ABSTRACT
A business entity is the structure that your endeavor will take. Most American business owners choose entities that are called flow-through or pass-through entities. This means that your share of income, deductions, and other items that the entity generates or incurs will flow right to you, the taxpayer, where you must pay federal income taxes at the individual level rather than the business level. Switching from being a non-employer to an employer, and the other way around, are also valid reasons for winding down and starting up again. Self-employment tax won’t be your only concern, though. Most indie developers tend to reinvest significant profits. A game that sells well easily self-funds the next game. But because sole proprietorships are taxed entirely on the profit you netted, this means that you’ll be in for some disappointment if you were purposely conservative with your take-home drawings.
