This guide has been written to provide an explanation for how non-US based companies can comply with Kickstarter's US-only requirements.
This is the method used to launch the Xenonauts
(X-Com re-imagining) Kickstarter project, despite Goldhawk Interactive being based in London, United Kingdom.
The Kickstarter team expressed reservations about me posting this guide online, as they are concerned people may follow the instructions and find they do not work for them (perhaps authorisation proceedures etc may have changed since it was written). Understandably, they don't want angry people emailing them about it.
I have considered this and my view is that the potential gain to the global indie community is greater than the risks. However, please understand that I cannot guarantee this method will work for you even if you follow it to the letter. If it does not work, please
do not be angry at Kickstarter (or me) because of it.
THIS IS IN NO WAY LEGAL OR PROFESSIONAL ADVICE, AND NEITHER I NOR GOLDHAWK INTERACTIVE CAN BE HELD RESPONSIBLE FOR ANY CONSEQUENCES OF FOLLOWING IT. IT IS SIMPLY MY COLLECTED THOUGHTS AND THEY ARE FOLLOWED AT YOUR OWN RISK.
UPDATE - 28 FEB 2013
This guide was written in mid-2012 and I know that at least half a dozen companies have used it to set themselves up on Kickstarter in this time. However, there have been some changes to the process that mean it may no longer be fully viable:
I will leave the guide up despite this, as elements of it may still be useful to non-US people trying to get onto Kickstarter. I think the principles are still sound - the tricky part is getting a bank account.
- Kickstarter was launched in the UK shortly after I wrote this piece. If you are based in the UK, you don't need this guide. If you are based in the EU, I strongly suggest you try to set up a UK company rather than a US one as you'll likely find it easier due to the EU common market.
- I have been informed that HSBC have tightened their requirements on setting up bank accounts recently, and they are less willing to have only overseas people as signatories on the account. Your helper will need to discuss the account with the bank in advance to make sure our method is still viable.
- Sadly I'm not able to provide the details of any US tax accountants etc; you will have to look into that yourself (I didn't use one because I'm a qualified accountant myself, but I wouldn't be confident providing professional advice to others on the matter).
- I've also been asked for the contact details of my US helper many times - sadly he's a busy man and I don't want to take up any more of his time than I already have, so I'm afraid I can't give these out either.
1 - Foreword
2 - Why Kickstarter?
3 - What You'll Need
4 - Basic Overview
5 - Step #1 - Registering a US Company
6 - Step #2 - Obtaining an EIN
7 - Step #3 - Getting a US Bank Account
8 - Step #4 - Tax Arrangements
9 - Step #5 - Kickstarter Registration
10 - Step #6 - Authorising Amazon Payments
11 - Personal Advice
12 - Conclusion
1 - FOREWORD:
This guide is borne out of geographical frustrations - we have witnessed a revolution in the way games have been funded over the past few months, but sadly one localised largely to the US. As the leader of a small studio based in London, I found it enormously frustrating that we were seemingly barred from taking part for no other reason than being situated on the wrong side of the Atlantic.
The power of Kickstarter should not be understated. While the largest successes have raised astonishing amounts of money, it is also perfect for small independent teams looking to raise funds. Xenonauts was late to the Kickstarter party and struggled to get much press coverage, but we raised as much money in 33 days of Kickstarter than we did in the entire previous 18 months of preorder alpha-funding. Had we had more coverage, I can only assume we'd have raised even more.
I strongly believe that independent games should be funded on merit rather than geography, and we want to help other non-US teams access Kickstarter in any way we can. After discussions with Kickstarter, we learned it is not possible for a team to set up a project on behalf of another team (as it would run into problems with Amazon Payments), so we cannot offer our US bank account to interested teams. Instead, if a non-US team wants to get on to Kickstarter, they will have to do it themselves.
This guide will explain how to do that.
2 - WHY KICKSTARTER?
