This article was prepared as a reference for those attending my “Startup your Startup” seminar at Pax Dev in Seattle on August 29th 2018.
This seminar is targeted at people who want to start a small company to publish a game (tabletop or video game), especially those who want to Kickstart a project.
I Am Not A Lawyer. Consult a professional lawyer or accountant.
Part I: THE QUESTIONS
Do you Want Your Game Published or do you Want To Publish A Game?
- Selling or Licensing your game to someone else
- What it means to run your own publishing business
Summary: Before you begin decide what it is you want to be in business to do.
What is “The Deal”
- Get it in writing
- Who owns what (Stand by for Part II!)
- Who puts in what assets (cash, equipment, rent/space, IP, time, etc.)
- Assignment of rights agreements
- Royalty deals
- What money is paid out, when, to whom
- How to bring in more people
- How to remove someone
- Who will be the Officers and what will their titles be
- Who will be the Board of Directors, and how are people added or removed
- Employment contracts
- How to liquidate
- Who is responsible for debts & liabilities
- Who has power to sign contracts
- Who has power to write checks
- Who will have access to the financial accounts / statements
Summary: Before you start, you need to have a frank and honest discussion with your co-founders; even if your co-founders are just you.
Costs: Zero up to bankruptcy, prison and the end of marriages & friendships
- CPA / Bookkeeper
- Print / Production broker for China
- Media buyer / PR Consultant / Marketing Consultant
Summary: There are some specialized fields that have a bearing on your startup. You should consider connecting with and retaining these services.
Costs: Will vary widely depending on the people and the amount of work.
What’s Your Name
Summary: Naming is hard, but fun. Try to get a name that converts to a snappy domain name and isn’t a trademark owned by someone else.
Costs: Zero unless you want to pay a lawyer to check trademarks
Part II: THE COLOR OF MONEY
Types of Legal Entities
- Sole Proprietors [ Bad ]
- Partnerships [ Bad ]
- Limited Liability entities [ Good ] / LLC vs S vs C
Summary: I recommend that you form a C-Corporation in either Delaware or your home state. C-Corporations are the least complex limited liability entity, are easy to set up, and are only problematic if you have a very wealthy investor who wants the maximum liability shield or you expect to have large amounts of cash profit that you want to pass to shareholders on a regular basis other than via payroll or dividends.
Costs: Legal work $1-$2k (may be optional — depends on your skills & comfort), setup & filing fees around $500.
Equity, loans, and gifts
- When you make someone a part owner in your business, you provide them with “equity”.
- When someone provides money that you are expected to pay back, that is a “loan”.
- When someone gives you money or anything else and doesn’t require repayment or return that is a “gift”.
Summary: There are lots of ways to input value into a startup. Each has it’s own pros & cons.
Costs: Will vary depending on how structured you make the transaction and how risk adverse are you and the other parties in deal.
Part III: ZERO TO “BUSINESS”
Form the Entity
- We recommend a very basic C-Corporation
Summary: Using boilerplate text from the internet you can bootstrap a simple C-Corp fairly easily.
Costs: Free, or you can pay a lawyer or other pro to make sure it’s all done “right”.
- Gives you access to business email accounts
- Also provides shared storage (Drive) and apps (Sheets and Docs)
Summary: Set up a GSuite account and buy a domain. Make your business on-line presence separate from your personal presence.
Costs: $5/user/mo, about $20/year to register a domain
Licensing & Registrations
- Federal Employer Tax ID Number (aka “FEIN”)
- Business license
- Sales tax account
- Business tax account
- “Foreign” corporation registration
Summary: You will need various licenses and registrations to operate legally.
Costs: FEIN is free, registrations & licenses with states cost $50-$100
- Minimum: checking with debit card
- Desired: Savings and a credit card
- Online applications now realistic (Wells Fargo)
Summary: Regardless of what kind of entity you choose you should always have a separate bank account for it; if you have a debit card you can protect your cash by keeping it in a savings account.
