LLCs, Death, and Taxes

[Tyrant]

Just curious, but how are the myriad of LLCs formed by all the aspiring game companies holding up under the tax requirements? Sales, Corporate Tax Returns, Accountant fees, etc? I'm finding that my accountant and the IRS are the only ones getting rich out of my LLC formation. Am I doing something wrong or is this just really the cost of doing business?

 

[Greatwyrm]

Unfortunately, this is probably a cost of doing business for you.

(If you've formed an LLC, you probably already know the rest of this, but...)

Nobody starts an LLC or standard corporation because they're cheap. These forms of businesses are essentially insurance policies, but instead of paying premiums you pay extra taxes. You're insuring yourself against somebody coming to you and taking your house/car/dog because your company can't pay it's bills.

 

[Tyrant]

Nobody starts an LLC or standard corporation because they're cheap. These forms of businesses are essentially insurance policies, but instead of paying premiums you pay extra taxes.

You're absolutely right about that. What I am wondering is, what is the real risk for a pdf or even a small press print company? Is this mass move to LLC that seems to be prevalent in the market really necessary? Or would a regular sole proprietorship / partnership with a little bit of liability insurance be an easier way for the small companies in our market to do business?

 

[Morrus]

I wouldn't worry about it for a small PDF outfit. Maybe if it expands to the point where you're raking in large amounts of money every year, but certainly not at first.

I presume in the US there's the equivalent of the Sole Trader. Basically, it's you personally selling stuff. Just make sure you know what you're doing tax-wise (and no, I know nothing about US tax, so I can't help you there!).

 

[Gargoyle]

I wouldn't worry about it for a small PDF outfit. Maybe if it expands to the point where you're raking in large amounts of money every year, but certainly not at first.

I presume in the US there's the equivalent of the Sole Trader. Basically, it's you personally selling stuff. Just make sure you know what you're doing tax-wise (and no, I know nothing about US tax, so I can't help you there!).

Yes, it's called a sole proprietorship. Tyrant, you could go with an SP and just purchase liability insurance if you feel you need protection from litigation.

I incorporated my company because it was cheaper to do so in my state than an LLC, so YMMV depending on what state you're in. Talk to a business lawyer and an accountant.

 

[Greatwyrm]

Another key thing here is the name itself -- "Limited Liability Corporation".

Another thing to ask yourself is how much liability you're actually looking at. If your business went under and you weren't an LLC, how much would you be on the hook for? Are you doing anything that may end up with you getting sued? Do you have any property involved in the business? If your business is just you writing pdfs in your basement and selling them on RPGnow, an LLC may be overkill.

As far as your tax consequences, talk to your accountant. Without knowing specifics, it's hard to say how the different taxation of an LLC would compare with taking all of that as self-employment income on your personal taxes.

If you're in a situation where you ultimately end up moving to a standard unlimited partnership or a limited partnership, get a written partnership agreement. Friends are friends, but business is business.

 

[BMF]

Its the cost of doing business. I run run 2 small companies on the net. One is an LLC, and it pays a lot in taxes. The other is a full corporation, but is about to be restructured as a SP.

I don't think ther is a trend toward LLC structure in the publishing business so much as there is a wide spread trend towards LLC is all industries.

Personlly, I think SP is a fine structure for a d20 publisher.