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Let's say that I've finished programming an indie MMO game similiar to Tibia.

I've got a stable server application that is ready to launch, i've got a tested bug-free working client application that is ready to play and the game's official website (ready to host) with payment system and client that is ready to be downloaded for free. No matter how impossible it sounds, let's also assume none of them break copyright laws.

My game divides accounts into two groups - free and premium. If someone gets premium, he has access to all possible game features, that of course, need server authorisation to work properly. Let's say that the "premium account" can be bought on the website for a fixed money/month. Free accounts mean that everyone can actually play, but without paying, you get limited access. This is what the mentioned payment system will be for. If I understand wikipedia properly, it's called Freemium model.

Well, I'm completely novice to these business entities issues, so in short: what, in terms of law, are steps from here to the state where my game earns money in a fully legal way? Also, is there for example, something like verification if game gives the user what it actually offers when paying on its website?

I live in Europe, if it changes something.

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3 Answers 3

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As made painfully obvious by recent events, 'Europe' is not a unified place in terms of laws or taxation, so giving a definitive answer here would be tricky to say the least. Even EU law is only a guide as each member state implements it differently.

Generally speaking, everything is legal until decided otherwise, so it's not so much "how do I earn money legally" but more "how do I avoid breaking laws when taking people's money".

Nobody can give you a comprehensive list of things to watch out for here - not even a lawyer, though they will most likely do a better job than me, for a price - but here are some you will need to consider in terms of money coming in:

  • Business tax - most countries expect your business to pay tax on profits, or similar.
  • Income tax - you will probably have to pay tax on your own income from the company.
  • Value-added tax - some jurisdictions require that you pay VAT on services you sell.
  • Trade laws - each country has its own laws on sales of goods and services, usually requiring that the goods/services are of reasonable quality, fit for purpose, matching the description, etc. Buyers may be entitled to refunds or replacements in certain circumstances, and there may also be laws that state that a buyer is entitled to a 'cooling down' period after purchase during which they can change their mind and receive a refund.
  • Record-keeping - in the UK at least, companies need to keep records of your accounts for almost six years after the tax year they relate to. Your jurisdiction may be the same.

Then there are various other laws you need to be careful not to fall foul of:

  • Storing user data - many countries have restrictions on what data you can collect from users, how long you can store it for, what form you have to store it in, whether you can disclose it to others, whether the user is entitled to see a copy of their data, etc.
  • Other privacy issues - Storing cookies on an end user's machine requires their permission, if I read recent EU law correctly. Anything similar to a cookie mechanism is probably covered.
  • Employment law - if you pay anybody to help with your game, you will need to follow various employment related laws. Note that if you accept volunteer labour, this may also end up being covered (especially by minimum wage laws), although I am unsure if it's been tested in EU courts so far.
  • Libel, slander, defamation - If people use your service to illegally criticise others, you may be liable for facilitating it, depending on the nature of your service.
  • Copyright and IP - even if your game does not infringe copyright, if it's possible for users to use it to infringe copyright, you could be held liable.
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+1, detailed answer. "if it's possible for users to use it to infringe copyright, you could be held liable." - do you mean, that if it's easy for a typical user to replace game's data so it uses copyrighted content, I can be sued ? Or, that it is illegal if I for example implement an in-game music player ? Could you please extend this point ? –  user Jun 8 '12 at 18:10
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Yes, if your in-game music player takes one person's music and plays it to others, that will be a copyright infringement. Also, anything in your game that allows others to infringe copyright while using it - eg. creating copies of other games, making in-game books containing text from real-world books - could be a problem. Finally, merely facilitating copyright infringement can be an issue: imagine a game which let people share URLs on a messageboard - if you're not careful you'd end up as a game version of MegaUpload.com or The Pirate Bay. –  Kylotan Jun 8 '12 at 18:42
    
@geneotech it's not quite that black and white; there's often Safe Harbor laws which reduce your liability to user actions which incidentally infringe copyright en.wikipedia.org/wiki/Safe_harbor (granted my knowledge of that is mostly from the US) –  Ben Brocka Jun 9 '12 at 2:11
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What recent events, I'm curious? –  Cyclops Jun 9 '12 at 10:56
    
@Cyclops: The current economic crisis in Europe in general. Much of the problem is that different countries have different rules and regulations but the ones with stronger regulations still have to bail out the others. –  Kylotan Jun 9 '12 at 13:15

Indie workflow:

  1. Make the game
  2. Find publishers
  3. Find a cheap attorney to get the general advice of protecting your game
  4. Submit to publishers
  5. Consult with an accountant
  6. Let your publisher tell you what to do next

I say all this just to say, make your game first then worry about this stuff. If you make something worth selling you will have to commit a small amount of funds to getting valid advice and not random people's understanding of business and tax law

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The definition of indie game is that you create it without a publisher. –  Philipp Jan 17 '13 at 13:06
    
post development publishers are a lot different than ones that invest on the front end, but strictly speaking, you're somewhat right. I prefer indie development, professional marketing. –  brandon Jan 17 '13 at 16:36

Others are saying to start with a lawyer or a publisher. While I agree that a lawyer will be important to the process (a publisher is not critical, and should be thought about with skepticism for indie games), the most important person to answer your question would actually be an accountant.

In the U.S. (and I am sure Europe) business accountants have a great deal of required knowledge of laws, taxation, and regulation that are required in order to gain certification. So, instead of running to an attorney, who may or may not understand this area of law, go first to an accountant who is certified to handle domestic accounts. Because the EU has intricate rules governing interstate commerce, a good place to start would be this site:

http://europa.eu/youreurope/business/managing-business/keeping-accounts/france/index_en.htm

A proper accountant will be able to do everything from setting up your payment system to explaining the various legalities of charging folks in different countries, tax handling, etc. The lawyer will not likely know these things explicitly unless they specialize in that specific area, which will be rare and expensive.

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+1 for not running to a lawyer for everything, an advice I never quite understood (and quite frankly thought was mostly an American recommendation at that) ^^ –  Oskar Duveborn Jan 17 '13 at 12:33
    
+1: hire an accountant. Not only will he take care of all the "boring" bookkeeping, he also knows how to do it in a way which fulfills all legal requirements and doesn't get you arrested for tax evasion (which happens quickly in many EU countries). –  Philipp Jan 17 '13 at 13:04

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