Costs: Essentially free with a minimal deposit (hundreds of dollars) and monthly balance after account created.
- Set Up PayPal
- Do not use your personal PayPal account
- Square (Varies based on type of transaction)
- Stripe (Varies based on type of transaction)
Summary: As soon as you have a bank account use it to set up a PayPal account; its free and there are lots of good reasons to get one for the business.
- Accrual vs Cash
Summary: Pros & cons to each, but future-proof option is accrual, especially for those Kickstarting.
Summary: You should be able to automatically connect to your bank, and to PayPal which will automate monthly account reconciliation imports and save a lot of time and heartache.
Costs: $60/mo (current deal for 3-month contract at $30/mo)
Summary: You need to know how to classify your workers correctly and file the proper paperwork with the IRS.
Costs: Zero, just your time to research and learn the difference.
- I9 forms
- State forms (you’ll need to research for your state)
- Onboarding Documentation
Summary: Get your paperwork in order and have your employees work through it when you hire them to avoid downstream problems.
Costs: Highly variable depending on how complex your employee agreements are.
Summary: Don’t try to do payroll yourself; it’s virtually impossible without a lot of specialized knowledge and training. Outsource to Quickbooks. The option you choose is mostly determined by the complexity of your mix of employees (how many states they’re in).
Costs: $19 or $49/mo + $2/employee/mo
Mandatory Payroll Features
- Worker’s Compensation
- Unemployment Insurance
- State Payroll Taxes
Summary: You need to investigate what you are required to provide and how to provide it on a state-by-state basis for each employee.
Costs: Highly variable based on who does what where
Optional Payroll Features
- Health Insurance
- Vacation & Sick Leave
Summary: These are the three primary benefits that most employees expect to receive through their jobs. On a state-by-state basis you’ll have to determine what you’re legally required to provide and how, and then decide what if anything you wish to offer beyond the minimums.
Costs: Highly variable
Take in Some Money
- $500 to $1,000 is a good amount to work with
- Have whomever puts in the money sign the shareholder’s agreement
Summary: You’re incurring expenses and you’ll want to have the entity pay or reimburse for those expenses so that your books are “clean” from the start and you don’t have a lot of weird loans and obligations outstanding for the costs of forming and starting your company.
Costs: Free, unless you want to pay a pro to write the initial shareholder’s agreement.
Part IV: GO TO MARKET
Logos & Trade Dress
- Decide how much to pay for these assets
Summary: Few initial company branding packages last very long. Whatever you make now you’ll almost certainly want to replace in the medium-term.
Don’t burn your the cash on this stuff until you’re actually making and selling products.
Costs: Highly Variable
- Creative Cloud ($50-ish/user/mo)
- FinalCut Pro X ($300/user one-time)
- Office 365 ($9/mo/user)
- DropBox ($12.50-$20/mo/user)
Summary: You want to use current versions of the best tools to ensure you can work with other people’s files and provide files other people can work with.
Costs: See above.
- Don’t host or manage a server, pay someone like Dreamhost
Summary: For a few dollars per month someone else can manage your website server and they should. You should focus on content.
Costs: Around $20/mo, plus extra for various plug-ins you may wish to use with WordPress ($50-$200).
Summary: You can get a suite of tools configured to help you market your brands and company quickly and easily.
Costs: Advertising platforms are basically free; MailChimp costs when you’re big enough to exceed the intro plan (2,000 subscribers, 12,000 emails a month), SurveyMonkey has features you may want to pay for.
Customer Service & CRM
Summary: You want to ensure that your customers are getting fast responses and you want transparency into what they’ve been told.
Costs: Pay as you grow; accounts are $50+/user/mo above intro volumes.
Summary: You want to automate as much of the process of shipping as you can.
Costs: See above.
- BigCommerce ($29/mo and up based on volume)
Summary: You want to outsource as much of the infrastructure of your online sales and merchant services as you can.
Costs: See above.