Xenonauts Project Lead
Though Kickstarter is the best known, there are numerous other crowdfunding sites available to any developer. Most of them take less of a cut than Kickstarter, and most do not have the same US-only requirement either. So why go to all the hassle of setting up your project on Kickstarter?
Ultimately, Kickstarter is the only site that has the reach necessary to draw in significant amounts of funding. All the major crowdfunding successes have been on Kickstarter, gaming or otherwise, and thus there is a far larger potential audience to tap into.
There is also far fewer barriers to donating on Kickstarter - a lot of gamers already have an account due to major projects like Doublefine or Wasteland 2, so it's just a few clicks for them to back a new project. Whereas if you launch on a rival site such as IndieGoGo, they would have to register an account before backing your project. They're less likely to bother.
As far as we can tell from the Kickstarter project stats, we have raised in the region of 30% of our total funds from random Kickstarter users stumbling across our project when browsing the site. Add to that the enhanced legitimacy for being on a well-known site, and it is clear that Kickstarter is the best place to be at the moment.
As a comparison, take the indie project Kenshi
. This listed on IndieGoGo a couple of weeks before we launched on Kickstarter. They are as close a comparison you will get for Xenonauts - arguably we're slightly more established because we've been around longer, but we're both mid-tier independent developers trying to raise funds to better complete a game that is already alpha-funded (and we've both provided a demo).
Xenonauts raised $155,000 in just over a month. Kenshi raised $2,315 across nearly two months. Yes, they've done a half-assed job with the project video and didn't do many updates, but that does not account for such a large disparity in fundraising. I think IndieGoGo accounts for most of it.
I dearly hope that in the future that either Kickstarter will open up to the rest of the world, or that the foreign equivalent of Tim Schafer (perhaps Notch?) will prove that an alternative platform can be equally as successful. However, until that happens you would be foolish not to use Kickstarter. The hassle is worth it.
3 - WHAT YOU'LL NEED
This is what you will need to get on Kickstarter:
4 - THE BASIC PROCESS
- A US citizen helper (who will effectively become part of the team for the purposes of the Kickstarter), with access to the following:
- A US address (this should be their home address)
- A US telephone number
- A US credit /debit card
- Access to a fax machine
- This person should NOT back the Kickstarter, or you will lose all of the money!
- A US Visa (if your country is covered by the ESTA program, this is relatively easy)
- Two forms of photo ID in common use in your company (I used my passport and driving license)
- A local branch of HSBC bank
- Two to three weeks of time. This can be sped up slightly if you’re willing to FedEx documents to and from the US.
- Endless patience
In short, the process is this – you form a US company, create a US bank account for it, and then create an Amazon Payments account in the name of your US helper. You link the Amazon Payments account to the US bank account and, once it is verified, you can launch the Kickstarter.
At first this may seem unnecessarily complex - can't you just get the US helper to do everything? Why bother with the US company at all?
It all boils down to security, both for you and for your US helper.
From your point of view, do you really want all the money raised to be under the control of somebody else? You can raise a lot of money from crowdsourcing, so there's always a small chance that your helper could vanish at the moment hundreds of thousands (or possibly even millions) of dollars turn up in their bank account. A corporate bank account gives you sole control over the money.
From your helper's point of view, they don't really want the money touching their bank account. If they do a Kickstarter on your behalf and then send you the money, they'll still have to pay tax on all the money raised. Needless to say, this is not a good thing.
Making a large payment abroad from a personal US bank account may well also raise eyebrows with US Homeland Security, thanks to the very tight US money laundering laws. While it sounds vaguely sexy to have the authorities probing you, I imagine the reality is somewhat different and a lot less appealing.
Therefore while this process is long-winded and time-consuming, it is the most sensible way to approach the Kickstarter from abroad.
A word on your US helper - they will have a lot of work to do as part of this process, so make sure they're up for it! Our helper was an absolute hero and spent just as much time setting up the Kickstarter as I did. Hopefully this guide means it won't be quite as painful for your helper as it was for ours, though!
