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Neil Carr
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I've stepped onto the path of being an amateur RPG publisher via Kickstarter. I want to see how far I can travel from zero-to-hero and I'm looking for help along the way. These series of posts are in part just me thinking aloud, but also asking specific questions as I put the pieces together to achieve rpg publishing victory.

I've been slowly building up the Geek Industrial Complex as a business for awhile now. The impending Kickstarter campaign though is what pushed me the hardest to nail down all sorts of legal, banking and tax issues.

Aside from my general intention of creating a company, why do it for a Kickstarter? When you create a crowdfunding campaign on a website like KS you're agree to a host of legal terms. Essentially you're creating a contract with your backers that you're going to deliver on what you promised with the money. While one can just wing it, if you're hoping to enter into a legal agreement with potentially hundreds of people it just makes sense to do it through something like a Limited Liability Company. It's not because you're trying to find ways to weasel money out of people with no consequences, it's just that “stuff happens” in a myriad of ways in life and so having some protection through a corporate entity is just sound business practice. Further, it protects your family.

I'm not really sure what would prevent me from failing to deliver. Aside from some catastrophic incident, such as a car accident that left me crippled or dead, or perhaps some act of god that destroys all of my data despite multiple backups, etc. Regardless, if I enter into this agreement and I can't follow through, say I die, the my wife is on the hook. Depending on the point in the process of creating the product, the money might have already been spent on various elements. I'd hope my wife my be able to see it through to completion, she is a gamer, but it's still just one of those existential and legal layers that you have to consider. Thus, creating an LLC gives a layer of protection to me and my wife in case our world falls apart.

So what have I been doing with these dreary legal realities? A lot of the factors fall into steps that have to be taken in a specific order. One thing can't be done until something else is accomplished, so here has been my path:

Create an LLC: This wasn't hard at all. I just went to my state's website, read up on it, filled out some forms and then paid $100. I know that you can do some loopy tax stuff by creating a company in a state like Delaware, but I like Vermont and don't have a problem giving the state some money for all the services I take for granted, plus if there are wacky problems I just drive down the road to the state capital to deal with them, rather than have some weird remote issues to contend with in Delaware.

Get an EIN:
Once my letter from the Secretary of State of Vermont arrived with my official piece of paper saying Geek Industrial Complex, LLC was now a new entity in the world I went online and got an Employer Identification Number. This is basically the Social Security number for the company and it's what is needed for all sorts of other realities in this world, much like how a newborn needs a SSN to start tapping into the vast array of services that are offered by governments.

This process was ultimately rather easy to perform online. It however required going to the IRS website and straining to hold back tears with all the hideous technical language and details to read up on, all of which I've completely forgotten at this point unfortunately, so you're on your own. Still, in the end one of those paths on the website leads to a quick online form that immediately spits out an EIN to you.

Create a business bank account: The most important thing that the EIN does is that it unlocks a business bank account. You need that slip of paper, basically the “birth certificate” of the corporation from the state, along with an EIN to open up a business bank account. I went to a local credit union and they were very helpful in getting me setup with an account and starting the process for online banking, business debit/credit card. It's that card that you really want for the Kickstarter. I needed $125 to open the account and it's all free services. Yeah credit unions!

Setting up a Kickstarter account: I've already got a KS account under my own name and connected to my personal Amazon account. While I'd love to show off in my campaign how many other KS I've backed, since the whole point is to do things right with clear business boundaries then I need to open up a new KS account for Geek Industrial Complex. Not a big deal and rather effortless.

Starting a Kickstarter project: It really needs to be stressed, start setting up your project well in advance of actually launching your campaign. Why? Beyond giving yourself the time to craft the campaign so it's clear, concise and well edited, you also need Amazon to setup an Amazon payment account and that requires layers of verifications. Don't worry about suddenly jumping into deep water. You're project will only launch when you tell it to, so you can keep the project in draft form for as long as you wish to tweak it.

Setting up an Amazon Payments account:
Kickstarter funnels you into the Amazon Payments process. Since I'm doing this as an LLC I had to setup a whole new Amazon account, which was easy, and then go into the layers of financial details and verifications. This is where that bank card I got from my credit union kicks in. That, along with my business checking account, are going to be the way that money flows in and out through Amazon payments.

