Any update on this?

thanks a lot Russ. if you are in a state where it is legal on the fronts you described as potential obstacles, does it matter if you form the LLC domestically or abroad? are there advantages to doing it either way?

I personally had no problem getting pre-approved for a mortgage with 3 years of tax forms (1st yr amateur, 2nd/3rd year filing professionally)

Yeah, most banks don't care how you make your money as long as you have a couple years of taxes filed and 20%+ down.

don't hijack thread please. i find it promising that not even the most conservative people are coming here saying there is anything wrong with this if it is legal in your state. i don't really get how it can be said that 'well, it is legal, but who knows what can happen if they go after you' as a reason not do this. if there is no precedent and no law against it, how can you advise against doing it when you can LEGALLY do this?

Disclaimer: I don't have a 100% solid understanding on exactly how it works, but since when does that stop anyone from posting on 2p2?

I'm told you have to pay yourself a "fair salary" and how do you define that and how do you defend that in court (maybe your state differs than mine and doesn't have this stipulation). If you own a poker llc company that makes 250k per year and you are the only person that works for it and you pay yourself 25k salary (to avoid hefty SE tax) then when you get audited how do you explain this to the IRS?

My cpa told me that he would not feel comfortable having my salary be less than half of my winnings and it's not worth the risk.

because it's a grey area and the IRS might bone you really hard if you pick the wrong option? Is this fair to us? No. Is it reality? Yes.

I don't know that the IRS would accept this if they looked into it. And a court ruling could go in their favor. It seems as though there is no reason to start an LLC for your poker playing except to attempt to alter your tax bill. At least just from thinking about this for a few minutes I don't see any other economic substance. Generally if a transaction has no economic substance and wouldn't have been undertaken except for tax reasons the transaction is disallowed as far as tax concerns go.

One primary purpose of an LLC is usually to protect the individual from personal liability and limit any lawsuits to the business's assets. There's no need for this as a poker player as there shouldn't be any liability. (What might be interesting is what has recently happened in [Indiana, Illinois? I forget.]) It was posted in this forum about the professional poker players who were being sued under some statute for the money they won from individuals and they were being sued by a third party from a different state and for treble damages I believe. (Maybe people remember this.) So that is liability. I haven't looked into it but LLC's may not protect against that anyway. It would depend on the state law and could depend on whether winning the money was considered illegal (considered fraud maybe) or something ... like I said I haven't looked into it, but it would depend on state law. If someone wants to look into I suppose it could be possible that it could be an economic substance argument (though it would be a very ironic one) and without any research whatsoever I tend to doubt this would be a winning argument.




*mere 3rd year law student with basically no experience

If you are interested in doing this it would be best to contact accountant(s) and lawyer(s) in your jurisdiction.

Lego, care to comment on the criminal liability of running an unlicensed gambling business such this?

Conservative people here know that it is illegal to render an opinion about this issue as it constitutes legal advice. Tax advice can legally be given for free by anyone. Legal advice can only legally be given by a licensed lawyer.

My only advice to anyone seeking to do this is to consult a law professional licensed in your state. The PPA's Litigation Support Network service, available to all Premium Members at no charge, can provide referrals to law counsel.

Not really. I don't know anything about it. Though the individual who is playing the gambling games doesn't normally need a license.

Anyway ... sorry, I don't really have anything to say about it other then to talk to a lawyer(s) in your jurisdiction.

Something I thought about and was kicking around in my head the other day while I was driving home:

What if 2 (or more) poker players formed an LLC or an S-Corp together ... In that case there would be economic substance (if it were set up in a way to create such). Each player would be paid a reasonable salary. Then at the end of the year profits would be distributed to each player in whatever manner is prescribed. There is economic substance because presumably now each of you are playing poker and the way the salaries are being paid and the way the profits are being split neither of you are now simply making the amount that you make at poker as an individual. A reason to to do this outside of taxes may be reduction of variance or another reason could be if you think he will make more money than you and by the deal you'll actually make more money. Anyway, there certainly would be a significant economic impact outside of tax consequences.

The downside obviously is that the amount of money you make will likely now depend on how much the other guy plays and how well he does.



Just something I spitballed. Even if it could possibly work it would depend on how it was set up. Also I did no research into anything nor put any work into this other than thinking about it a bit while I was driving.


This is in no way legal advice and as I said above I am not a lawyer. If you think you may be interested in doing this or something similar then I once again advise you to contact attorney(s) and lawyer(s) in your jurisdiction.

Russ Fox, Drew On Tilt - I started a thread on this over at:

http://forumserver.twoplustwo.com/10.../#post26617965

I too want to be able to set a salary, take advantage of health and retirement benefits, and also be able to use the corp for my consulting work.

Now the only problem I see is whether the "gambling" winnings are treated as a different tax bracket like on personal returns - I thought not, since for a corp, income is income is income.

