An Independent Game Developer’s Diary

What company name should I use?

Thats a question that has been raised on indiegamer forums a couple of times, and that I’m in discussion with my designer about as well.
Why should I be in discussion about it I hear you say, well we’re looking at offering other commercial services, so that we can fund our crack habitgames company.

But what is in a name? I registered MIB Solutions Ltd as a business name when I started the company. Unfortunately I didn’t really do enough research, there is already a mibsolutions.com, but I did get the mib-solutions.co.uk domain name. I was content with that, and given that we got the mibgames.co.uk name as well, I thought that would do fine.
Except the name that you want to use varies depending on the work you want to do and the customer you want to attract.
MIB Games is kind of fun and gamey. People ask us about the Men In Black film, (which MIB is not related to), and we have a little logo guy, Mib (pronounced Meh-ii-beh), who is very cute.
For games we thinkt aht logo and name is fine.
MIB Solutions Ltd is great for the overall business name, it says generic, bland boring, but official. If I wanted to advertise my programming skills on the indiegamer forum as a programmer for hire, MIB Solutions Ltd the name would work well for that.

But we want o create a web design portion to our business. MIB Solutions is too boring, too bland, and for a company that is focusing on intelligently communicating the clients branding, is too dangerously easy to mixup with the film.

So we’re brainstorming a new name.
We’ve noticed that design firms, especially those that are doing the web2.0 thing, are basically two unrelated words being pushed together, like 37signals, or 101ltd, or myspace, or youtube.
This lets me cover the imortance of naming.
These rules are important for naming your company, and naming your products.

Number 1: Think of the audience.
Who is going to hear this name, and what will it mean to them? MIB Games, hopefully sounds like a games development company, as does puppygames or any other indie gamer hopefully.
However, would you buy web design services from a company called MIB Games?
This applies to products of course, if your game is casual, match 3 game, then marble match, or something is a great name.
But being that your target audience is at least 50% female, and quite possibly in the 35 to 75 age range, calling it Ultra Death Explosion Gore, is probably a bad idea.

Number 2: It must be memorable
37signals is a name that tends to stick in your mind, if only because it’s unusual.
At the same time, Bobs Garage, down the road, sticks in your mind for other reasons. When you want a mechanic, you want a freindly service. The guy who owns it is probably not called Bob, but it serves a marketting purpose, staying memorable for the audience it is aimed at.
MIB Games is fairly easy to remember for a games company name, and so are some of the more successfull indies.

Number 3: It should be meaningful
I put this last, because of course, the previous two trump it.
MIB Games is meaningful to me in a jokey way, but actually the MIB doesn’t mean anything anymore. I dearsay Puppygames has a story behind it, but lets face it, puppies are cute, games are fun, cute fun, and memorable.
For Product names this tends to be more appropriate, I remember an interview with Amanda Fitch, the creator of Aveyond, where she said that she should have called it something like Aveyond: The Quest or something to make the name more meaningful (I cant find the link right now though). the later games have a more meaningful name you’ll notice Ahrimans Prophecy and Grims Hatchery

So I can hear those of you who have started up a company or are going to start up a company asking, “how can I get this right before I start trading?”.
Well the good news is you don’t have to get it right first time. Although in the UK there are laws that restrict what name you can trade under, it is perfectly legal, and quite normal, for a single company to trade under multiple names. So you might have three arms of your business, and trade under three differant names.
It does get a little more complicated when it comes to bank accounts. Essentially, payments must be made payable to your bank account. For us that’s MIB Solutions. But if we had a cool web design name like 37signals, or 101ltd, and then when we bill people it says to make cheques payable to MIB solutions ltd, well I dont think it says anything good about us.
However, there are at least two ways round this.
1. Setup a seperate bank account for each portion of the business.
this has the drawback of requiring a bit more admin overhead, and you will have to pay the bank fees for each account.
2. Most banks will also offer a trading as name. Use it
Yeh I found this out today, when I called the bank about this.
If you have a generic name and trade under a second name as well, you can have your bank account to have a second trading as name. It’s not very complicated to do, seems to be free with my bank, and gives you the ability to accept cheques or bank transfers to the trading name or the original name.
Downside is that Natwest will definatly only let you have one, and I imagine that other banks are the same.

Before I talk about this, I should say, I am not a business advisor, tax advisor or accountant. Get everything checked with a friendly accountant before you register yourself. The tax office new businesses line is very helpful with advice for stuff like this.

Register with the tax office.