The whole process seems similar to setting up a Paypal account. You can even have money sitting in Amazon Payments, just like in Paypal, though I'm not sure how flexible you are in sending money to people.

Amazon requires several verifications, such as security questions, your SSN, and since I'm doing this as an LLC, they want a bank statement faxed to them. The bank statement is verified manually and so takes a few business days to get processed. This is one thing I could imagine people getting tripped up on if they were in a real rush to get a KS going.

Fill out Amazon Tax Form: Taxes thematically hover over this entire process, but they get highlighted here with you needing to fill out federal W-9 form. At least you have to do this as a business. I'm not sure what happens as an individual. They have a wizard to move you through the steps in filling this out, but honestly they didn't give you any real instructions on the arcane terms and details. I went to the IRS and found the directions for this form. That helped tremendously, as it made sure I avoided making some big errors in how I should be filling out that form.

Dealing with Taxes: I have yet to understand the full implications of what will happen next year when I have to slog through my taxes and sort out everything. However, I've lived long enough to anticipate that having my personal finances separate from my business finances will make life far easier on me. Plus, business have all sorts of expenses that can be deducted. That'll be important because if I get a bucket of money from a KS campaign, most of it will be spent paying to get the product made. Paying taxes on the revenue rather than the profit from KS would not make me or my wife happy come next tax season.

One thing that I can say in a nuance with taxes through this process is that an LLC can be designated as “disregarded entity” if you're the only one owning the LLC. Basically for tax purposes the government will just lump you and your LLC together for filing purposes. You still end up doing a lot of things separate, but when you file you also include all of the LLC stuff with your personal tax return. This special status has come up a few times in the technical details, such as that W-9 form above, so if you go with an LLC keep your eyes peeled for how to handle this situation.

Conclusion

So that's where I'm at now. I can pull the trigger on my KS when I'm ready now that I've got all of these elements taken care of. I have no idea if there are gaping holes in any of these issues, but so far everything has been fairly straight forward.

One of the things that I've been doing up to this point has been paying for a lot of artwork and other business related material out of my own personal finances. I'm going to eventually put money into my business account and the pay myself back so that the LLC has “ownership” over the assets, and clears up the business expenses for tax purposes. I have no idea if this is sound, but it seems logical to me at least.
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Jacob Wood
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Coming from a business major, it sounds like you're on the right path. I'm still a student and probably not the best person to ask for advice, but I can spot that you've done your research and have made a lot of solid decisions.

That being said, I think going with a Sole Proprietorship (as I have done for the time being) isn't necessarily a bad choice for anyone who's still not sure about this whole "LLC" thing. The tax implications are perhaps the biggest and most confusing aspect of company ownership, but the legal concerns you brought up are important too, of course.

I will actually probably renew my company as an LLC when the time comes (actually, Accessible Games has been a legal DBA for almost two years now and it's going to be time to renew it soon) primarily for the legal protection it offers, even though I don't anticipate anything catastrophic occuring.

I've already filed taxes once as a DBA (for my other business, actually) and as far as being a Sole Proprietor goes it's fairly simple. I did it all through TurboTax, paid them the extra money they wanted to walk me through doing taxes as a business, and went about my way.

How's ti all going to look when I have an LLC instead? Well, we'll likely find that out this coming January.
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What sold me on the LLC is basically the disregarded entity status. From a tax paperwork standpoint it sounds as if it will be similar to a sole proprietorship, but with the added legal protections. If I wasn't the sole owner then you'd have to specify a specific form of LLC which seems to up the complexity of tax preparation, so this seemed to have just the right mix of features for a single owner.

It also helped that the Vermont government website seemed to be fairly lucid in its explanation. Vermont is pretty friendly for small business. It has to as the population is so small that any draconian policies would cause an uproar in our town meeting days.
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Why get an ISBN?

Major retailers and internet booksellers use ISBNs for their internal processing and ordering. So without one, you may find it impossible to sell your book through these channels.

ISBNs are also used by various book databases and libraries, so it makes your book easier to catalogue and find.

If you want to publish the book in more than one format and wish these to be distinguishable in a retail or library database, you may want to use separate barcodes for each version (softback, hardback, PDF, etc.).

