bobc@attctc.Dallas.TX.US (Bob Calbridge) (01/08/90)
Okay, I've gotten the situation on the copyright straightened out. Now on to the meat of the problem. Does anyone know what the legal implications are of authoring a shareware product are? For instance, does one need the set them- selves up as a business? I assume that you are required to report your income from this to the IRS. I ask these questions because I don't see too many shareware products that indicate that they keep track of who, in fact, is a registered user. There are some, of course. Notably these are the ones that charge in the $25 and up range. Given that they have a good user base it wouldn't be to unreasonable to promise upgrades for minimal fees. Upgrades mean having to notify the users and this means expense. This also means having to have a databse on these users. With a product that initially costs upwards of $25 a $5 fee for upgrade seems pretty reasonable. However if one were to charge a minimal amount, say $5 or $10, then maintaining business type records for upgrades and the expense of notification would seem a bit extreme. also the cost of supplying an upgrade would be a major portion of the original cost. What it boils down to is that I hope to release a program soon that I feel is worth $10-15. I don't want to make promises as to cost of upgrades but I feel that at least one upgrade will be forthcoming. Others will depend on response to the original and suggestions from the users. What would be an appropriate method of handling this and still be fair to original purchasers? Thanks, Bob -- -=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=- = More stupid questions available on request from = - bobc@attctc Your humble servant (real humble) - =-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=
alien@cpoint.UUCP (Alien Wells) (01/10/90)
In article <10889@attctc.Dallas.TX.US> bobc@attctc.Dallas.TX.US (Bob Calbridge) writes: >Does anyone know what the legal implications are of >authoring a shareware product are? For instance, does one need the set them- >selves up as a business? I assume that you are required to report your >income from this to the IRS. This really has nothing to do with shareware, all the same issues arise if you start a home catering business. I strongly recommend that you do not take the advice of Usenet (myself included) as gospel, go out and get some books on the subject or get the advice of an accountant. The latter is probably wise, since you will need accounting advice to line up all the paperwork and tax work anyway. Here is fundamentally how it works. You have three basic options: - Run the thing yourself and just call everything you make income. o unlimited personal liability o profits considered personal income o easiest to do (least paperwork, etc) - Run the thing as a sole proprietorship. o unlimited personal liability o profits consided part of business o paperwork is fairly simple - Run the thing as a corporation o all liability is corporate o profits considered part of business o paperwork is more complex The issue of liability is 'what happens if the company runs up bills it can't pay'. This can be out of poor business practices, accidents, law suits, etc. A corporation simply goes chapter 11. A sole proprietorship or individual setup means that you go with it. All personal assets are fair game (which is why so many contractors put all their assets in their wife's name). Other than liability, the main advantage of being a company or corporation is to play tax games. Some things become legitimate business expenses that would be taxable to an individual. In addition, through the use of salary and such you can play games with where the profits go (you or the company) to play tax minimization games (beware, dividends are doubly taxed). Get the advice of an accountant. -- --------| With Altzheimer's Disease, every day is a new day! Alien | - Earl McKennon --------| decvax!frog!cpoint!alien bu-cs!mirror!frog!cpoint!alien
pipkins@qmsseq.imagen.com (Jeff Pipkins) (01/11/90)
In article <3412@cpoint.UUCP> alien@cpoint.UUCP (Alien Wells) writes: >In article <10889@attctc.Dallas.TX.US> bobc@attctc.Dallas.TX.US (Bob Calbridge) writes: >>Does anyone know what the legal implications are of >>authoring a shareware product are? For instance, does one need the set them- >>selves up as a business? [...] > >This really has nothing to do with shareware, all the same issues arise if you >start a home catering business. I strongly recommend that you [...] get the >advice of an accountant. [...] May I suggest that you contact your local area chamber of commerce? They are probably the single best place to start, and it's free. Also, it's a good idea to talk to someone who has started their own business, no matter what kind it is.
cs4g6ag@maccs.dcss.mcmaster.ca (Stephen M. Dunn) (01/12/90)
In article <10889@attctc.Dallas.TX.US> bobc@attctc.Dallas.TX.US (Bob Calbridge) writes:
$Okay, I've gotten the situation on the copyright straightened out. Now on to
$the meat of the problem. Does anyone know what the legal implications are of
$authoring a shareware product are? For instance, does one need the set them-
$selves up as a business? I assume that you are required to report your
$income from this to the IRS.
