Should I form an LLC?

#1 Do you have actual employees? That would be a great reason to form one. But lots of successful developers are just one guy or gal churning out games, paying contractors for odd pieces of art and sound. An LLC obviously gives you protection, but also means you need to keep company money separately, and possibly hire an accountant once per month or week.

Keep the plans in mind if you're very successful and the games sell enough to make a living off them. That's when it's worth doing all the paperwork anyway :)

#2 There are 3 different types of businesses: sole proprietorship, LLC, and incorporated.

The first is the way most indie developers start (the mom and pop shop).

The second (LLC) can have the same structure as the first (i.e. only one owner) or you can have multiple partners going into business together.

The third (Inc.) is the most expensive and complicated option. Incorporation is not necessary unless you plan to bring in outside investors or go public (IPO).

The main reason to form an LLC is to protect yourself in case your company gets sued. In a Limited Liability Company (LLC) the assets of the company are the only thing you could lose. In a Sole Proprietorship you could lose your personal belongings since there is no distinction between you and your company.

#3 Alain is correct- LLC's can protect you. There's also a bit of maintenance involved as well, and you have to make sure your business paperwork is in order, ensure that you're filing and reporting things correctly, etc.

Do lots of research on the types of corporations you can form, and what states/regions are best for forming them in (especially if you're in the US, as ease of incorporation varies wildly per state).

#4 And cost, especially, of incorporation, varies by state.

Which is why so many corporations operating out of California are filed in Nevada--CA wants $800 annually, and Nevada only $85, just to "exist"--it's a miniscule difference to a company with a large annual gross, but an enormous one to a struggling game development haus who may be operating at a loss for years before they ship their first product.

Every state offers tax advantages and corporate filing under different rulesets--read up on the subject before taking the plunge (I would imagine that European laws vary between countries in similar fashion, but I can't enumerate any examples off the top of my head).

Here's a good place to start learning:

www.nolo.com/legal-encyclopedia/business-llcs-corporations/;jsessionid=A58EF7788...

#5 One popular thing to do here in Norway…is to not do it here in Norway :)

There's one particular P.O. box in London with thousands of companies listed. The registration fees inside the country aren't yearly, though, so it's for legal reasons. Or potentially illegal.

#6 Interesting that they allow a PO Box to be abused like that, lol...

#7 Alain, thanks for that description! I wasn't entirely sure the difference between a sole proprietorship and an LLC with only yourself until now.

#8 He forgot another type of business. The partnership one, where you have 2 or more partners, and you're not incorporated.