Note that there is no legal requirement for you to get an ISBN.


Where to get an ISBN

See: http://www.isbn-international.org/

This is the website for the International ISBN Agency. from here you can find the details of the issuing agency for your country. I've explicitly listed the websites and costs (in relevant local currencies) for selected national agencies below (I've just listed those countries with the highest Geekdō user base). Agencies may offer greater discounts beyond the rates I've quoted here for even larger orders.


In the USA and related territories

See: https://www.myidentifiers.com/

Current costs (USD) are:
$125 for a single ISBN ($125 each)
$250 for a block of 10 ISBNs ($25 each)
$575 for a block of 100 ISBNs ($5.75 each)
$1,000 for a block of 1000 ISBNs ($1 each)


In the United Kingdom and related territories, and Ireland

See: www.isbn.nielsenbook.co.uk/

Current costs (GBP) are:
£52.32 for the first time registering of a new publisher
£66.36 for a block of 10 ISBNs (£6.636 each)
£204 for a block of 100 ISBNs (£2.04 each)
£600 for a block of 1000 ISBNs (£0.60 each)


In Canada

See: http://www.collectionscanada.gc.ca/

There is no fee. This is because the intention of issuing ISBNs in Canada is to encourage the promotion of Canadian culture.


In Spain

See: http://agenciaisbn.es/

Current costs (EUR) are:
€45 for the first time registering of a new publisher
€95 for a block of 10 ISBNs (€9.50 each)
€550 for a block of 100 ISBNs (€5.50 each)
€3,500 for a block of 1000 ISBNs (€3.50 each)
€26,500 for a block of 10,000 ISBNs (€2.65 each)


In Germany

See: http://www.german-isbn.de/

My grasp of German is patchy so I didn't identify with certainty exactly which set of prices was relevant.


In Australia

See: http://www.thorpe.com.au/

Current costs (AUD) are:
$55 for the first time registering of a new publisher
$40 for a single ISBN ($40 each)
$80 for a block of 10 ISBNs ($8 each)
$435 for a block of 100 ISBNs ($4.35 each)
$2,750 for a block of 1000 ISBNs ($2.75 each)


In the Netherlands

See: https://portal.boekhuis.nl/isbn

Current costs (EUR) are:
€50.62 for the first time registering of a new publisher
€8.89 for a single ISBN (€8.89 each)


In Belgium

For Flemish-language, as per the Netherlands above.
For German-language, as per Germany above.
For French-language, as per France...

(France) See: http://www.afnil.org/

No explicit prices are listed. It may be that they are free, as per the Canadian system, in order to promote French culture (but I haven't confirmed this with certainty).
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As a footnote to Stelio's excellent post...

With DriveThruRPG/RPGNow's website they specifically do not want an ISBN submitted on a file for printing. It messes up their own internal system of book printing, so if you go that route as your main distribution channel then you won't have to worry about an ISBN.
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echoota wrote:
As a footnote to Stelio's excellent post...

With DriveThruRPG/RPGNow's website they specifically do not want an ISBN submitted on a file for printing. It messes up their own internal system of book printing, so if you go that route as your main distribution channel then you won't have to worry about an ISBN.
You want one, anyway. They need to fix that issue.
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echoota wrote:
With DriveThruRPG/RPGNow's website they specifically do not want an ISBN submitted on a file for printing.
I'm very surprised by that. DriveThruRPG was initially set up by Steve Wieck using the back catalogue of White Wolf Entertainment AB products and exploiting his links with other large publishers. All of which used ISBNs.

So I think in practice it really shouldn't be a problem for them. They ought to be able to cope.
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Neil Carr
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Stelio wrote:
echoota wrote:
With DriveThruRPG/RPGNow's website they specifically do not want an ISBN submitted on a file for printing.
I'm very surprised by that. DriveThruRPG was initially set up by Steve Wieck using the back catalogue of White Wolf Entertainment AB products and exploiting his links with other large publishers. All of which used ISBNs.

So I think in practice it really shouldn't be a problem for them. They ought to be able to cope.


I saw it being brought up in an hour long video seminar on how to set up publishing files with them.

Here is what they have to say in their FAQ:

DTRGP wrote:
The reason we must ask you to remove your ISBN is a rather complicated story relating to how our printer, Lightning Source, indexes titles in their database and a bug in their software code that passes data back and forth with our server.


