over that of an s-corporation due to its simplicity in structure and in handling taxes.  Basically and LLC allows you the same personal liability protections as that of an s-corporation but allows you to operate in the same manner as a general partnership.  Corporations on the other hand have greater complexity in regards to taxes and structure as well as more guidelines to follow. It is not recommended to set up an s-corporation without consulting legal console.  Some states do not currently offer an option to set up an LLC (typically you will register your company with the state in which you do business in) and in these cases you will have to set up a corporation (most likely an s-corporation).  Also, if you will be seeking outside investors you will need to incorporate. 

It should be noted that there are two types of corporations, the s-corporation as mentioned and a c-corporation.  Without going into high detail the basic differences between the two is in regards to investors and taxes.  There are many more restrictions on the number of investors for an s-corporation over that of a c-corporation however an s-corporation has tax advantages over that of a c-corporation.  The best place to start in obtaining information in regards to business classifications is the Secretary of States Office for the state(s) in which you will be operating, you should also contact your local Small Business Administration (SBA) Office or visit their website (http://www.sba.gov).

While setting up your business structure is necessary its only one piece of the entire puzzle another very important aspect is protecting your idea.  Once again it is not required that you obtain the services of a lawyer to file patents (in this case design patents), trademarks and copyrights.  Information can be obtained from the United States and Patent Office (http://www.uspto.gov/) and the United States Copyright office (http://lcweb.loc.gov/copyright/).  The State of Minnesota has published an excellent guide to intellectual property rights and can be found at (http://groups.yahoo.com/group/boardgamedesign/ and then click on Business and Economic Development), most of this guide would be useful to persons located in any state since Copyrights, Trademarks and Patents are handled through the US Government.  Note that some of the applicable fees, especially patents, can be reduced by 50% for small businesses ¨C the Minnesota Guide covers facts such as these.

Finally but not least, taxes.  When engaging in any business the goal is to make a profit and where there are profits there are taxes.  Tax information can be obtained for the IRS (http://www.irs.gov) and your states income tax office.  While most of the literature is dry it is indeed possible for anyone to understand it.  The very first step to undertake in regards to taxes is to obtain an Employee Identification Number from the IRS.  This will be required for any business classification other than a sole proprietorship however it is still a good idea to have one ¨C its best to keep personal and business finances separate.  When it comes to preparing your taxes it is recommended though that you at least seek council if you have not had experience in preparing taxes but when you do so use it as a learning opportunity.  Do not just hand off your tax information, have someone prepare and send them in.  Take the time to discuss the issues with them so you yourself can plan better and you will have the option to do them yourself in the future.  Another very important consideration is quarterly payments of taxes.  Much like you are required to pay taxes out of each paycheck you are required to pay taxes on income from business activity and failure to pay the tax can result in penalties!  Another important tax consideration are sales taxes, be sure to contact your state and states in which you will be physically selling your product in for applying for a sales tax id and required forms (city taxes may apply as well).  Note about the only exception to paying sales taxes is when you send product across state lines otherwise if you attend an event in any state and you sell product you must collect for sales taxes.

This article has just touched on all the basics of starting and operating your company and more information can be obtained from the websites referenced in this article.  You do not need a business degree to start or operate your business and you do not need to attend college classes although if you have little experience with accounting they can help.  Also do not ignore the rich variety of resources available through the SBA and SCORE (Service Corps of Retired Executives) (http://www.score.com).  Both offer training, resources, literature, advice and other services to assist you in starting or managing your business.  The services are either free or low cost and regardless of your level of expertise you can be sure to gain knowledge from tapping into this resource.  Utilizing these resources can be especially helpful if you are seeking a SBA loan.  Many will advise against taking out a loan when starting a business however it may be the only way to finance the initial printing of your game.  The bottom line is that if you wish to be successful you must be willing to undertake risk however be sure to only take out a loan if you can afford to pay it off on your current income and you are willing to make payments on it even if your idea does not generate the profits you envisioned.

Copyright 2002 Scott Perowitz

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