Devlog 6: All the Business I've Gotten Wrong So Far

This article's a bit of a departure for the PBM devlogs. I'm going to talk about things that specifically relate to Paint By Monsters as a project, but they'll also relate to Perfect Minute Games as a company. 

If you ask someone who does business development for games, chances are they'll tell you the Canada Media Fund is a pretty good asset for Canadian developers. They provide solid funding under very generous terms. They're not a publisher, which means some of the support systems aren't there, but they have certainly made it a lot easier for an indie studio to make a go of it in the Great White North. I've written about my experiences with them before (and before that and before that and before that). Overall, it's been a good experience, one that has, if I'm honest, made it possible to make Paint By Monsters to begin with.

Having said that, it's really easy to make mistakes your first time around with CMF, and I'm guessing these pitfalls are not unique to CMF clients. 

One of the requirements for eligibility for CMF funding is incorporation. Incorporation is not something you usually do lightly; you want to balance the chance of liability or tax hits against the added complexity and costs. A corporation has directors, and shares, and filing requirements, and on it goes. Each requirement, on its own, is small enough, but each one takes a little of your time and energy, and in combination they can leave you without much in the tank to work on the games themselves.

In my case, I did my incorporation on my own, without benefit of a lawyer or other knowledgeable person. This was something a few folks suggested, since it significantly reduces the cost of the process. And the incorporation itself, if you're incorporating  federally in Canada,  is actually fairly straightforward - a name search you can do right on the site, a couple of forms, and a small fee, and boom, corporation.

The devil, however, is in the details. 

I incorporated with a split share structure based on previous experience with startups, and I named myself sole director and shareholder of the company. That seemed fine, but when I started talking to a lawyer about drawing up some contracts for art and sound folks, the cracks started showing up. The share structure I chose is very unusual for a game company. My lawyers, Voyer Law, work extensively with startups and in particular with game developers, so they're in a position to know, whereas I am not.  I have agreed to their suggested alterations regarding this and other corporate structure details.

Then there's registration. Incorporation, in Canada at least, creates a legal entity, but unless it's created within a province - which isn't a good idea for a game studio, since we tend to spread our business far and wide - the corporation needs to be separately registered within the province(s) in which it has operations. My home is in the province of Newfoundland and Labrador (NL for short, sorry Netherlands!), where registration is surprisingly expensive. It also requires appointing someone residing within the province to have power of attorney for affairs relating to and emerging from the business's operations in NL. Since my lawyer's nearest office is in Nova Scotia, I really wasn't sure what to do about that. Happily, they were, and one (notarized) document later, I've just about got myself a registered business.

I also hadn't considered the difference between being owner, shareholder, and director of the company and being its employee. And in my application to the CMF, I declared that I would do the work I am responsible for on PBM as an employee of the company. So I need an employment agreement with my own corporation. And there's a bunch of other complications involved here, since I have been doing billable work for the project since the start of the CMF agreement, which requires special permission, and let me tell you, that was not an easy ask.

Finally, tied into employment agreements comes IP assignment. If you create something and then incorporate, you need to make sure the corporation is the entity that holds the IP rights. This is critical in particular when dealing with the CMF and other such entities, who require that the corporation with which they're dealing has all of the relevant rights to the project they're funding.  In my case, I created all of the original feature demos for Paint By Monsters before I incorporated Perfect Minute Games Inc. That means that I, not the corporation, still hold all IP rights for the project. My lawyer is working on that now, but there's probably a way to prevent that from being required in the first place, and I recommend taking that option if at all possible.

I've already talked elsewhere about the various dead ends I've encountered at a company level, but all of the above were interspersed with those missteps. These questions have plagued me for months now, but they came to a head in February and March. The costs involved have been higher and the time required significantly longer simply because I didn't know what I was doing at the start of all this. 

I think I'm on the right footing now, finally, but I figured a good cautionary tale would be useful. Here's hoping your experiences are easier and less stressful.