In fact, isn't this what venture capital and private finance firms do every single day? Risk large sums in volatile investments that often end up being a write-off? Why not structure the corp so that a loan is being made out to the owner (or to other players even), and it simply has an interest plus a kickback component? (and some sort of flex payment for months where the income is not as high or where player did not put in as many hours)

I too am looking for someone local in Vegas who KNOWS WHAT THEY'RE DOING regarding this matter, but so far from my cold calls it seems like I'd be wasting my own time plus at least a few or several Benjamins just to get stuff that is not helpful or that I didn't already know.

So Russ Fox, maybe you're my man! Let me know if it makes sense to PM you to set up a private consult. I see that you're in California though. (I do play out there, but my home base is Vegas and the corp would be here as well.)

From what I've understood and my personal experience there are VERY FEW professionals that understand/have a good grasp of these concepts (creating a corporation for the purpose of "gambling").

Looking for info similar to this situation since I am forming an LLC with economic substance, I am a coach and consultant for poker players and casinos. This is to look more professional as well as protecting from liability. I of course play since I need to retain my edge if I set up S-Corp LLC and take my gambling income as income as well as the other requirements would this be possible?

I honestly had a 3 hour talk with a good lawyer for a company I'm opening. If you are the sole person who makes the decisions in an LLC, they can and will easily come after your assets.

You can't just use the LLC as a shield for messing up. So if the reason is for protection, it's useless.

Besides actually creating a business, what other reason is there to create a LLC?

I found the two prong test but its wording is so convoluted.

(1) the transaction changes in a meaningful way the taxpayer’s economic position, and (2) the taxpayer has a substantial purpose for entering into the transaction.

You can pay yourself a "reasonable" salary and take the rest of your winnings as dividends and avoid the 15% self-employment tax.

The only case law I found before I did this for a year was that $0/hr was not "reasonable". Some dentists tried that, and it didn't work out.

There's quite a bit of time overhead to doing all the filings, and some amount of $ for various state fees. Some people incorporate in Delaware because of their low fees and minimized filings.

I did it in 2007, and found that it wasn't worth it, then switched back. They charged me additional fees to close my business...

administrative bump to prevent archiving of thread, as this thread is linked to by the tax sticky

I'm thinking of getting a business license and filing my poker income as a business. Getting that setup would be no problem on my end but tax wise what would I be looking at for something like this instead of filing my winnings as gambling winnings like in the past. I now use investor's money to play online poker and keep a % of the profits here in Nevada on regulated usa poker sites so this changes everything! I'm basically running a business! I know I will have to file taxes quarterly but i'm up for that! What am I looking at tax % wise? I estimate myself making around 100k a year.

Read:
http://forumserver.twoplustwo.com/57...-poker-740589/

For UK Players considering going self employed.

There are reports of unemployed people who play poker recreationally being encouraged via the Work Programme to drop their unemployment claim and instead claim tax credits as a business start up. This can mean that you get more in benefits than as a jobseeker and it means you don't get hassled by the benefits people or the work programme people so it looks great.

Do not let the Work Programme people con you in to this!!!!! If everything goes swimmingly and you become a regular winning pro within a year or two who is able to stop claiming tax credits and related housing benefits then it may work out fine but if you are not in a position in 18-24 months time to stop claiming you can end up in a world of ****.

The WP people love this self employment trick. They get paid thousands for getting you off the unemployment benefits but don't actually need to find you a job or help you deal with/stay with your new employer.. They get follow up payments if you stay off the unemployment lists for 12, 18, 24 months. Just as they have collected all their money for "helping" you though you can end up screwed by the tax credits people.

If you have been claiming tax credits for 18-24 months as a new business they will let it slide as a startup but if you keep claiming they will investigate. If they decide that the business was not a legitimate one or had no realistic chance of success then they can decide that you were claiming fraudulently and demand it all back. You can't even take off what you would have got via unemployment, basically you can be liable for every penny paid in tax credit or housing benefit for 18-24 months and as a worst case risk prosecution for fraud.

Meanwhile the WP people have just had their final payment for "helping" you.

Basically if you are unemployed and cannot make a legit living playing poker to stop claiming going on to tax credits will not help your play improve to the level you need to be a pro, it will however put you at risk.

If you are earning a living as a pro - don't claim, that is fraud. If you are unemployed and play a bit, that is fine so long as you are looking for and available for work. If someone then asks you to shift to self employed poker player ask why? It is +ev for them and -ev for you.

It occurs to me that this limits one's ability to control the size of his bankroll. If you have to pay yourself at least 50% of your profit, then spend some for business expenses, you're not adding a whole lot to a bankroll.

Johnathan Little's said in one of his books that his plan pretty much from the beginning was to play on the World Poker Tour. To reach his goal of a minimum 100 buy-ins for 10K tournaments, he grinded SNGs until he had a bankroll of $1 million (10K X 100).

If Little had been forced to pay himself half of his profits, that kind of bankroll building would have been extremely difficult.

I know next to nothing about LLCs and incorporation, but based on my experience plus some of the things posted in this thread, it just seems neater, cleaner and easier to just be self-employed and use Schedule C, unless you have some unusual circumstances.

When the LLC you own pays you money, the money is yours. You still have it. I don't see the issue you are raising.

how has this setup been working for you?

Can you play/register at the tournament ( lets say WSOP) as LLC?