Incorporating to play poker

[menexus]

Has anyone thought of doing this. Is it even legal to do it? It seems like you could lower your tax burden a bit by taking dividends instead of having to report it all as income. If I recall right the MIT blackjack team was incorporated so I would think that you could do something similar for poker. Might also be a good way to put together a team of tourney players to share the risk.
Any thoughts?

[Sean Fraley]

I would really like someone to answer this question also. I've thought about this but currently don't have remotely enough knowledge of the law to come up with any useful answer.

[Jimbo]

First you will pay corporate taxes then be taxed on your salary. Taking all your income in dividends will be no different than a salary other than you might dodge some FICA taxes but I doubt it will work well or for very long. Besides dividends paid out as earnings and not capital are taxed at your regular income tax rate. It is very hard to justify a single entity corporation.
I finally just created a seperate sole prop so at least I am able to both net my wins/losses and deduct my expenses. Even though my poker business has shown a profit every year for the past nine years I still have all my records for every year including my poker session logbooks just in case.

FWIW every year or so I look at converting to either an LLC or Subchapter S Corp but have yet to find enough benefits to make it worth converting from a Sole Prop. YMMV

Jimbo

[menexus]

I was of course only thinking about an S corp or LLC. No way do I want to be double taxed. I have owned different S corporations in the past and one great benefit is the ability to make retirement plans. You can defer a lot more taxes that way than you can by simply funding an IRA or Roth IRA. I'm not sure because I haven't looked into corporate retirement plans in a number of years but there may be something similar now to the self directed IRA where you can buy and sell real estate and make much more aggressive investments than just putting it in a mutual fund. You could also buy health insurance for your family as well as pay for many expenses pretax than you could just by filing as a professional. I'm really interested if anyone has already done this.

[DeadMoneyDad]

[ QUOTE ]
I was of course only thinking about an S corp or LLC. No way do I want to be double taxed. I have owned different S corporations in the past and one great benefit is the ability to make retirement plans. You can defer a lot more taxes that way than you can by simply funding an IRA or Roth IRA. I'm not sure because I haven't looked into corporate retirement plans in a number of years but there may be something similar now to the self directed IRA where you can buy and sell real estate and make much more aggressive investments than just putting it in a mutual fund. You could also buy health insurance for your family as well as pay for many expenses pretax than you could just by filing as a professional. I'm really interested if anyone has already done this.

[/ QUOTE ]

I've been had businesses from a sole prop to being incorporated in a number of ways, sub chapter S is a personal "family" favorite.

Well unless you have a busness that involves something more than one person playing poker or gambling for a living the IRS is going to bitch slap this suggestion.

Now if you as part of a corporation played as well as staked players, perhaps ran a poker school, and had other concerns and had a contract exactly to the corp entity the same as a few other you might get away with this idea. I've given it some thought but rejected it as too burdensome for my tastes.


D$D

[Jimbo]

[ QUOTE ]
You can defer a lot more taxes that way than you can by simply funding an IRA or Roth IRA. I'm not sure because I haven't looked into corporate retirement plans in a number of years but there may be something similar now to the self directed IRA where you can buy and sell real estate and make much more aggressive investments than just putting it in a mutual fund. You could also buy health insurance for your family as well as pay for many expenses pretax than you could just by filing as a professional.

[/ QUOTE ]

This is all incorrect. The only partially correct portion is if your family are truly employees or partners. I have an SEP, deduct my health insurance and all my poker expenses are pretax as well. I think you are wishing in the wrong places, better you wish to make the final table of next years WSOP.

Jimbo

[bekman]

I looked seriously into LLC with a friend as my staker, and then an LLC for him with me as a staker. We could potentially right every years dividends based upon our dispersions to account for our own play. The break even point was somewhere around $33k per person, and I was part time for a good amount less so I didn't pursue. Also, given the tumultuous times we live in, I didn't want to attract any undue attention upon us.

I do know that Scott Fischmann is arranged in some sort of business for his play, as well as Raymer. Fischmann wouldn't tell me any details because he had it set up by an accountant, and Raymer just wouldn't agree to release the details. There may be others, and some people may have suggestions for who might orchestrate something like this. It is likely that the break even point for an accountant will raise to $60k or more depending upon how active they have to be or if they charge heavily for setting up, but lower maintainance.