iOS iPhone App Store publishing - set up company?

[johnnyjibbs]

Hi all,

My first app is well under way and I'm hopeful to be in the position to submit it in the next month or so. Just a line about my background: I have a full time job, only started learning objective-C in October and am writing this app in my free time. I'm not planning on giving up my job, but supplementing my income, at least in the first instance.

I'm not sure if I should publish apps under my name or whether to set up a Limited Liability Company with Companies House (UK talk, but there must be something similar in the US).

I have some questions which I was hoping some people might be able to answer:

- Do I need to set anything up to pay taxes if I publish under my own name? Does Apple provide everything you need when you set up the account for payment?

- Am I liable to be sued (and therefore my assets are at risk) if I file under my own name and someone claims my app is infringing something/hazardous to their health?

- Does filing it under a Ltd company protect my personal assets in the event of being sued in relation to my app?

- What steps need to be made to protect my ideas/design with copyright?

Many thanks!
John

 

[Cromulent]

1. Yes, you need to contact HMRC and possibly others.
2. Yes
3. Yes but there are significant legal responsibilities that you must fulfil as a company director.
4. Patents and trademarks are the two normal means although you will most likely need legal advice for these.

 

[craig1410]

Hi,

I've looked into this as well and came to the following conclusions:

1. You can either pay income tax personally by declaring the extra income in your self-assessment tax return. Note that you will need to request a tax return or fill it in online. Alternatively, you can set up either as a sole trader or partnership (eg with spouse). This has the advantage that you are able to deduct costs from your revenue and only pay income tax on the profits. For example, you could claim the capital cost of your computer used to do the programming as long as it is less than 2 years old and you have receipts to prove purchase. Note that according to an accountant who I spoke to, you can offset the total, as new, cost of the computer. You can also claim tax relief on a number of other costs such as a proportion of your utility bills but this becomes quite complex so you should get advice from a qualified professional really. As a rule of thumb though you can claim about 2 or 3 pounds per week for utility bills without upsetting HMRC.

2. I am in the same position as yourself - employed but looking to make extra money from the app store. I spoke to a C.A. who took me through the different tax options and it turned out that a partnership was the best, followed by sole trader followed by a LLC. This is mainly because I am already a higher rate tax payer so anything I earn through my LLC would be taxable at 40% plus employers NI (12.8%) plus employees NI (1%). Alternatively I could draw no salary and just take dividends but the combination of corp. tax and dividend tax would still be 43% (21 +22) so this is still worse than as a sole trader. In addition I would need to deal with PAYE and other employer related issues and would need to pay accountancy fees of around £600-£700 pa plus some other setup and legal costs.

If I had not been employed already then a LLC would be much more attractive since I could take a salary equal to my personal tax free allowance and then just pay 21% corp. tax (dividend tax for basic rate tax payer is 0% as I understand it). There are also advantages if you wish to pay extra money into your pension scheme.

The partnership works like a sole trader but you can split your profits 50:50 between your tax return and your partner's tax return. So if you have a spouse who doesn't work then potentially you get tax free income up to the personal allowance and then pay 20% up to around £40k. Note that you need to split the profit 50:50 and can't attribute more profit to your partner to gain additional advantage as HMRC will jump on you. It is also wise to have your partner involved to some extent in the business even if it is a minor admin type role. HMRC have tried to bring in a system where the profit is divided according to the proportion of the work which each partner actually does but they were defeated in court when trying to implement this and have abandoned this for now. The downside of a partnership is that you have to fill in 3 tax returns each year (1 for each partner plus one for the partnership itself).

3. The getting sued bit is of great interest to myself as well and I don't know the answer to that. I would have thought that Apple as retailer would be the one to be sued if an application caused damages of some kind and I'm sure their lawyers have drafted up an appropriate disclaimer which will be part of the legal blurb we all agree to when signing up for an Apple ID for iTunes. I don't know if Apple can effectively pass on the liability to the application developer and if in turn we would need to create a disclaimer. I would think it would be hard to sue the developer because we didn't actually sell the application to the purchaser and therefore have no contract with them in the same way that Apple have a contract with the purchaser.

Hopefully a lawyer will read this thread and give some guidance.

4. As for copyright, I didn't think it was possible to copyright a piece of software? I think you can copyright methods used within the software (eg. special search/sort algorithms) but I don't think you can, for example, copyright "any application which produces simulated fart sounds". Again I could be wrong and will be interested to hear what others have to say on this.

In general, my intention is to get my app out there asap and just try to ride the wave and make as much money and reputation out of each development as possible. I think that timing is everything and if you try to cover all the bases then you risk missing your wave completely. I'd like to think the risk of being sued are very slim and at worst case you might need to provide a full refund. Note that if you do give a refund I don't know if Apple give back their 30% as well or whether you need to refund the full price of the app having only collected 70% of the price in the first instance.