I'm a bit foggy on it, but I think what was brought up in the seminar as a solution is to have a sticker of your ISBN that you apply to the cover after it has been printed.
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Wow! Good to know, and thanks for pointing it out.
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C-type Corporations
* Have restrictions on how you can pay out profits to shareholders
* Have a lot more paperwork to file and setup
* Pay the owner a salary. The owner is taxed on this salary, whether the corporation makes money or not.
* The corporation is taxed on profits that it makes. Then the owner is taxed based on how much payment is paid to him. This can be reduced by keeping the profits within the corporation instead of paying them out.
* The corporation can record losses, getting credited toward taxation on its own future profits.
* You may create different types of stock options for your employees, allowing you to customize the worth of various types of stock. This is handy if you plan to pay out stock to employees but do not want to subject them to a lot of additional income taxation on the value of that stock.


LLCs
* Are easier and cheaper to setup
* Combine their profits and losses with the owner's own income for taxation purposes, reducing the amount of times your profit is taxed. This is better if you plan to "pay yourself" all the profits from the corporation.
* Losses of the corporation will apply to the owner's own income for the current year for taxation purposes.
* If you plan to pay stock to employees, the limited stock options for an LLC may subject the receiver of the stock to additional income taxation.


Sole Proprietorship or Partnership
* Much less significant setup fees or paperwork. Very easy to get into.
* All income is considered personal income, and you don't get to take advantage of preferred tax laws and rates that apply to corporate income tax.
* Combine all business income with the owner's own income for taxation purposes, reducing the amount of times your profit is taxed but you may be taxed on more money than you actually earn based on a limited means of deducting losses.
* Most importantly, you have no separate "corporate entity" to reduce your liability against lawsuits and the like. When a corporation is sued, only business/corporate assets are liable. Under a sole proprietorship or partnership, the owners are directly liable and thus their own property and finances may be at risk in a lawsuit.



I saw this summary on a webpage that looks helpful: "When you're talking investors and employee option pools, C-Corporations are the way to go. If it's just you and some partners trying to make a few bucks, go with the LLC."
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Brian Cox
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Munkwunk wrote:
Coming from a business major, it sounds like you're on the right path...


Coming from a CPA, it really sounds like you're on the right path.

I've seen enough horrible game ideas with absolutely no business plan put out by people who obviously have no clue, so it is very refreshing to see someone like you really putting forth the effort to do things the right way from a small business perspective.

You've done your research, filled out your official forms, and registered with the proper agencies. Judging from your original post, I'm assuming your keeping good records on all your business activity, which is great. Also, I don't know anything about the games your producing (yet), but I can already imagine that they are at least well play-tested, edited, and of a general good quality.

I've been a Tax Professional for over seven years, and without knowing the full details of your situation, I can tell you that you're doing things right. This sentence here tells me everything I need to know about your ability to handle your taxes:

echoota wrote:
I went to the IRS and found the directions for this form. That helped tremendously


The IRS website is a great place to find direct answers. At my job I have access to professional tax software, multiple tax research subscription databases, and the expert knowledge from years of service from myself and everyone I work with, and I still get a ton of answers by typing my tax question or issue into a Google search along with "irs.gov."

I would say good luck and keep up the good work.

And to any other prospective game publishers/kickstarters, the original post is a really good skeleton blueprint for getting started on the right foot. (Disclaimer: Always do your own research and planning as it pertains to your situation.)

---------------------------------

Edit: Whoops! I just noticed that the post above was reviving a six month old thread and you've already had a successful Kickstarter campaing for Companions of the Firmament. Congrats. I hope all your business issues are going along smoothly.

How soon until you add it to the RPGG database and us non-Kickstarter backers can get a hold of a copy?
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ptdnet wrote:
I agree with everything OP said except I always go C Corporation over LLC. It's only slightly more expensive and gives me complete separation from the business.


A major factor for picking the LLC for myself was to simplify doing the taxes. I have yet to test if this will be the case, but that will be happening soon as we move into the tax season!
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Neil Carr
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fuzzydice82 wrote:

Edit: Whoops! I just noticed that the post above was reviving a six month old thread and you've already had a successful Kickstarter campaing for Companions of the Firmament. Congrats. I hope all your business issues are going along smoothly.

