Bank accounts and taxes

Our first payday

Picture Garden Defense's first month in the stores. AdMob says the studio has earned $112. AdMob pays out once earnings reach US$100, so Google is ready to pay. Where should the money go?

Not into anyone's personal account. It goes into a business bank account: an account in the company's name. Google Play, the App Store and AdMob all pay straight into it.

Opening the account

• Company papersThe bank asks for the registration documents that prove the company exists.
• A tax numberMost countries give a company its own tax ID number, a bit like an ID card for taxes.
• An adult who signsOpening an account is a contract, so the bank needs an adult from the company to show ID and sign. You can go along and ask questions.

Once it is open, we enter its details in Google Play Console, App Store Connect and AdMob, so they know where to send our money.

Keep studio money separate

• Studio accountMoney from games and ads comes in. Studio costs, like store fees and tools, go out.
• Personal moneyYour birthday money and allowance stay yours, in a different place.
• See the truthWith one account just for the studio, we can see at a glance whether the games really earn money.
• Keep the shield strongA company's shield, called limited liability, keeps the owners' own savings safe from studio debts. Mixing family money and studio money is one of the ways it can crack.

Revenue, costs and profit

Three words every business uses:

• Revenue: all the money coming in, like game sales and ad money. Some people call it sales.
• Costs (or expenses): money going out to run the studio, like developer fees and tools.
• Profit: what is left. Revenue minus costs. If costs are bigger, it is a loss.

Big revenue does not mean big profit. A studio can earn $10,000 and still lose money if it spends $12,000.

Bolt says: Some costs repeat and some don't. The Apple Developer Program is US$99 every year. Google Play registration is US$25, just once.

Tax on profit

A tax is money paid to the government. It pays for things everyone uses, like roads, schools and hospitals.

In most countries a business pays income tax on its profit, not its revenue. So every real cost lowers the amount the tax is worked out on. Depending on the type of company, the company pays the tax itself, or the profit counts as the owners' income on their own tax returns. Many studios work with an accountant, a money expert who prepares the tax forms.

Keeping the books

• ReceiptsA receipt proves what we paid, when, and for what. Save one for every fee, domain bill and tool.
• Store reportsGoogle Play, the App Store and AdMob send monthly reports of what we earned and what they kept.
• Sales taxMany countries add a tax to what players buy (VAT or sales tax). The big stores usually collect and pay it for us. On our own website, we handle it (the Sales tax and VAT lesson, later in this stage, explains how).
• Keep them for yearsTax offices can ask to see records years later. How long to keep them depends on the country.

Bookkeeping means writing down every bit of money in and out, with proof.

Next: taking card payments

We have a company, a bank account and a way to track every dollar. Income tax is worked out on our profit once a year.

The stores and AdMob pay into this account for us. On our own website there is no store in between, so next we take card payments ourselves, with Stripe. Later in this stage comes a second kind of tax, one that touches every single sale before the money even reaches us: sales tax and VAT.

Bolt says: Up next: payments with Stripe. Then webhooks, currencies, and sales tax and VAT.