I'm creating a KickStarter to raise enough funds to take 3 months off from my full-time job and finish an iOS game that I've been working on for about 3 years now. Put simply, all I need is about $35,000 (after KickStarter and Amazon fees, taxes, and paying for backer rewards). $35k will cover everything my income normally would--health insurance, house, car, bills, etc.--and allow me to invest some in equipment, legal, accounting, etc..
I've been reading that, if I choose to file as a sole-proprietorship or as an LLC, I'll have to pay federal and state taxes just as if it were income from my primary employment. As far as I can tell, this means I should account for taxes being in the area of about 35% of the TOTAL amount raised via the KickStarter.
KickStarter takes 5% of the total amount raised as their fee. Amazon takes the same. That's another 10% gone, right off the top.
After all that, I'll still need to cover the cost of backer rewards out of whatever's left.
Then, once all that has been accounted for, I'll have whatever's left over to invest in equipment and pay my bills and feed my family for 3 months.
On any given day, you can find dozens of KickStarters where developers claim they can make an iOS game for $5000, $10,000, and some for even less. It makes me think that these guys must be coming up with a number that just "sounds good" and throwing a KickStarter up.
All of the above is to give you a background on how I've come up with the numbers below. Am I doing something wrong?
Let's say I start my goal at $230,000. (Wayyy more than I thought I'd be asking for.)
Taxes should be in the area of 35% of that, which is $80,500.
230,000 - 80,500 = $149,500
The KickStarter fee (on the full raised amount of $230,000) is $11,500.
The Amazon fee is the same: $11,500.
$149,500 - 11,500 - 11,500 = $126,500
For each backer reward, I've marked up the donation tier by 150%. In other words, the actual, out-of-pocket cost of each backer reward makes up 40% of the total amount received for that reward tier. (If I pay $20 to have a shirt made and shipped to the backer, then I make that shirt available to backers who donate $50.)
So if I've raise $230,000, I'll have to give back $92,000 in backer rewards.
$126,500 - 92,000 = $34,500
So that leaves me with just a little shy of the $35,000 I need to pay for my expenses for 3 months...out of $230,000!
So, what do these $5,000 iOS guys know that I don't?
It seems to me that the only solution to lowering the overall funding goal is to raise the mark-up on each item to about 400%, about 5 times what the actual cost is, but that means asking $72 for a coffee mug, $200 for a t-shirt, and $300 for a hoodie. I fear that these numbers are just too high. Are any of these costs tax-deductible???
Any help you guys can offer would be much appreciated. Thanks.
By the way, I'm in California.