If we assume their previous income was covering their expenses (a reasonable assumption for a 18 year old company), the $7M from Steam would be pure profit.

Now I'm not sure about Washington (?) tax rates, but just for comparison: in Germany you would have paid about 35% taxes on company profits, and another 20% income/capital gains taxes if you just pay it all out to the owners. Not that this is the smartest choice, at that point you play games like keeping money in the company to spend on a company car. But if you don't care about optimizing your taxes 50% doesn't seem unreasonable.

Well when they want to withdraw the money eventually they’d get taxed right?

In the US, only if your corporation is a "C" corporation. For an "S" corporation, the income, distributed or undistributed, is treated as income on the individual tax returns of the owners. So if you and a partner own an S corporation, and you make $800k in net income and pay yourselves $100,000 in salary each, you would pay yourselves salaries (SS & Medicare tax on that portion) and then income tax on the net income + salary, so you would owe about $156,000 in income tax, plus whatever your state charges, and you would owe about $8,000 in SS+Medicare (because the company has already paid the other half). Rough numbers, of course. This would asymptotically approach 37% of income as your income increases (plus state tax).

Sketchy dudes talk about it but can't actually provide solid examples and numbers that don't involve things like "invest all your profits in a failed startup so that it's all a business expense".

Look at the actual income tax paid by professional athletes; if anyone knew how to do it it would be them.

The thing is that this is the first time they got this kind of money. And it was unexpected, since Dwarf Fortress sold their 8 month objective by the second week. So they weren't in a position of knowing who and how to call that someone.

> With this kind of money, you can absolutely get someone to do all the work you need to make your tax mostly disappear.

Taxes can be deferred or distributed across a number of years with various structures if you’re willing to put that money into a business structure and pay it out to yourself over time (which they absolutely should)

But there is no magic wand someone can wave to get the money into your bank account and make the tax bill disappear without other consequences and/or breaking the law.

Note that in these situations, people absolutely will come out of the woodwork and try to talk you into various schemes to dodge taxes, but that doesn’t mean they’re legal. Plenty of stories about people using dubious structures to avoid taxes and then getting crushed by the IRS when they get around to auditing the situation.