Now this bit is complicated because you are filling two roles here, you are both an employer and an employee.
Note: You are not self employed as the director of a company.
You need to register with Her Majestys Revenue and Customs (www.hmrc.gov.uk, I phoned them up, done in 5 minutes) as a new employer. They will send you out a new employers pack with all the paperwork you need.
You need to keep a number of documents, but the easiest system for game developers is probably to do this.
1. Agree to pay yourself per month
2. Get your P45 if you are working fulltime for yourself, otherwise contact tax office, you’ll need a tax code and most recent payslip).
3. enter details onto the P11 either by hand on the actual P11, or onto their computer system.
4. Each month if you have earned any money, you total up all the money you’ve earned, and pay the tax office the tax that needs to be paid.
If you haven’t earnt anything, you need to phone the tax office and tell them that you are paying nill tax this month. You can also send them a filled in payment form with a big fat zero in it.

Tax Back

Yup, my first three months, i ahve paid myself nothing, zippo, squat. And because I was paying tax at my previous job, the P11 calculator that the Tax Office gives you, let me know that I was owed tax back. I phoned up the Tax office, and they explained that in normal circumstances, the company would deduct the amount to pay back from it’s total monthly tax contributions from all employees, and would therefor pay less to the tax office than it deducted from peoples salery, and could pay me with that money.

But of course, I’m the sole employee, so what is supposed to happen is that the company pays the tax back, and claims relief from corporate tax at tax year end. But again, I don’t have the money to pay myself, so I wrote to the tax office and they sent me a cheque for the tax back to teh company, so the company can pay me the tax back. Very nice.

Paying yourself.
The easiest way I can see works like this.

• Work out how much you would like to actually take home.
• Add approximately 1/3 more, maybe a little more.
• Calculate the tax, NI contributions, pension, student loan and other deductions. They normally come to about a 1/3 of the monthly pay.
• If you aren’t taking as much home as you want, increase the amount your being paid, and recalculate the tax until your happy.
• As the company you now need to transfer the relevant money to all the correct places. Tax and NI go to the tax office as one payment I believe (I’m not paying myself anything yet).
• Student loans must be sent to student loans company. They’ll send you letters explaining it all when you tell the tax office that your now emloyed by your company.
• Pension contributions should be sent by direct debit normally to the pension company. They can help you set that up if you actually want a pension.
• The rest must b e transfered to your own account.

You must remember to give yourself a payslip. I’ts the law. the payslip must contain a number of legal bits of information. The pack you get from the tax office details them all, but basically, you must detail the employees name, NI number, gross pay, all deductions and payments, and the Tax paid this month, Total tax paid this year, and net payment.

It does not have to be written on any kind of special paper, or anyhting like that, it can be printed out on company headed paper, and given to you. File it, and keep it, because you may well need it when doing a tax return.

The rest of this series is Part 3: Accounting and The Books, and Part 4: The Tax Return. They come later on this year.

I’ve spent the first fours days of my company time on miscellaneous tasks, and I thought I’d share.

The main thing is getting the accounting setup right.  There is no legal reason why I needed to spend four hours with my accountant understanding business accounting, and then produce a document and spreadsheet to work out my balance sheets, but the time I spend here will hopefully save me time later.

I decided to write an opening balance sheet for my company.  This shows the amount of money the company is worth, what it owes me and what items belong to the company.

I’ve also racked up some expenses before I started the company, and a few after.

For example, I have given / sold my laptop to the company.  I purchased this laptop with the intention of it being for this business about a year ago with money invested for me by my grandfather.  Working out the depreciation, we reckon the laptop is now worth about £800.  I also have a server that is wholely dedicated to the company, it has tape backup, raid hard drives, ubuntu linux, the whole shebang.  We valued it at £0 as I was very kindly given it by my previous company when they were disposing of computing equipment.

So, the company has assets worth £800, and didn’t pay for them.  it also currently has no cash as I’m waiting for the bank account to be setup.  So In order for our balance sheet to actually balance, I have to work out that the company owes me £800.  Now I paid some startup expenses, the company formation costs and so forth, which are about £80, so company now owes me £880.  Finally, I started my company and took 100 shares, valued at £1 each, so I owe the company £100.

The balance sheet now tells me that the company owes me £780 at startup, and that it owns one Dell server and one Laptop.

So why is this important, well, it means that when I give the company cash to get started, it will owe me even more, but it’s cash will increase.  When I get some money from sales or contracting, I can now do one of three things.

• I can retain the profit in the company, and pay Corporation tax at end of year on my Net Profit (Sales - Expenses), and pay myself a dividend after Corp Tax.
• I can pay myself the money, paying income tax on that amount, but it counts as an expense which reduces amount of Corp Tax that I’ll pay.
• I can repay the company loan, which is an expense, so reduces the amount of Corp Tax, and is not counted as income for personal taxable purposes.

So that means that working out what I’ve invested in the company, and calculating the amount the company owes me for that gives me a tax free cash bonus that I can take out of the company at a later date, when it’s wildly profitable.