5 - STEP #1 - REGISTERING A US COMPANY
The first step in the process is to register a US company. The first decision is to choose what US State you want to register the company in.
US companies are usually registered in Delaware because of their company-friendly state laws. However, in this instance you should be registering a New York company instead. This is because the HSBC bank account we will obtain later is the process does not appear to be available for Delaware-registered companies. I believe there are less overall fees involved with registering a NY company too.
You will want to form a Domestic Limited Liability Corporation. The first step is to decide on a name, which must include the term “LLC”. Search for it on their website here
to see if it is already taken. Our UK company is named “Goldhawk Interactive Ltd”, so we went with “Goldhawk US, LLC”.
Next, go to this website and download the Articles of Organisation form:
This is the main filing document forming your company. It is not particularly difficult to fill in, but it should be submitted by your US helper once it has been completed. Filling in the company name in the FIRST box is straightforward, and then you should enter “County of New York” for the SECOND box. For the THIRD box, fill in the address of your US helper.
After that date and sign the form at the bottom of the first page, using your name and signature. Your US helper will need to fill in the second page with their name and address, as they will be filing it.
A quick disclaimer here - for the third box, our US helper was based in New York so it was not a problem to provide a business address in the State of New York. If your helper is not based in New York, I am not sure whether they'll accept an address from outside the state(it didn't come up for us). You may have to get that clarified, or find a NY-based helper.
Your US helper then needs to go here
to fax the submission in. They’ll need their credit / debit card, and they need to download the card authorisation form on that site and fill it in. You will need to pay a total of $235 - that is $200 for the filing itself, $25 for the 24-hour turnaround and the $10 for the certificates (the bank will need these). The fax numbers are on the linked page above. Once that is sent in – congratulations, you now own a US company! You can check when it is formed as the name will appear in the name database linked above.
So, a few words on legal matters. Firstly, this corporation should be a short-lived one. Owning a LLC comes with legal requirements such as filing accounts and announcing your formation in a NY newspaper. Unless you’re willing to hire an accountant or do all those things yourself, you’ll want to dissolve the company as soon as the Kickstarter funds come through. The newspaper announcement must be done within 120 days of company formation, so close it before then or you’ll need to pay an extra $50 to get that certificate.
Also, LLCs in the US have “members” rather than shareholders as they do in the UK. Your title throughout this process will therefore just be “Member”.
Secondly, it is a legal requirement to have a Member Agreement that defines how the company is run. This does not have to be submitted to the US authorities, but you should probably still have it. Just download the form here
and fill in the parts in red, then sign it and keep it somewhere safe until the company is dissolved.
Right. That’s the company set up!
6 - STEP #2 - OBTAINING AN EIN
Next up, you need an EIN – this is an Employer Identification Number, and is obtained from the IRS free of charge. It’s essentially the corporate version of a US citizen’s Social Security Number and you’ll need it to get the bank account. Handily, the Member Agreement above that you’ve just signed authorised your US helper to obtain this on your behalf.
Firstly, you need to give the US helper power of attorney so they can deal with the IRS on your behalf. You do that by filling out Form 2848, which is available in a semi-filled in version here
. If you fill in the parts in Part I where I have indicated with the “<>” and then sign it, leaving the remainder blank, and have your US helper sign Part II, you’re good to go. The only issue is with regards to whether the letter “d” or “e” should be used in Part II. If the helper is a full time employee, fill in “d”. Otherwise, use “e”.
Then you need to fill in the EIN Application form
. Again, I’ve highlighted what you should fill in and where. Then your US Helper should submit it – the information is on this page
. I think ours was sorted out over the phone, and they provide a toll free number so it's probably best just to pick up the phone. If you need to fax in the two forms you've filled in above, I’m sure they’ll give you details on how to do it.
That gives you the company and your EIN. Once you have the company certificates and your EIN, you can start trying to open the bank account. This is the tough part!
