Hey everyone! It’s been a bit since you last heard from me. Hopefully those deck-building tips came in handy as you started your Gem Blending journey.
This month, I’m writing the first installment in a new series of posts focusing on the business side of creating a TCG. Today’s post is all about the formation of a business entity. It’s not the sexiest topic, but it can be as necessary to your long-term success as incredible gameplay and design! Hopefully my quick breakdown will help make this potentially confusing topic a little easier to tangle with.
I’ll start off with Gem Blenders’ story and then lead into a few pointers on incorporating your entity.
HOW WE DID IT
Gem Blenders is currently a limited liability company incorporated in the state of New York. A “limited liability company” (LLC) is a company whose liability does not extend to the directors/owners – meaning that whoever owns 100% of the company is not on the hook for debts and liabilities incurred by the company. LLCs are generally the most flexible entity type when it comes to filing taxes and governance structure, which is why we chose it for Gem Blenders.
Ok, now that we have covered Gem Blenders, let’s discuss incorporating a company!
ASKING THE HARD QUESTIONS
First off, do you even need to incorporate an entity? The answer to this question heavily depends on where you are in your business cycle. Here are some factors that may help you decide:
• Are you selling to customers (i.e., do you need to start preparing financials and/or keep records of sales)? • Do you need to open a bank account? • Do you need to report your business proceeds on your taxes?
If the answers to these questions are yes, then you probably need to incorporate an entity. Banks will require company formation docs in order to open a bank account and you will need to have a corporate presence in order to file a federal tax return.
4 steps to the corporate ladder
Now that you’ve determined that you need to incorporate an entity, here are the general steps to do so:
1) Pick your state of domicile (i.e., where you want the company to be located) • Most corporate entities pick Delaware due to advantageous bankruptcy regulations and Delaware judges are well-known for being experienced with all things corporate litigation • Ultimately, you should have some nexus to the state where you are domiciling. Larger corporations appoint an agent to act on their behalf in states where they do not have a physical presence. That’s why Gem Blenders picked New York as our home state rather than Delaware 2) Go to the State’s Department of State website. Almost every US state has an online filing system for you to submit your application 3) Pick your entity type (LLC, Corporation, Trust, Partnership, etc.): truthfully, I have more experience forming LLCs, but Corporations are also an option. I have found that LLCs are preferable in most cases due to governance flexibility 4) Prepare what you will need to file (please note that this varies by state!): • A unique business name (meaning no other company in the state has already registered using that name) • A business address (it can be a home address) • A registered agent address (meaning an address through which other companies can reach you). Registered agents receive documents from the state and lawsuits served against your entity. A registered agent can, in most cases, be the same as your home address and you can act as the registered agent for your company • A signatory authorized to act on behalf of your entity • Check, cash, or e-payment to cover the filing fee
New York has a few extra steps, but most states are pretty straightforward with their formation requirements. Once you file, the state will then send you a certificate of formation certifying that you registered your entity with them. Turnaround time for official formation varies by state, but you should be prepared for a bit of waiting.
After that, you’ve officially registered your company! The only thing to keep track of is the state taxes required to stay registered. Most states refer to this process as filing your annual report, which updates your information with the state and pays the fee necessary to stay registered and “in good standing.”
The process for registering isn’t particularly complicated, and it is more difficult to determine whether you need to register an entity at all.
Hopefully this was a helpful insight into some of the inner workings of the card game business. I leave you with a quick peek at what our very official corporate meetings look like. Until next time!
3 thoughts on “Let’s Get Down to Business: Incorporation”
I love the meeting picture x
Yes! Love how they chose a picture with Ben in a non-flattering position lol.
Love learning about the biz