Mobile Growth Hackers San Diego Message Board › How much is selling an app going to cost me?

How much is selling an app going to cost me?

Brian H.
bjhanifin
Santee, CA
Post #: 184
Originally I thought the answer was straightforward:

  • Developer Program Fees: Apple Developer Program at $99/yr.
  • Training materials: books, videos, etc.
  • Software: Keynote and templates to create an app mockup.

Now that I have gotten the first records from my database to display in the interface I find myself thinking about the complications that will arise once I start selling my app. My questions include:

  • Do I have to get a business license to sell my app?
  • Could I lose my house if someone were to sue over the app? And would selling it under a fictitious business name protect my family and house?

I am a stay-at-home dad, and I honestly want to create this app for the fun and challenge of it. The app I am making has an extremely limited audience, so I feel like I would be a really lucky guy if I could at least sell enough apps to cover the annual expenses related to selling the app (Apple Developer Program and any business costs).

I would like to know what additional costs there are that I am missing (not including marketing, and getting someone to design an icon). I don't want to make a living doing this, I just have an app that would be useful to a select group of people and I want to bring it to them. Heck, I would give it away if it weren't for the $99/yr cost from Apple. :-(
Mike H.
mikeho1999
San Diego, CA
Post #: 3
Brian, first of all, congrats on getting this far! Getting over the first few hurdles of setting up your Xcode project, and having it talk to a data store (Core Data, SQLite or otherwise), etc. is definitely one of the more frustrating parts of early development... but once you're able to actually start interacting and playing with the data and making some more intriguing interfaces for it, it definitely starts to get a lot more fun!

Now... in terms of your specific questions, I have some thoughts. But please note: I am NOT a lawyer. Everything I'm writing below is just from my own personal experience of co-founding a startup as well as from being a full-time freelance software developer. So please take what I say with a grain of salt, and if you need a more legally-sound opinion, I would highly recommend that you consult an attorney.

(1) There is nothing I am aware of at the state or federal level that would require you to get a business license. However, there *may* be city and/or county regulations that could require it, but my guess is that it would be highly unlikely. The startup I co-founded several years ago was a pure internet startup that had advertising based revenue (e.g. we had no tangible goods we were selling). However, after we got funding, we opened one of our offices in Mountain View, CA. Technically, Mountain View had a city ordinance that required any company "which operated in Mountain View" to pay for a MV Business License.

My understanding is that this fee was mostly supposed to apply to the retail stores in MV (which we clearly were not)... and we probably could've parsed the wording of the law and had our lawyer make an argument saying that we were exempt. (Moreover, this is usually something that Mountain View really doesn't enforce -- they really don't have the manpower to do so -- so we probably could've just gotten away with it anyway.)

However, given that the license was just $100 per year, and given that our lawyer was... well... a lot more than $100 per year, we figured it wasn't worth the hassle and just forked the money over.

Plus, as a bonus we got a cool little MV Business License sticker that we could place on our door. =)

Anyway, bottom line is -- if you want to be meticulous about it, you should probably check with the city and county you reside in... but in all likelihood, it probably doesn't really matter.

(2) This is a much bigger question. Unfortunately, in our society, people like to sue. I've already been involved with several lawsuits in the startup we founded.

And here's the unfortunate kicker: it doesn't matter if the lawsuit even has any merit. The lawsuit itself will take up a lot of time (if it's in small claims) and could take up a lot of money (if you end up lawyering up to fight it).

Legally, my understanding is "yes": you could lose your house. If you publish an app and the app causes some major damage / harm to an individual, if an individual sues, s/he would be suing you directly. Your personal assets would be at risk. Selling it under a separate business name (known as "DBA" or "Doing Business As") doesn't change it at all. After all, the legal entity which the app is being produced is still you, just under a different name.

So if you truly want to have liability protection, then the first step (at least in California) would be to set up a separate LLC. An LLC is a completely separate legal entity... and if you conduct business via your LLC (e.g. your developer account is purchased by the LLC, the LLC is the one with its own bank account which stores the monetary assets of the company, etc.), then according to my understanding of the law, if the application is the subject of a lawsuit, the litigant can only go after the LLC, and not you.

The second step would be conducting all of your business thru the LLC to ensure that you're not doing what's called "Piercing the Veil" of the LLC. There are some good books and resources that can help explain this further (some of the books by Nolo would be worth looking into, e.g.: http://www.nolo.com/p...­)

Assuming that you only have limited assets in the LLC (e.g. likely just the app itself, as well as the source code for the app, and maybe a limited amount of cash), then that's all that they can go for. They cannot go after you personally, or your house, family, etc.

Unfortunately, an LLC is not cheap when trying to do this as a hobby. It costs about $100 or so in various fees with the State of California up-front. But you then have to pay an additional $800 per year in tax, regardless of whether or not you are making any money.

At the end of the day, it's all about risk and risk protection. If forced to make a guess, I would say that for probably 80% of the apps being developed like yours (e.g. as a hobbyist, not a full-time iOS developer, etc.), it is being sold directly by the individual and not through something like an LLC. The risk is manageable because you would assume that (a) not a whole lot of people are going to download it and (b) the chances that one of those people is a total **** and decides to sue you is pretty slim.

However, if you are very concerned about it and if you are all about risk mitigation, and/or the nature / subject matter of your app is actually one that could expose itself to being the subject of a lawsuit, then I would recommend looking into the LLC approach.

Best of luck / have fun!

(Full Disclosure: as a full time independent/freelance software engineer, I conduct all of my business through my single-person LLC)
Brian H.
bjhanifin
Santee, CA
Post #: 185
Mike,

Thank you for taking the time to offer your advice and experience! I might do some more research later, but it sounds like it would be pointless for me to do anything but create an LLC, and considering my apps limited audience I would have to charge like $50 a pop to hope to break even. LOL.

I am a nervous type of person that never likes to take risks. For example I don't like giving my money away to casinos (some people refer to it as the chance to win big money). And I just can't see myself ever risking money on a physical business (as much as I dream about running a Pinball Museum someday). But this app is something I really feel passionate about, and will give me something constructive to do. It might make sense to cross my fingers and just hope for the best.

My background:
I was a web developer for 9 years, mostly custom ASP development work. In the past 5 years of being a stay-at-home parent I have really missed programming as a creative outlet. It was very intimidating to get back into programming, after working through lessons for several weeks I finally got over my nerves and just started coding, searching google, then coding some more. :-)
Sal Q.
user 12055537
San Diego, CA
Post #: 6
Hi Brian,

I asked a similar question recently for San Diego specifically. How did things work out for you?

Regards,
Sal
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