7 - STEP #3 - GETTING A US BANK ACCOUNT
You want an account that is free and has good online banking facilities (so you can transfer the money to your non-US account easily). You also want an international bank with local branches near you as well as a US presence, so I decided to use HSBC and their Business Direct
The reason you need an international bank is that you will need two types of proof of identity to open a bank account. The US banks will recognise your passport if you are from overseas, but are unlikely to recognise any other form of ID (including driving licenses) – leaving you one short. As you should be the only person with access to the account, this is a bit of an issue!
However, an international bank will allow you to go into the local branch and provide your ID there. HSBC UK verified my identity in the UK using my UK Passport and Driving License, and then passed this approval on to HSBC US, allowing me to open the account. Make sure your chosen bank will allow you to do this.
One thing that hit us out of the blue is that HSBC have a requirement that the account signatory is able to travel to the US to do business. You don’t actually have to do this, of course, but you must be able to. This means being able to show off a valid US Visa.
In my case, it wasn’t really a problem – the UK is part of the US ESTA Visa Waiver Program, which allows you to apply online for a Visa for $15 and get it in less than 10 minutes – assuming you don’t have criminal convictions and don’t answer “Yes” to the question that asks if you are heading to the States to commit acts of terrorism. You can see what countries are part of this program here
. If your country is not on the list, I’m afraid I can’t help there - I guess you’ll have to talk to your local embassy or something.
It’s probably best if your US helper goes into the bank and explains the situation, as the bank staff should be able to help guide them through the entire process. These are the key objectives you will need to achieve to go further:
- A bank account in the name of your US company, but with your US helper’s address
- You being sole signatory on the account (and registered to your actual overseas address), and only one with internet banking access
- A bank statement showing the US helper’s address (can be got off HSBC internet banking), as this is needed for Amazon Payments verification.
You don’t actually need a credit / debit card from the bank for this process.
8 - STEP #4 - TAX ARRANGEMENTS
Right – a quick primer on corporate tax (disclaimer: while I am an accountant, I am relatively unfamiliar with US tax law. If there is someone with more expertise out there, feel free to send me corrections).
Companies pay tax on their profits (revenue less costs), and development costs are a valid cost for tax reasons. So if you are a US company that raises $200,000 on Kickstarter and spends it all on development in the US, you don’t have to pay any tax on your Kickstarter income.
However, it’s more than likely you’ll want to move the money raised back to your parent company (situated abroad). The situation is complicated by moving money across borders, for two reasons:
Firstly, different rates of tax apply. The highest US corporate tax rate is 35%, while in the UK it is 24%. Reduced rates apply for smaller companies in both countries, but US tax is *likely* to be higher than elsewhere.
Generally, countries have tax treaties in place so you don’t pay tax twice – but it usually works that you pay tax in the country where the profits originate (here the US) and then are then taxed again in your own country, but can claim back the tax paid in the first country against your corporate tax bill in the second (capped at the amount you would pay if the profits were made in the second country). So you effectively only pay tax once, but you pay it at the higher of the two rates. If the US tax rate is higher, this is obviously not good for you.
Secondly, and more importantly, the US company is a standalone entity. The development costs you incur in your parent company (in our case situated in the UK) can’t be deducted against your US company, as that is an entirely separate company. What you'll get instead is a large profit in the US company, and a correspondingly large loss in your parent company – so you’ll be liable for a full US tax bill on all the money raised on Kickstarter, even if your parent company spends it all on development!
You may be able to recover the cash eventually by deducting the US tax paid from the tax you’ll pay in your home country on the eventual profits made from your game after release, but this isn’t much help. You need the money during development, not after the game is finished! Additionally, if your game doesn't actually make a profit on release, you won't be able to recover the US tax at all.
Therefore, you DO NOT want to transfer the money across as profits from your US subsidiary company to your parent company in your home country.
The way around this is a sales contract. In practical terms, the sales contract will say this:
- The game and all the associated rights are owned by the parent company, situated abroad.
- The US company is providing a service to the parent company, which involves setting the game up on Kickstarter and handling the money.
