Setting up an RL Company for an SL Business

I have started an SL business with a business partner who is from the Netherlands. I live in Australia. This is a serious business venture, so we do need to set up an RL business for it. We will primarily be paid either in Euros or US Dollars, so we will also need a joint bank account for our business.

Because we live in two different countries, and effectively operate in a third (whether it's the USA, because the servers are there, or SL - a separate universe really), the company would be international. The one thing I discovered is that the company must be set up in the country where the decisions are made! Well..in our case we make joint decisions, so where exactly would that be?

So far, it has been impossible to find information on what our legal options are. This situation doesn't appear to have been considered generally. Our thoughts are that perhaps setting up a company in a low-tax country would be the way to go, and then what we receive as profits/salary from the company would be taxed according to the laws of our respective countries. I don't know what the feasibility of that is, though.

I'd appreciate it if there is someone here that either has been through this situation or who actually knows the relevant laws, who could give me some advice or feedback on their experience.

Thanks in advance.

The view I would have is that if your business venture is wholly based in Second Life and has no external first life counterparty, apart from the transmission of funds the straightforward way would be to adopt the attitude that the business exists in Second Life and all business decisions are taken within Second Life.

You and your partner can form a Second Life Group to allow for an agreed division of revenue, as an alternative I have seen a scripted device that will allow people to programme revenue stream as a percentage between named avatars.

When and if revenue via Linden dollars is taken out and converted into whatever first life currency you both deem appropriate an initial view is that it should be treated as income in your country of residence, ordinary resident, and country of domain. (R,OR,D)

It may be possible for you both to form a limited company or partnership, and have it registered in a third country if that is legal, tax effective, and cost effective for both your countries of R, OR, D.

I would suggest that extreme care needs to be taken in choosing an off shore country, make sure it is a safe country in terms of political stability and financial regulation. Possible examples include The Isle Of Man and The Channel Islands.

You would need to consider taking first life accountancy and/or legal advice as all sorts of other issues become relevant in these circumstances. Examples include share protection and cross option agreements; death illness and partnership cover to name but a few.

I would suggest you both adopt an initial "common sense" attitude and in the beginning "trial" the business within Second Life to see if it becomes successful.

Finally there are whole loads of issues I have not even touched on as in some circumstances real life law has yet to catch up with virtual worlds. Examples include the concept of eminent domain, in world Second Life taxation, and your legal perceived location.

On this point I am giving serious consideration to starting a Second and First Life business based around these issues so if I can help further you are welcome to IM me within Second Life

Regards

John Horner

Thanks for your response, John. The suggestion you made is one we have considered. We do have a group for our business, and it would certainly have been preferable if we were able to use it as our primary business structure. Unfortunately, apart from the ability for money paid into the group to automatically be split between us, there is no real provision for businesses in the way groups have been set up. The fact is, we really need to be able to keep money in the group, and then be able to draw it out to pay for business expenses within SL as required, especially in the initial stages. As it stands, this cannot be done.

In addition to this, we have RL expenses that the business needs to pay for, such as the cost of a website, amongst other things. It would be problematic if any Linden Dollars that were converted into US Dollars were seen as profit for either of us, because clearly it wouldn't be. That is the primary reason we felt there was a need for an RL business structure.

I will try to contact you in-world, when my partner and I are both online. We are quite willing to pay for helpful advice, ideally within SL, given our different RL locations (although our resources are somewhat limited at this stage, given the fact that we haven't made any money yet).