Disclaimer: Laws are constantly changing and this blog post makes no representations or warranties of the outcomes or results of using information in this post. The author of this post and source information will not assume any liability for any claims, losses or damages from the use of this information.
Sorry for that wordy disclaimer, but it would be a real shame if something that was meant to spark people’s interest was used as anything else. The reason for this post is that something that I feel a lot of developers do not spend enough time with is learning parts of a business. If you are smart enough to to develop complex games, you should be able to know as much about a business as someone who sets up a hotdog stand (by the way I do like those guys a lot, and only meant as an example of the complexity of creating the final product).
The book Starting a Successful Business in Canada KIT 18th edition by Jack D. James. MBA, LLB is one of the first business type books I have read outside of a few business books for courses I took in university. James recommends developing a business for things you are passionate about as a business can quickly eat up a ton of your time. If you do not have an interest in what you are doing, you are less likely to continue and pursue through the hardtimes.
There are some useful techniques in setting up your business:
Constantly re-evaluate your business process, if you are doing minor tasks to make your business run (like repairs, tools etc.) consider expanding your business (James example was with boats, if you rent boats and motors, and spend a lot of time fixing the motors, you should also consider buying broken motors and fix them to rent or sell as part of your business).
Keep copies of everything, keep all your receipts, print outs, photocopies of cheques received for payment, bills, tax information. There is lots of software to help get organized, if you are finding it difficult to keep track yourself.
Before starting a business do a break-even analysis, which is:
Total Costs = Variable Costs + Fixed Costs
Fixed Costs are things you can not get away from (rent, insurance, salaries, equipment, etc.)
Variable Costs are any additional costs it takes to create a sellable unit (material, labour, etc.)
The goal of the break-even analysis is to see how much you have to sell to break even, everything above that is profit, everything below that is a loss and worth re-evaluating how if the business will make money.
There are multiple setups for creating a business Proprietorship, Partnership and a Limited Company (or Corporation). After reading the pros and cons (and though I am not a lawyer) it seems like almost everyone would recommend a Limited Company. It is a little bit more money to get started, but offers a lot more protection to you as an individual (unless you have signed a personal guarantee). The difference is, with a sole Proprietorship you and your business are considered “one entity” and can not easily be sold or transfered, may not be eligible for government loans and creditors can go after your personal assets (house, car, etc.) if your business is being sued. With a limited company the corporation exists as a separate legal entity and also offers better government tax considerations, and is eligible for government funding, can be sold, and is generally perceived as having more status in the marketplace.
There are a number of requirements that you should be aware of, they may include any or all of the following.
Registering for GST (to recover money spent on business purchases).
Privacy Acts (acts for collecting personal information of clients)
Sales Tax (tax on all tangible personal property that is purchased or imported)
Patents (trademarks, copyright etc.)
Product Standards (CSA approved)
Licenses (loan money, handle food, transport items, manufacture, modify natural resources etc.)
Federal excise tax (for any manufacturing)
Custom duties (if dealing with imports and exports).
Federal income tax (if you are an employer, need to handle the income deductions)
Employment insurance (if youa re an employer and not a proprietor)
Canada Pension Plan (if you are an employer)
Of course there is more to it, but it is likely that if you are a game programmer (potentially an indie programmer of one), you may not have to worry about the employer aspects or many of the manufacturing elements, but it is still worth while to have some knowledge of what is involved. All in all, if you need more advice consult a lawyer or accountant, they will likely help set you in the right direction. There are some tax benefits you can look at (even working from home), but you will have to do a bit more research on this part of it.
Fortunately there is lots of support the Business Development Bank of Canada (BDC) offers a wide range of services for all stages of business http://www.bdc.ca/. Canada Business Service Centers offers information about government services and programs: http://canadabusiness.ca/
All I am saying, is that do not be afraid of something that millions of people already do: http://www.ic.gc.ca/eic/site/sbrp-rppe.nsf/eng/h_rd01252.html. I’m not saying go out and create a business now, but if you have that next great idea, do not let the unknown fear of “what is a business” stop you. Sure, if you have never done something like this before it is a little out of your element, but like everything it will become second nature with a bit of knowledge and practice. You can even check out the information involced online: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/bn-ne/bro-ide/menu-eng.html (sorry international friends, I hope you can find a similar link).
Best of luck,