I'm in the process of setting up a company, most likely as a sole proprietorship, where I contract with developers to build the iPhone apps and profit-share with them. My question arises about taxes. For those of you already in bed with the App Store...does Apple withhold any taxes from your royalty checks? Probably not, but I just want to make sure. If anyone else develops as part of a group, how do you handle taxes/payment? From what I can tell (and I'll be speaking with a lawyer soon I hope, but I wanted to get a head start), on any income I get from the App Store, I would pay my normal income tax rate PLUS the 15.2% self employment tax. Yikes. Can I deduct what I pay to my contractors as a business expense so I'm not taxed on their income too? If not, I'm not sure I'd have hardly anything left over for myself! I've been reading tax law for two days and my eyes are glazing over. I just want to know how other multi-developer groups are structured and how they handle this. Thanks.