Well, just like any other business enterprise, you can run a shareware
business in one of many ways. You can be just a person doing it, in which
case you have to include the income in your income tax calculations. You
can form a partnership, or you can incorporate. If you need more information
on this, I suggest you try to get some free advice from one of your friends
who happens to be a chartered accountant :-)
$I ask these questions because I don't see too many shareware products that
$indicate that they keep track of who, in fact, is a registered user. There
$are some, of course. Notably these are the ones that charge in the $25 and
$up range. Given that they have a good user base it wouldn't be to unreasonable
$to promise upgrades for minimal fees. Upgrades mean having to notify the
$users and this means expense. This also means having to have a databse on
$these users. With a product that initially costs upwards of $25 a $5 fee for
$upgrade seems pretty reasonable. However if one were to charge a minimal
$amount, say $5 or $10, then maintaining business type records for upgrades and
$the expense of notification would seem a bit extreme. also the cost of supplying
$an upgrade would be a major portion of the original cost.
Please note carefully the words, "Given that they ahve a good user base",
in the above paragraph. Keep that in mind as you read my next paragraphs.
Speaking from about 1.5 years of experience, if you want to distribute
something as shareware, don't count on making much money from it. I ahve
two programs that I've sent to some of the shareware/public domain distribution
houses in the States, posted on Canada Remote Systems (a well-known, cross-
Canada BBS), and put them on all sorts of BBSs around Hamilton and a couple
in Toronto. I'm still looking at several other places to send my programs
to for distribution. In this time, I have received exactly two registrations,
one for $20 CDN, and one for $20 US. My costs have been quite small, if you
don't include anything for my time - around $25 CDN. Net profit over two
years - about $20. Legally, I'm required to report that to Revenue Canada.
Ha. Right.
As for keeping records, I spent an hour or two writing a very, very
simple suite of programs in dBASE to keep track of registrations and of
my revenues and expenses. So far, the revenues and expenses file has
about eight expenses and those two revenues, and the registrations file
has three entreis (the two mentioned above, plus a dummy registration
number indicating that it's a copy that originated from me).
One thing that tends to bother me is that one of my programs made the
"top seller" list of one of those shareware/PD distribution places this
summer. Do you think I've received any money from people who bought it
from them? No. That program generated one registration, that from Canada
and about two weeks after I posted it on CRS. And it isn't because it's
a lousy program, either ... I've received quite a few comments from people
I've worked with or from others (and from people who register - all two of
them), and for both programs I have been told they look very professional
and are quite useful.
My policy, up to now, has been that I send to places the most recent
version of my programs that I have, since sending a program with lots of
features is more likely to attract people's attention and liking. I
request a donation and state that for any donation of $20 Canadian or
more, I will send out a copy of the next version when it becomes available.
Obviously, this isn't working. I'm just putting the finishing touches onto
the latest version of one of my programs, and it should be ready around the
end of the month (or the middle of February at the latest, depending on
how school goes). This time, the only version that's going out of my
possession for free is a demonstration version with all the features but
with very restricted file sizes. The documentation expresses my
frustration very clearly and strongly encourages people to donate. I didn't
want to have to take this step, as it isn't in the true spirit of shareware,
but I feel forced to by people who consider shareware to be the same as
PD - that is, free for all to take and use with no regard for the hours
and hours of work that the author(s) put into the project. So far, with
the net profit I've made from the two programs, I figure I've made maybe
10 cents an hour - _maybe_.
So, for those of you who are considering releasing programs as
shareware, I have the following to say: It's a wonderful concept, but
with human nature the way it is, don't count on getting much, or any,
money out of it.
---------------------------------------------------------------------------
PLUG FOR MY PROGRAMS - TUNE OUT IF YOU AREN'T INTERESTED
---------------------------------------------------------------------------
One of them is called SCHEDULE, and is a daily schedule manager. It
allows you to have a 'skeleton schedule' of events that happen every
week, and these automatically appear in your main schedule. You can
then modify your main schedule as you wish. It also has a separate notepad
for each day and month, and one notepad that you can use for whatever you
want (the next version, nearing release, has as many such notepads as you
want, each with a title). You can view a graphical display of a week's
events or, in the new version, see them in detail. On-line help is
available, along with a good-sized .DOC file. The new version is
network-ready; both versions allow multiple users to store their information
in one file without any fear of one person's information getting mixed in
with another's.
The other is called PERSONAL, and is a phone/address manager program.
You can find people by using either their first or last name (and you don't
have to spell it exactly, either), or using another key field which you can
use for any purpose you want (I've used it, for example, to separate the
people in my file according to what department they worked in). There is
a ten-line notepad on each person that you can use for whatever you want.
On-line help is available, along with about a 40K .DOC file; it's network-
ready, and allows multiple users to store their information in one file etc.
as with SCHEDULE.
