As I’ve been trying to come up to speed with Windows Phone 8 and Windows 8 Store app development, I’m finally at a point where I’m ready to publish some apps. When I went to register for a “Publisher” account with Microsoft, I signed up as “Seder Software” – the moniker I’ve used over the years. It’s really sort of a psuedo-company, as I use it more for professional development, rather than actually selling any good or services. I also have www.sedersoftware.com
You could also say that I use this name as a “doing business as” (or DBA) type of organizational structure – legally. Although it’s never really come up because I don’t actually “sell” any good or services.
Well, turns out Microsoft doesn’t allow this sort of thing. I either need to register as an individual or as a full-blown, proper corporation. Either I have to register as myself or I have to incorporate Seder Software.
What is a “corporation”?
I am not a lawyer, nor an expert – so I’ll just explain things as I understand them. Incorporating an organization is a way to create a legal entity, which is separate from the founders. Think about it this way: is Starbucks, JCPenney, Ford, or Sony a “person”? No, they are their own legal entity, and people work for that entity. Incorporating is sort of like taking an organization, and making it it’s own legal entity, separate from you.
In the US, I believe there are 3 kinds of corporations: C corp, S corp, and LLC (or LLP)
Should you incorporate?
In my opinion, yes. There are two important reasons to incorporate: 1) tax incentives and 2) liability protection.
If you have a corporation, you now have an entity where you can LEGALLY write-off expenses related to running this business. For example, it costs ~$120/year to maintain a corporation, you might write-off the cost of your internet and cell phone bills, you might write-off and then depreciate a new laptop that you buy. So, if you are actively doing things outside of your dayjob, incorporating can give you a way to legally save a little money in taxes by writing things off and depreciating hardware.
Secondly, is liability protection. If you publish apps as yourself, you are now completely vulnerable to a lawsuit. Let’s say you create a nifty app. Let’s some big corporation loves it and has all the employees install the app – even if it’s free! Now, let’s say that company’s data was compromised. It is likely you will be sued. You could realistically lose everything in the lawsuit: your car, your home, your possessions – PLUS still own hundreds of thousands of dollars afterwards. This could literally ruin the rest of your life.
Now, imagine that same scenario except you published the app as a corporation. The corporation will be sued. This will likely run that corporation into the ground, but you may be spared. In fact, you will likely only be sued personally (or held personally liable) if there was gross negligence or malicious intent. Again, I’m not attorney, go talk to an attorney in your municipality, this is just my understanding from around where I live.
So, the point is – a corporation has some benefits.
Which kind of incorporation?
I’ve been told: “unless you have over perhaps 100 employees, then just do an LLC”. The main difference to me is that there is far, far less paperwork for an LLC. The same legal and tax benefits exist for both – the main difference is how often, and how detailed your tax reporting must be.
Again, I am not an attorney nor an accountant – go seek professionals in your area to understand your local laws!
Where do you start?
Well, if you don’t already have a company, see this blog post and the section “Set up a Psuedo-Company”. If you do already have an informal “fake” company, you just need to do the last part and become legitimate. This really entails too things:
- Incorporate in your state (cost varies: $50-150/year)
- Get an EIN number from the IRS (free)
Every state has a Division of Corporations or Department of Commerce. In my case, I’m in Florida and the Division of Corporations works out of this site: http://www.sunbiz.org For your state you can probably just google “wyoming department of commerce corporation” assuming you lived in Wyoming.
In my case, I filled out an online form, paid the $120 fee and the next morning I got the e-mail that my corporation has been established. The form took just a few minutes to fill out. So – do NOT use those websites where you can pay to incorporate. That was needed in the olden days, but most states seem to let you do it online and it only takes minutes, now.
Once you have your email, they will send you or you can get access to your “Article of Incorporation” – which is the official document that says you are a registered corporation in your state. That will also include your legal name. The legal name for my corporation is now “Seder Software LLC”
Now, you can go to the IRS website and request an EIN. The Employer Identification Number (EIN) is like your social security number, except it’s the SSN for the business. When you file taxes next year, you will have to file a separate form for that entity, in addition to your personal taxes. You also have to do an “annual filing” with your state to report any sales tax you collected, if any. In most states you have to report even if you had no sales.
So basically, I started at 4pm on Monday and by 10am on Tuesday, I was a legal corporation with an EIN – so it’s pretty simple.
Registering with Microsoft:
This is where the story turns very dark. I have been trying to register with Microsoft since late last week. They require your article of incorporation, a full copy of a phone bill for the business (this can be your cell phone bill), and a notarized letter that must be e-mailed or faxed – and then they actually call you on the phone too. I got notification a little while ago that I jumped through all of the hoops and their approval was going to be sent to Microsoft – and then Microsoft takes 2 days to approve me to submit apps.
So, it’s no quick or easy process. This though, is how they are trying to woo more developers to write more apps! I wonder how that’s working out?
What address and phone to use:
This is optional, but I wanted to still bring this up. If you are doing stuff out of your house, then you likely are using your home address. This can be.. not-ideal for a few reasons. So, when you register your domain names and corporations, you may opt to get a PO Box at your local post office. Those cost typically $50-60/year – and give your business a permanent mailing address. Your business and registration address for a domain are public records and visible to anyone – so if you don’t want that, getting a PO Box is an alternative.