How soon until you add it to the RPGG database and us non-Kickstarter backers can get a hold of a copy?


Thanks for all the kind words! It's very encouraging.

Soon! The end is in sight! Going through the whole process of publishing and wearing most of the hats of the whole process has been very educational.

Lesson #871 that I'm having right now is financially related in that my bank and Western Union don't seem to like each other. I commissioned a last minute piece of artwork and the artist needed WU for payment. Now the money floats in the aether between my bank and WU as one side needs to blink and finish the wire transfer validation process. The intricacies of wire transfers are slowly being revealed to me, along with depths of Murphy's Law.
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echoota wrote:
As a footnote to Stelio's excellent post...

With DriveThruRPG/RPGNow's website they specifically do not want an ISBN submitted on a file for printing. It messes up their own internal system of book printing, so if you go that route as your main distribution channel then you won't have to worry about an ISBN.


I want to clarify a bit on that:

1. The no-ISBN applies to printed products not the PDF.

2. They are only talking about putting the ISBN on the cover. The reason is that their printer places their own bar code on the cover. This is for internal tracking purposes. You can still have an ISBN. This in no way affects your ability to print products, or get those printed products into distribution. Just don't put it on the cover in the bar code space.

3. Major book chains like to use a special bar code that will have your ISBN listed in the bar code. Game stores don't care. They are fine using the bar codes generated by the DTRPG printers. If you have to use DTRPG to print your products, chances are you are in no position to get your books into Barnes and Noble anyway.

4. DTRPG uses a POD company known as Lightning Source. They are the worst printer I have ever used. Hardbacks and glued. Once you open your book, the glue breaks off the spine. The cover printer they use has poor quality. They do not do full bleeds unless you print in color. I would say that 2/3 of the books we received from them were damaged and about 95% of them were just printed very poorly. Corners were bent, scratches on them, spine crushed, and pages were cut irregularly. I won't allow DTRPG to print my products any longer because I am embarrassed by the printing quality.

5. If you use a POD service, and do softcover, I recommended you go with CreateSpace, although Lulu may work. Both companies permit full bleed. Their printing quality is better. The color fidelity of the covers is so much better than Lightning Source. CreateSpace is very cheap and you can use Amazon for direct distribution of your book. You can also use your own ISBN with either company.

6. If you want to do a hard cover (casebound) I recommend you find a traditional printer and do a print run. The quality is always going to be lacking. Perfect bound, however, works great for POD.
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SteamCraft wrote:
5. If you use a POD service, and do softcover, I recommended you go with CreateSpace, although Lulu may work. Both companies permit full bleed. Their printing quality is better. The color fidelity of the covers is so much better than Lightning Source. CreateSpace is very cheap and you can use Amazon for direct distribution of your book. You can also use your own ISBN with either company.
I was going to use CreateSpace if I had been successful in my Kickstarter. I was under the impression that they wanted you to print a hundred or so books at a time which is perfectly fine for a KS. The prices are far better than Lulu's which I have used traditionally. I'm wondering, do they allow one off purchases like Lulu does?
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CreateSpace has a few options. If you want to soft cover (Perfect Bound) they print per product. I use them instead of Lulu because they are so cheap. I find the paper quality to be a bit better if you want a thicker paper.


Also, when you order your own product for yourself, it is not considered retail so you don't pay sales tax on it. I mention this because Amazon is collecting sale tax for states now.
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May your game be so profitable that you have tax issues!
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Neil,

Do you have a post that collects links to these articles in one place? I looked on GIC and couldn't find it. A new friend has considered doing it on the board game side and I'd love a one stop link to send him to for all the great research.
 
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Terrell Case
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I know this is from a couple years ago, but I am trying to start a kickstarter using my LLC and the benefits involved. This is the most useful information I've come across so far. But I had one question regarding the Amazon Payments account. Did you actually use your EIN somewhere in the Amazon account information? I wasn't sure if I was supposed to use my social security number or use the EIN in place of it. My assumption is that you wouldn't need to verify your EIN through Amazon because the business bank account would have the EIN associated with it. But I'm new to all this, so I thought I would ask. Thanks!
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