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My friend and I own a website which hosts fan-created content for a video game (character skins, etc.), and make around 800$/month in ad revenue, which we're splitting 50/50. To thank the people uploading content to our site, and to encourage them to create and upload more amazing content, we'd like to start sharing some of that revenue with the content creators.

I live in Canada, and my friend lives in Germany. The website is hosted on Amazon AWS. We'd like to use PayPal to send the money to content creators.

Are there any legal steps we need to take before starting to pay the content creators?

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    Yes; talk to a tax lawyer about your and the content creators' tax liabilities. – BlueDogRanch Aug 2 at 20:35
  • And check your laws on contests, if you hinge your payouts to performance of the skin. – Trish Aug 3 at 12:02
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Yes

I will assume that your business is presently compliant with the law - you have the right licences, insurances, report and pay the correct taxes etc.

Depending on the arrangement between you and the people you pay they might be:

  • contractors,
  • employees,
  • prize winners,
  • partners.

You need to work out which because different laws give different rights and responsibilities to them.

You need to establish your responsibility for things like tax withholding and reporting (in your and the payees country/state), both income and value added. Workers compensation insurance and work health and safety responsibilities (also in both jurisdictions). Public risk and professional indemnity insurance if applicable. Who owns IP. More, generally, you need to allocate risks between you in the contract.

Your lawyer and accountant can help with all of this.

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