Based on your experience publishing games, did you open a company?

I am actually wondering about that. I think it is more likely to get audited if you are operating at a loss for several years as an incorporated business and deducting expenses. Some states even close down companies that do not make a profit three out of five years. Kind of hard for a game company to do.

 

It may be a difference in jurisdiction thing. But here the directors of a company can be held responsible for its debts if they operate it recklessly. Acquiring debts that the company can't pay during its normal course of operations is known as trading while insolvent. And that often makes the director personally responsible for the companies debts. The courts take a pretty dim view of people that operate recklessly.

 

Although you go bankrupt after a certain amount of time; not as soon as you go in red with your finance, right?
Otherwise companies should close like crazy.

I believe that LLC are formed also for the purpose of not declaring bankruptcy at personal level. If your LLC goes upside down, you close it, cut the loss and move on; although I doubt that you can open another one anytime soon, since your name would still be connected to the LLC that went bankrupt I believe.

Good points guys, thanks

 

You are talking of irresponsible conduit; if I recall correctly, it is considered a criminal offense, as much as a scam or Ponzi scheme.
At least in CA; if you go on for some time and increase the debt of your LLC; you eventually become liable for the loss; but if you are trying to cut the loss and bring back some cash in to improve the situation, that would not be considered as irresponsible conduit, so the owner/director assets won't be attacked.

As Teila said before, if you do everyting working within the law, nothing bad shall happen. At least in USA

 

Which brings me back to the original point. A LLC doesn't actually give you much in terms of protection.

 

Getting protection from bad doing is not something contemplated in any form or companies. If a person mess up, no matter what kind of company type they create. they will be held responsible. Which is fair IMO.

 

Small businesses do close like crazy. A very small fraction in the US make it.