On Founding My Own Game Studio

How I started Coyote63 LLC and what was involved in doing so.

Created on February 15, 2021.

Picture of the model home in Arrested Development.

Not my game studio. This is in fact a picture of the model home inhabited by the Bluth family in Arrested Development, who have a difficult time separating their personal and business assets.

I conceived of Coyote63 back in 2019. At the time it was an informal machination of a restless mind obsessed with the idea of making games following an exit from corporate life. The studio's name is the concatenation of Coyote, the archetypal trickster of Native American myths, and an integer, the last element of a 64bit address as it's zero-indexed. In my youth, I happened upon Coyote while reading Trickster Makes This World: Mischief, Myth and Art by Lewis Hyde, and couldn't shake the bastard from my thoughts. No doubt, programmers such as myself should not name companies, although sometimes we do anyway. In this sense we may invoke the irreverent insensitivity of Coyote. He is a muse who, provided adequate tribute, brandishes interesting and novel opportunities.

With that in mind, I did not formalize Coyote63 as a limited liability company (LLC) until January 2021.

... Why?

Without a solid business plan, and no anticipation of money changing hands for a game, it wasn't justifiable for me to establish a company. There are expenses and (some) paperwork involved in the upkeep of a small company, so why waste it when there is no projected business activity for a given year? In the meantime before I figured out what I wanted to build and why, I wrote open source code targeting the Unity game engine. The open source packages I created were purpose-built for roughly the type of game I thought I wanted to build. While that vision has evolved, said code will still comprise the foundation of Coyote63's first game. I'm happy Past Reese took the time to create it.

Before I was finally sure of things in December 2020, I studied a great deal of reference art, spending hours on Google Images and ArtStation. I played games too, of course. I did tutorials for 2D and 3D editing software. Likewise, I read books on game design and AI. The most poignant design book I read was aptly titled The Art of Game Design: A Book of Lenses by Jesse Schell, a book I cannot recommend more to aspiring game developers. Read it!

Now, you might be wondering, why form an LLC specifically?

I will attempt to answer that question, but I am not a lawyer, and I am not providing legal advice. Furthermore, I am not an accountant, and I am not providing financial advice. What ensues are merely opinions and observations subject to my interpretation as a layperson.

Coyote63 LLC

The legal name of my company is really Coyote63 LLC, although I colloquially refer to it as Coyote63. There is legal code requiring the official name bear indication that the company is in fact an LLC, at least in the state where I established it. It appears most, if not all states, enforce a similar condition. Presumably that is because entities interacting with one's company must be reasonably informed about what kind of company that is.

What is an LLC?

According to Nolo:

An LLC, or Limited Liability Company, combines the best parts of corporations, sole proprietorships, and partnerships into one business entity offering owners liability protection, flexible management structure, and certain tax advantages.

But, let's dive deeper:

  • Liability protection means members of the company are not necessarily liable for actions performed on the company's behalf—instead, the company itself may be liable. Therefore, if someone filed a lawsuit against a company, and that company lost, then a portion of its assets could be up for grabs. I stress its assets, because the owner's home, for instance, should not be one of them (unless you're the Bluth family). Nobody wants to be held personally liable, or else the things they need to survive could be taken from them. There's no guarantee one won't be held personally liable in spite of one's best efforts, so think of an LLC as a sort of energy shield.
  • Flexible management structure, simply meaning companies can be organized however the owners want, as long as no laws are broken. In my case, I plan on conducting Coyote63 as a de facto worker cooperative. I firmly believe each worker should have one vote in every relevant company matter. It doesn't necessarily mean all employees get paid the same, but it should ensure fairness. Learn more at Democracy at Work.
  • Tax advantages which may include deductions for company-related expenses and office space.

I must emphasize the line between what one does personally and what one does on behalf of a company should be clear. It is not prudent to muddy this line, or else it is more likely it can be successfully argued that one can be held personally liable in a lawsuit. Limited liability is, after all, the main point of the limited liability company.

Maintaining such separation also explains why, after I formed my company, I felt a bit like a corporate drone again. While I always assumed capitalism was alienating, I had not plumbed the depths of precisely why that was prior to founding my own company. Naturally I kept personal matters out of work previously to be "professional," or so I was told. The root cause is, however, not professionalism. Personal matters must be rooted out from the business to protect employees from personal liability.

The best way to maintain separation is not to maximize alienation by treating one's colleagues as unfeeling automatons. Instead, it is to treat the company as a bucket of intellectual property (IP). Since Coyote63's first game is composed of IP, I go to some length to establish that the game belongs to Coyote63 and not me. This is especially important whenever money changes hands. For instance, if I pay someone for concept art, then I need to use my company bank account for that transaction. I need to clarify that the customer is the company in a well-written agreement, ideally one that is written by a lawyer.

Still, my unapologetic take is that many lawyers enjoy frightening people into sending them absurd amounts of money for little-to-no work on their part. Establishing profitability before blowing thousands of dollars on a game that may fall through is a good idea. With sufficient profit, consulting a lawyer for almost every external interaction is reasonable. They also assist with trademarks, operating agreements, etc.

If you're interested in learning more, I recommend viewing these talks by a lawyer, Chris Reid, for the Game Developer's Conference (GDC):

  1. Practical Law 101 For Indie Developers: Not Scary Edition
  2. Practical Contract Law 201 for Indie Developers: Moderately Scary Edition
  3. Practical IP Law for Indie Developers 301: Plain Scary Edition

The point of my sharing these talks is not to scare you into forming an LLC or any sort of company, but rather to make you aware of the possibilities. Remember, the worst-case scenario is not the same as the average-case. It's rare, but it does happen. Chris discusses some ridiculous things that have happened to indies who didn't do enough to protect themselves.

Obligations

There are one-time and regular obligations my company must meet as to not breach state and federal law. I had to weigh these obligations against risking personal liability when I considered founding Coyote63. What are these obligations? Here are some:

  • Startup fees, as in the fees required by the state for establishing an LLC, and for trademark registration of names and logos.
  • Posters! That's right. There are posters that must be prominently displayed in my office. The Department of Labor describes some of these.
  • Social security filing information via W-2s and/or W-2Cs.
  • Unemployment insurance taxes provided certain conditions are met.

Keep in mind, there are obligations that ought to be fulfilled at both the state and federal levels.

Conclusions

I'm glad to have founded Coyote63, and look forward to releasing its first game. Being the founder of a business is a new and exciting frontier for me, and I love it already. With diligence, I believe anyone sufficiently interested can start their own company and find success in whatever they aim to do, even if their goals change over time. Believe it or not, Nintendo started out as a card company, and even went on to make toys, before settling upon games and consoles for playing them.

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