Now I’ve also created a spreadsheet to account for business expenses.  For legal and tax reasons you must keep every reciept for anything purchased for the company.  I’ve purchased a few office things, a white board, some suspension files, paper for my printer that kind of thing.  I can account for all of this with a years worth of reciepts when it comes to doing my year end accounts if I want, or I can do them monthly, and when I do year end, simply put my monthly’s together, and then
check them all over.  It seems easier to me to take a couple of hours every month to  do that than spend a week in January doing it.

Setting up a limited company isn’t actually that hard, it just takes a bit more organisation and money than being self-employed.

The cheapest method is to go directly to companies house (www.companieshouse.gov.uk) and pay them the £20 fee to setup your company.
You can request a company startup pack from them which will give you the relevant forms (two forms to fill in, fairly simple). However, you will need two more items to be truely legal.
You need to have what are called the Articles of Association.
This is a legal document that defines what your company will be doing. The reason for these are lost in the mists of time, essentially I think the reason is for limited companies with multiple directors, where there is division about what the company should do next, they can look at the articles of association to see if the plan is within the company scope.
Secondly you need a memorandum of association. You need this, not companies house, but it is supposed to be a legal requirement.
This document is essentially the minutes of the first ever directors meeting. It has to be laid out in a special way, and it says things like who is going to be your accountant, who the directors are and what they will be paid, and what banking you’ll do and so forth.

I searched for a while to find examples of these documents, and this is the thing that made me not form my company direct in the end. If you have a lawyer friend, they can draft these documents for you, but I wouldn’t advise writing them yourself as if they are wrong your company may not be legal.

In the end I found an online company formation agent, called Company Wizard (www.company-wizard.co.uk). Forming the company took me about 25 minutes of form filling, and I got the registration document the next day.
I purchased not only the registration but a bound portfolio for the register of members shares and other legal documents, and total cost was approx £70.

Now you’ve done that you will receive a registered company number for your company name. Thats it you are officially a director of a limited company. Now you need to tell the Tax office that you are employed as a director, and that you are a new employer as well.
You may also want to think about VAT Registration. As for me I haven’t registered for VAT yet, I’ll cover why later.

I had to decide when setting up my company whether to go self employed or register a limited company. For those who don’t know, the main differance is to do with liability.
As a sole trader, if the company can’t meet the costs of a liability, then my whole life is liable. Literally anything I own, my car, my house, my TV can all be claimed by bailiffs to repay the companies debt.
With a limited company, this is not always true. The directors have a limited liability. They may owe the company money which can be collected, but the amounts and how it is collected is far more limited.
A director is still personally liable for some risks of the whole company, but those risks are reduced for a lot of cases.

So how does that relate to Games development. Well to be honest it doesn’t.
The risks that you will face as a games developer involve going out of business owing money to banks and or equipment leasing companies. (Sorry if thats a shock, but theres a good chance that your company will never make money, and will go bankrupt).
Those are exactly the sorts of cases where a director can be found to personally liable, if the business went under because of bad management, poor money handling or tax mistakes (tax fraud technically), then you will still be personally liable.
Generally games don’t kill people, and are unlikley to cause accidents (which is why you probably wont need public liability insurance), and those are the cases where a Director would not have to personally pay to settle.

So the main differances between Sole Trader and Limited Company are

1. Sole Traders are wholey and totally peronsally responsible for all company debts / liabilities, Directors aren’t always (but there are priviso’s)
3. Sole Traders have to do a personal tax return as self employed, Directors have to submit an employed persons tax return, and a company tax return, and pay tax twice, once on company profits and once for themselves
5. Directors need to ensure they do full employer tax records, and have to submit yearly company accounts, Sole traders dont

In addition to this, setting up a limited company is reputedly difficult work, and will result in a lot of extra business paperwork and administration.

So am I advocating that you should go self employed?

Limited companies do have their advantages as well, the main being that they are more complex and difficult to setup. Why is that an advantage I hear you cry. Well, anyone you deal with knows that Limited companies are more reputable because you need to be more organised. Secondly they know that they have better legal recompense if you default on a payment, as the company itself has assets and they dont have to chase an individual person. So you are more likely to be trusted for equipment hire, business development loans.
Also there are a number of developers who make money on the side with contracting. A lot of the major firms will only deal with Limited companies when outsourcing contract work. Again because they know they have better legal recompense if something goes wrong.
This means that a limited company will find it easier to get external cotnracts, to get trade cards from stores like Makro or Costco.

Also the aspect of partners comes up often. if you and a freind setup a company and it is a sole trading arrangement then you are in a partnreship. In that case you absolutly must get a partnership agreement. But I would never recommend this, a partnership is almost always the wrong style of company except for certain special cases. In almost all cases a better system is to create a limited company, with the partners being directors.

So in the end, what is the best way to go? Well I decided that the extra overhead of a Limited company was worth the effort. I felt that the benefit of being more genuine, and the possible tax advantages made it worthwhile. whether you will feel the same is up to you.