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A friend and I have started developing an app to put on Apple's app store. Development is going fine, but thinking ahead, we're trying to come up with an easy way to share any revenue coming from our efforts. The app store allows you to deposit your revenue into a single bank account, but there's no easy way to split revenue among several people.

How do (small) dev teams split up revenue on their products, on, and off the app store?

As far as I can tell, banks don't offer an easy way to automatically split the balance on an account 50-50 (or any other percentage, for that matter), especially on a regular basis. So how do teams deal with this? We're not incorporated, and we don't have an official business set up.

We're considering depositing all the money into one of our accounts and manually transferring half the money to the other person, but this isn't sustainable over long periods of time.

Is there a low-cost, sustainable, automatic process for handling these finances?

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Ask your bank how several people can be put on the same account. Of course it will be considered a business account and you'll pay more for it. –  JeffO Nov 22 '11 at 1:51

2 Answers 2

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First things first: You're now operating a business. By most standards, once you start selling a product or service, you're a business. In most jurisdictions, if you aren't properly licensed, you can find yourself in a bit of a legal bind with your local or federal authority, even if you think of yourself as just a bunch of friends working on a common project. Assuming you're in the US, most states have a revenue-based B&O tax or income tax and will expect you to treat yourself as a business, though some states may show no interest in your venture unless it's above a certain amount of annual revenue.

I'll leave that particular detail aside for the moment, but please don't neglect it; realistically, even if you choose a simple sole proprietorship or partnership arrangement, you are a business.

As to a service that automagically transfers your revenues, let's take a step back and identify the problems if there were such a thing. While software is somewhat special in that the cost of goods approaches zero, it's almost impossible to have a zero-expense business. If nothing else, you'll have to pay Apple's annual fee that allows you to list items in their store, and you'll probably have at least a modicum of marketing expenses, probably some web hosting and domain name registrations, and so on. That's assuming you have a pretty simple product that has no other recurring expenses or dependencies on any other service providers.

So, at a minimum, such a service would need to have a mechanism to account for basic expenses. It's not insurmountable, but every company that needs to solve this problem will have different rules for how they account for such expenses, when they pay those bills, etc.

If you're lucky enough to have a predictable revenue stream and minimal expenses, most banks and credit unions will let you automatically transfer a fixed amount per month to a specific payee, especially if everyone in your project is also a customer of that bank. But I can't think of any banks that would do this on a percentage basis. Some banks offer payroll services, and you could perhaps treat the monthly revenue like some companies do sales commissions, but that seems like overengineering, and you'll still have to do a once-per-month bookkeeping effort.

I am not sure why you think manually initiating two transactions a month is "not sustainable over time." If your scale were hundreds, or maybe dozens, of partners, I could see that, but even the consulting company I subcontract through manually cuts and signs checks after receiving monthly invoices for at least a few dozen consultants; it's not that hard to do that, and electronic transfers are even easier. I work as an independent contractor and manually write checks for my attorney, accountant, and other service providers when those expenses come up, and manually initiate other electronic payments; only a couple of ritual automatic payments even enter the picture. I don't see a good justification for automating this kind of work until you have hundreds of transactions a month and it turns into something like a part time job just to deal with it.

Realistically, if two transactions a month is too burdensome, there's nothing stopping you from doing the work once a quarter or once a year. It shouldn't take you more than 30 minutes to figure it out, each time you need to do it.

For one of my other nascent projects, my attorney basically advised my partner and I to set up a three ring binder with minutes of our decisions on how to treat our capitalization of the company, our expenditures, and our decisions on how to allocate profits between us, and he told us to consult an accountant to figure out the consequences of those decisions.

I know this goes against the engineering ethos, but not every problem warrants automation.

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It makes more sense to have a single account, dedicated to the app / business, than to have the revenue split into two accounts.

If you're working on the app together (and are co-owners), then you're a business. Your business will have revenue (at least you hope so), and it will have costs. The costs should come out of the business account. Costs are things like Apple developer registration (is it $300?), software costs, internet costs (hosting, domains), and potentially hardware costs / depreciation.

Many of these costs should come out of the business account before you start talking about splitting up the revenue. Don't forget, you will be liable to pay tax on the money earnt from Apple (I'm not a tax advisor but you'll want to check it out).

If you keep all the business income & expenses channeling through a business account then your tax affairs will be much easier to manage.

When there's some money in the account, and after all the business expenses have been paid, then you can draw down some of the profits.

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Kirk, I appreciate the response, but, a) we're not a registered business, so we can't sign up for a business dev account with Apple, and b) having one business account still doesn't solve our problem of actually splitting any revenues we do make. –  itaiferber Nov 22 '11 at 2:52

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