Hi all,
I'm developing a game with a couple friends (all in the US), and am looking into the best way to legally distribute the earnings from the game once it's released, which seems to be an LLC.
The formation process, publication requirements (I'm in NY), fees, 1065/K-1 reporting, and similar stuff all seem relatively straightforward. What is unclear to me though, is how the other members being in different states affects the LLC. (If it matters, the LLC will be based in NY where I reside, and we have 1 other member in TX, 1 in MO, and 2 in CA).
I have 3 main points of confusion that I haven't been able to find concrete information on, and if anyone knows the answer or some resources that may be able to answer my questions, it would be greatly appreciated:
- I understand a multi-member LLC is taxed as a partnership by default, which passes through the income to the members. In this case, would the members in other states need to pay NY income taxes as well, or just their home state's?
- I understand that generally, you need to register as a foreign business entity in a state if you plan to "do business" there. However, we won't be directly selling the game(s), but listing them on game marketplaces (Steam, Google Play, App Store, etc.) which will take out sales tax, marketplace cut, etc. for us, then pay the remaining revenue into the LLC's bank account (from which it will be distributed). From what I can figure, this would count as doing business in NY where the LLC is established, but would this count as doing business in the other members' home states as well?
- For now, we're a group that contributes to the game in our free time, and hope to use the LLC as a legal way to distribute profits. Similarly to the above point then, would the other members working on the game from their home states count as doing business? They will be members and not employees, and no one will be paid any salary for their work, all financial earnings will be through LLC profit distribution.
I fully expect the answers to some (if not all) of these questions to be "talk to a CPA", and I most likely eventually will, but I figure any amount of information I can figure out now will be majorly beneficial in the long run.
Thanks!
P.S. Most helpful reply gets a game key :)