Interesting stuff - I will monitor this thread with interest!!

Cheers,
Craig.

 

[johnnyjibbs]

This is interesting stuff - thanks for your replies so far.

I am interested in setting up a company - but I hadn't thought about being a Sole Trader - this sounds like my best bet - at least in the short term.

I do also have this nervous feeling that if I take too long it will all be "yesterday's thing" and I will have missed the boat. But I've learnt a lot in the last couple of months and my app development is speeding up rapidly. It's actually quite fun as well!

It would be interesting to see the terms of contract - because it may be that Apple takes all the liability. I guess I have some reading up to do...

 

[craig1410]

This is interesting stuff - thanks for your replies so far.

I am interested in setting up a company - but I hadn't thought about being a Sole Trader - this sounds like my best bet - at least in the short term.

I do also have this nervous feeling that if I take too long it will all be "yesterday's thing" and I will have missed the boat. But I've learnt a lot in the last couple of months and my app development is speeding up rapidly. It's actually quite fun as well!

It would be interesting to see the terms of contract - because it may be that Apple takes all the liability. I guess I have some reading up to do...

After I posted earlier I did some googling, looking for terms such as "apple app store liability compensation developer" and couldn't find anything to suggest that developers would be in the firing line.

I did find a few forum postings and more formal articles which suggested that even refunds weren't likely to be forthcoming and that since Apple don't do refunds for music and iPod games they are unlikely to offer them for applications. Any refunds would be at the discretion of the developer who usually tends to supply a website or email address to contact for support queries. However, the expectation was that the developer would only be expected to refund 70% of the purchase price.

Assuming the app store is covered by the sale of goods act then this webpage may be of interest:

http://www.berr.gov.uk/whatwedo/consumers/fact-sheets/page38311.html

The bits which interest me are as follows:

1. Any complaints should be made to the seller, not the manufacturer (unless the seller is the agent of the manufacturer - possible get out clause for Apple although I don't think they would see themselves as anyone's agent...)

2. Damages can only be claimed up to the equivalent of a full refund.

I honestly believe that Apple acting as seller will shield us developers from the bulk of end-user issues and that we will be free to provide full (or more likely partial) refunds at our discretion if feel that we cannot address a customer's complaint via a software update or if we feel that a particular customer is likely to be just too much work to try and please...

Glad to hear that you are getting up to speed with iPhone development - I am working my way through the Pragmatic Programmers iPhone SDK Development PDF book and still find it quite different to the mobile development I have done in the past on Java. Objective-C takes a bit of getting used to and XCode and IB are (so far) proving to be hard work compared to Eclipse which I am pretty familiar with. There are features that I do like about XCode and IB but it really is quite different in many ways.

Anyway, I'll get there I'm sure - I've not started building my actual application yet but it is relatively simple (no it's not iBurb or iHiccup before you ask... ) so I should be able to put it together quite quickly once I gather the necessary skills. At the moment I don't think anyone else has produced an app which does what mine will do so I am keen to get my app out there before there are fifteen similar apps to compete with...

Cheers,
Craig.

 

[johnnyjibbs]

That's good to know. It makes sense that the contract is between the customer and Apple, and I suspect that a refund will normally sort out any complaints.

I think I'll run this one under my name as it's a low key productivity app which - while it is already turning out to be quite polished and good at what it is designed to do - is not going to be a big money-earner I don't think.

Still, it has helped (and still continues to help) familiarise myself not just with the objective-C syntax and basic principles of C and OO programming but of the ins and outs of UIKit and the iPhone UI. It's amazing how quickly you can pick it up actually - last night I implemented a UISearchBar search field and implemented an item search as you type using various methods of NSString and set the resulting data array to a UITableView output with animation effects.

I downloaded the PragProg book and started using that before using some of the more simple projects as a template for my own. I certainly think it is a great way to learn by picking a fairly simple productivity app and then getting to grips with navigation controllers and table views yourself, dipping into the book and the sample applications if and when neccessary.

Anyway, good luck with your application - I've got loats of ideas including a few game ideas that will translate into simple but great games I think so that will be where I'm heading (and probably the time to think about starting my company!) but my primary goal is getting my first app out. It's teaching me lots all the time so, although there's competition, I think it's well enough thought out to hold its own, even make a little bit of money on the side. (It's not an iBurp either )

 

[priyank.ranka]

Hi,
I want to know if a person want to upload an app on appstore does he can upload as an individual or he require to make a Pvt Ltd company or a propriety firm plz do let me know.

 

[dejo]

Hi,
I want to know if a person want to upload an app on appstore does he can upload as an individual or he require to make a Pvt Ltd company or a propriety firm plz do let me know.

You can either sign up as an individual or as a company.

 

[priyank.ranka]

ok well so whn i sign as individual so my name will come in publish by and developed by tag...so its ok right