US Corporation Strategy for Game Companies

US Subsidiary Strategy for Gaming Companies — Benefits of Establishing a US Entity for Mobile/PC Game Developers

Korean gaming companies are accelerating their global expansion. Mobile games are already targeting the worldwide market through the App Store and Google Play, while PC games are securing global users primarily through Steam.

However, as global revenue grows, one issue becomes clear: The Korean corporate structure has limitations in operating global business efficiently.

I will outline the reasons why a gaming company should establish a US subsidiary and how to structure it in practice.

Why Gaming Companies Need a US Subsidiary

1. Contracts with Global Publishers and Partners

Most global publishers (Nexon America, Krafton USA, 2K, EA, etc.) and counterparties for IP licensing agreements prefer to contract with a US entity. Contracts are frequently governed by US law, and often require jurisdiction in US courts in the event of a dispute.

Contracting under a Korean entity name can put you in a disadvantageous position during negotiations, or lead the counterparty to be reluctant to enter into the contract at all.

2. Receiving Advances from US Publishers

When a publisher pays an advance to a developer, US publishers often prefer using a US corporate bank account. Receiving funds in a Korean corporate account can complicate foreign exchange regulations and tax processing.

3. Collecting Revenue from Steam and the Epic Games Store

Steam (Valve) allows you to settle revenue into a US corporate bank account regardless of where your company is registered. By using an EIN and Form W-8BEN-E, you can set up a structure to benefit from withholding tax exemptions or treaty-reduced rates.

If you receive Steam revenue as a Korean entity, a 30% withholding tax is standard.

4. Direct Marketing in the US Gaming Market

The US gaming market is the largest in the world. Having a US entity provides clear legal status as a contracting party when signing with local marketing agencies, engaging influencers, or participating in game shows (GDC, E3, etc.).

Structural Usage for Gaming Companies with a US Subsidiary

Structure 1. IP Holding Structure

In this structure, the game IP (Intellectual Property) is held by the US entity, and the Korean developer licenses the IP from the US entity to perform development.

[Delaware C-Corp] — IP holding, global publishing

↓

Licensing Agreement (Royalty payments)

[Korean Entity] — Game development, Korean operations

Advantages of this structure:

Note, however, that according to Transfer Pricing regulations, royalty rates must be set on an "Arm's Length" basis, and documentation supporting this must be maintained.

Structure 2. Global Publishing Subsidiary

In this structure, development occurs in Korea, while the US subsidiary handles global publishing. Revenue is collected by the US subsidiary, and development service fees are paid to the Korean entity.

[Delaware C-Corp] — Global revenue collection, marketing

↓

Payment of development service fees

[Korean Entity] — Game development

This structure allows for efficient handling of withholding tax issues since the US subsidiary directly collects revenue from global platforms (Steam, App Store, Google Play).

Tax Processing by Platform

Tax Issues Gaming Companies Should Pay Special Attention To

GILTI (Global Intangible Low-Taxed Income)

When a US C-Corp receives IP-related income from a foreign subsidiary (such as a Korean corporation), there's potential for additional taxation under GILTI rules. You must review the GILTI implications when designing your IP structure.

State Tax Issues

You may establish economic nexus in states where you provide gaming services. If you generate revenue above a certain threshold in a specific state, you may incur corporate income tax or sales tax filing obligations in that state.

Sales tax regulations for digital goods (games, DLC, subscriptions, etc.) vary by state. Rather than reviewing all 50 states individually, it's more practical to prioritize review of states with higher revenue.

App Store Fee Treatment

Apple/Google take 30% in fees and remit the remaining 70% to you. How you handle the tax treatment of that 70% and how you deduct the 30% fee can significantly affect your overall tax burden.

Impact of US Corporation Formation on Gaming Company VC Investment

VCs investing in gaming companies (a16z Games, Andreessen Horowitz, Bitkraft, etc.) typically only invest in Delaware C-Corps. Gaming-focused VCs in particular scrutinize IP structure and publishing structure very carefully during investment due diligence.

What VCs Look for in Gaming Company Investment Review:

• Whether IP is clearly vested in the corporation's name

• How exclusive clauses and IP reversion clauses in publishing agreements are structured

• Whether developer employment contracts contain IP assignment provisions

• Whether cross-border transaction structures comply with transfer pricing regulations

If these items are not properly documented, they can become a problem during investment due diligence.

In Closing

Gaming is an IP business. Where and in what structure you hold your IP affects both global monetization and investor relations.

A US corporation is more than just a foreign bank account for game companies. It becomes the entity through which global publishing happens, the foundation for IP protection, and the gateway to global investment.

If you're interested in learning more about US corporation structure design tailored for gaming companies, reach out to Arclow.

🔗 arclow.com