- All earnings are the property of the parent company, but the US company will receive a small payment for its services.
This is not an unfair reflection of reality, though how much the service charge is (and thus how much money you pay US tax on) is up to you. If we were dealing with a third-party we’d probably charge them about 1% of the sum to process the money through our account, so we’ll be using that in our contract.
We’re using a modified version of the contract we’ve signed with Desura, our current online distributors - as they obviously only pay tax on their share of the profits made from selling Xenonauts on their site, rather than the full game price.
Realistically, given how long the company will exist for and the fact it will only make one transaction, you could probably get away with setting the service charge to $1. However, I’d rather not take the risk (however small) of annoying the IRS, so I’ll be treating the transaction as if it was done at arms-length between the two companies.
If you are raising any serious sums of money (definitely anything above $100,000) then TALK TO A US TAX ACCOUNTANT once you hit your funding goal to make sure your tax arrangements are in order. Seriously. It will cost a bit of money, but not that much - and the costs of getting it wrong would be enormous!
The information provided above is not legal or professional advice so if you get a tax bill as a result of it, you’ll have to pay it – but if you get an accountant to give their professional opinion on your affairs and you still end up with a tax bill, you can sue them to recoup the unexpected losses.
9 - STEP #5 - KICKSTARTER REGISTRATION
The Kickstarter is relatively simple. Essentially you just register for it as normal, then let your US helper log in and do the telephone verification for you with their US phone number.
Then have them create an Amazon Payments account linked with your email address, using the link in the Kickstarter under the Accounts tab. More details on what to do are under the Amazon Payments section below.
For the project itself, there is a very helpful guide called the Crowdfunding Bible
. It's a very good primer on crowdfunding and draws on the experience of both successful and unsuccessful projects. Read it.
Finally, bear in mind that Kickstarter can take a couple of days to authorise a project. We’d sent out preview builds and set a press embargo until 9th May but didn’t finish the video until early morning the day before. We submitted it to Kickstarter immediately afterwards, but I had to send begging emails to the Kickstarter team asking them to make sure it was authorised that day so we didn’t have previews going live before the Kickstarter did.
In the end it worked out fine, but avoid doing that if possible (I have a few extra grey hairs as a result). You can launch the project any time you like after Kickstarter authorise it, so get it authorised early.
10 - STEP #6 - AUTHORISING AMAZON PAYMENTS
The key thing to understand with Amazon Payments is that, even with you using a corporate bank account, the account is linked to a person – in this case, it’ll be the US helper. Because they are linked to the Amazon Payments account creating the project, they SHOULD NOT donate to the Kickstarter project under any circumstances. Donating to your own Kickstarter is strictly forbidden and will get your account locked with all the money inside it. Make sure you tell them this!
They should be the one filling in the Amazon Payments registration form, because it’ll ask for all of their sensitive personal data. You and your company have essentially nothing to do with this beyond providing the bank account (though they are acting as an officer or employee of the company at this point).
If you try and register in the name of the company and explain that a corporation is technically a legal person, you’ll just wind up talking to a confused support person. I tried it so can vouch for this.
After filling in their personal details, they’ll have to authorise the account. This involves providing personal data to verify their identity, adding a valid credit / debit card and adding a bank account. The credit / debit card will need to be one of their own personal ones. Unless you make any Kickstarter pledges using the corporate account, it will not be charged.
The bank account should be your US company one. It’s relatively easy to add it to the account, but once it has been added it has to be verified. Corporate bank accounts have to be verified manually. This is where the bank account statement you got from HSBC comes in – as long as it displays your company name and your US helpers’ home address, you’re fine. Just scribble your email address on it and fax it to Amazon Payments, and they should authorise it within 24 hours.
Finally, you'll need to fill in a tax questionnaire. This is where you state that you are operating as a corporation rather than an individual, and from what I understand this is how the IRS know that the individual associated with the account shouldn't be getting a tax bill. Rather, the company should.
