What about taxes? How much of $829,829 will be left over?


#1

Come next year I am assuming that the $829,829 gained from the Indiegogo campaign will need to be reported to the IRS and is not all pure profit. Even though a character costs $150,000 to make, did Indiegogo and state/federal taxes combined really only take a “$10,500: IndieGoGo and Payment Processing Fees” bite out of it per $150k ? Or is Lab Zero going to go bankrupt next year from spending all of their money on characters/stages/etc… and not having enough left over to pay the piper ?

Or perhaps this income is not at all like that paycheck option when you choose to be paid the full amount every two weeks, but you still have to keep in mind that you owe X amount back to the Government at the end of the year that would have otherwise been taken out automatically if you had chosen the other option. Maybe businesses like Lab Zero are only taxed on “profits” above and beyond the amounts put back into the company to make it grow, I don’t know. If anyone could help me understand the situation better I would greatly appreciate it.


#2

The later. They don’t pay tax on it because of the nature of the money. But, even if the 829k came from sales, winning the lottery, or the heavens, it isn’t profit until the operating costs are taken out. So, 829k income - 829k costs = $0 to be taxed on. Otherwise businesses wouldn’t work.


#3

I thought the government can’t place a tax on charitable donations anyway?


#4

(1) not “can’t,” but chooses not to for certain approved charities it recognizes under 501©(3)
(2) This isn’t a charity or charitable donations

If this was for a church, Kids Need to Read, etc., the amount raised would be exempt from taxes.

You might be thinking of “gifts,” which don’t create a tax liability in the recipient so long as they are truely “gifts,” which the government is pretty good at seeing through. So, the bus driver that got all the money = gift.

In any event, if after making and distributing all the merchandise to the contributors, LZ decided to just fold up and distribute the rest of the money among themselves then they would have tax on the rest of the money left (as well as lawsuits from marvelous, autumn, etc.) because then it would be characterized as income without the cost deduction to defray it.

Similarly, if it turns out they develop a new system of making content and they end up 20K under budget, they would owe taxes on that 20k. But, costs from other areas can be used as well. So, if they spent the 20k on a new IP they’re back to 0 again.

So long as they use it all for development, they don’t owe anything until the eventual profits from that development come in. How those eventual profits get handled depends on the structure of LZ as an entity and what they choose to do with them (as briefly touched on above.)

The bigger problem would be the amount being so large that their expenses in the first year don’t cover it. But, there are a few ways around this depending on how your company is structured: the most notable being that corporations are allowed to set their taxable year. So if you’re a corporation that is thinking of doing a crowd funding, it can be smart to change your taxable year to start when you receive payment, that way you have 12 months to spend the money you get.


#5

That’s a good point about the fiscal year. You might want to shoot an email to @Ravidrath to make sure they are on top of that since they said 3-4 months per character, which means this might run a year and a half to do all five. If they are on a calendar year that could mean as much as 100k in tax liability if they’re not careful with how they schedule their expenses.


#6

I think it would go a bit quicker than a year and a half. Sure they have 5 characters to make but robo fortune is going to recycle a lot of resources. I don’t think she will take as long as the others.