If you'd like a copy of one of them emailed to you, let me know; they'll
come in several parts, though, because some nodes won't pass email messages
over a certain size. Please specify:
PERSONAL
SCHEDULE 1.30 (the old version)
SCHEDULE 1.4D (the new one, but a demo version with restricted file sizes;
not available for a few weeks)
*end of commercial*
--
Stephen M. Dunn cs4g6ag@maccs.dcss.mcmaster.ca
<std_disclaimer.h> = "\nI'm only an undergraduate!!!\n";
****************************************************************************
If it's true that love is only a game//Well, then I can play pretendcs4g6ag@maccs.dcss.mcmaster.ca (Stephen M. Dunn) (01/12/90)
In article <3412@cpoint.UUCP> alien@cpoint.UUCP (Alien Wells) writes:
$ - Run the thing as a corporation
$ o all liability is corporate
Well, in theory. If you need a loan, though, most banks (at least
here in Canada, and likely in the States too) will require a personal
guarantee for the loan, defeating a large part of this protection. I
know you can scream that "This isn't fair", but you're pretty well
stuck with it.
Another thing about incorporation: It costs $$$. Nothing out-
rageous, it can be done for around $500 in Canada (less if you have
a friend who can help you out), but it's still a lot more than many
shareware authors make from their products. Yes, I know that there
are some success stories (Quicksoft, Buttonware, Datastorm), but
there are lots and lots of shareware programs out there that don't
generate any worthwhile revenue. See my other post if you want to
hear me write at great length (well, 130 lines or so) on the
subject.
--
Stephen M. Dunn cs4g6ag@maccs.dcss.mcmaster.ca
<std_disclaimer.h> = "\nI'm only an undergraduate!!!\n";
****************************************************************************
If it's true that love is only a game//Well, then I can play pretendwarren@.cs.pdx.edu (Warren Harrison) (01/13/90)
In article <3412@cpoint.UUCP> alien@cpoint.UUCP (Alien Wells) writes: >In article <10889@attctc.Dallas.TX.US> bobc@attctc.Dallas.TX.US (Bob Calbridge) writes: >>Does anyone know what the legal implications are of >>authoring a shareware product are? For instance, does one need the set them- >>selves up as a business? I assume that you are required to report your >>income from this to the IRS. > >Other than liability, the main advantage of being a company or corporation >is to play tax games. Some things become legitimate business expenses that >would be taxable to an individual. In addition, through the use of salary >and such you can play games with where the profits go (you or the company) >to play tax minimization games (beware, dividends are doubly taxed). The double taxation problem can be effectively removed by becoming a subchapter S corporation. I found one of those books that you get at the bookstores on how to set up your own corporation to be quite useful. Make sure you get one for your own state (ie, not a generic one for the whole world since state regulations vary). This may not be your cup of tea, but with the help of such a book, I was able to start up an S-Corp and file all the needed papers myself (Oregon) without the aid of an attorney. Since then I have had an attorney review the papers I filed and he could find nothing amiss. If you plan on having more than one shareholder (yourself), then a $100 for an attorney would be a good investment, since the major sticky issues come up if you have to plan for multiple shareholders. > >Get the advice of an accountant. It's probably not a bad idea, but based on my experience with shareware it'll be a long time before you have it paid for. On the other hand, if you do make a lot of money and do some things wrong, it could be an expensive mistake. ========================================================================== Warren Harrison warren@cs.pdx.edu Department of Computer Science 503/725-3108 Portland State University
bcw@rti.UUCP (Bruce Wright) (01/13/90)
In article <25AD7AFC.25749@maccs.dcss.mcmaster.ca>, cs4g6ag@maccs.dcss.mcmaster.ca (Stephen M. Dunn) writes: > In article <3412@cpoint.UUCP> alien@cpoint.UUCP (Alien Wells) writes: > $ - Run the thing as a corporation > $ o all liability is corporate > > Well, in theory. If you need a loan, though, most banks (at least > here in Canada, and likely in the States too) will require a personal > guarantee for the loan, defeating a large part of this protection. I > know you can scream that "This isn't fair", but you're pretty well > stuck with it. Banks require substantial evidence that you can repay the loan. In practice, if the company has been going for several years and is consistently profitable, and if its projections, existing liabilities and assets look OK, a bank will lend money without a personal guarantee. In practice new companies can't qualify under these rules, so you do have to give some sort of personal guarantee or you have to find financing elsewhere (banks are *extremely* conservative ... but there are lots of other ways to finance a business). The major benefit of limited liability is not to limit loan liability - it's to limit lawsuit liability. It is possible for a lawsuit to find a company owner personally responsible for damages caused by the company, but it is *much* harder to collect anything if the company is a corporation. Not impossible though - a corporation isn't a license for fraud, and if the court finds that a corporation is a sham created in order to commit fraud, they may assess substantial punitive damages. Bruce C. Wright