Once that is done, your Amazon Payments account is good to go. Just log back into Kickstarter and finish hooking the two up, and this part of your journey is at an end. Congratulations, you’ve done the easy part!
11 - PERSONAL ADVICE
If you thought you could take things easy now you’ve done all that, think again. Believe me when I say running the actual Kickstarter is going to be far harder and far more work than you think it will be - but nobody ever said making your dreams a reality would be easy!
Read the Crowdfunding Bible
that I linked above. I was linked that about a week after I launched the Kickstarter, which was about two weeks too late. It’s full of relevant information, but be sure to read page 6 (cons of crowdfunding) and page 26 (which demonstrates how little profit you might receive from the total donated).
I'm hardly a crowdfunding expert, but at least now I can say I've been there and done that. My personal advice would be relatively simple:
Even if you’re doing far better (or far worse) than you expect, don’t be tempted to put out any Update too quickly. Everything feels like it’s going a million miles an hour when a project first kicks off, but it’s easy to make mistakes if you’re moving too fast - and any mistake you make is a potential PR firestorm.
If people are demanding an answer on a difficult issue, just tell them you’re thinking about it and take your time to come up with the right solution. Most of the pressure to get things done quickly is imagined - people will wait for you if you ask them to.
Get some sleep:
After the mammoth job of getting onto Kickstarter in the first place, then the huge job of getting the project page and video right, I had to deal with the avalanche of work that comes with launching a new Kickstarter – getting literally a hundred messages or emails in a few hours, for instance (and all this on top of my usual role overseeing development). I tried to do too much, and achieved very little beyond losing perspective.
This is linked with point #1 – you feel like you should deal with everything that turns up immediately, even when you’re into the wee hours of the morning (or perhaps you're mesmerised by watching the numbers tick up). Don’t fall into that trap. You won’t be very productive, but you will
be irritable and you will
find yourself making silly errors. Just go to bed. The world will not stop turning. The project will still be there in 8 hours' time and you'll be in a much better position to deal with whatever it throws at you.
Don’t take it personally:
You can post ANYTHING up on the internet and some people will complain about it. For instance, check this BBC article where scientists have partially cured blindness
and check the All Comments section at the bottom (then feel your faith in humanity wither up and die). You're not doing anything as amazing as curing blindness, partially or otherwise. You're making a video game.
Thus whatever you post up on Kickstarter, there will be people who will complain. Don’t take it personally. Few of those people actually know anything about making games, and most are making assumptions and extrapolations based on incomplete information. They’re not always
wrong, of course, but be very careful of going too far catering to the whims of a vocal minority.
Here’s a good test - count up how many people are criticising you, and then compare it to the number of people pledging to your project. It’s much easier to write a few sentences criticising somebody on the internet than it is to actually put your money where your mouth is and back a project. If you’ve got more backers than you have critics, you’re probably doing fine.
Listen to the critics, but don’t feel obliged to change things to accommodate them. Ultimately, it’s your project and your ideas that people are backing, not theirs.
12 - CONCLUSION
Writing up this guide has taken a lot of my time, but I know how helpful it would have been if someone had given it to me when we started out. I hope our experiences will be of some use to other indie teams frustrated by not being able to access Kickstarter.
In all honesty, I believe the Kickstarter gold-rush has passed. It is now very difficult to get coverage for new Kickstarter gaming projects, as journalists get dozens of new Kickstarter projects every week and have simply had enough. Backers are starting to find their wallets lighter than before, and there is more competition for the money that is available.
Instead, crowdsourcing is normalising a little. There is still plenty of funding to be raised if a project is sufficiently interesting, but Kickstarter is no longer a fountain of money that sprays dollars at anyone who passes by. Now you have to work hard to generate buzz around the project, and work for every backer who joins the project.
This is as it should be. I still expect to see many more unique and exciting games find funding on Kickstarter in the future, and if even one of them is from beyond the borders of the US, writing this guide would have been worthwhile.
(Feel free to send me a copy of said game to say thanks!)