Home > Gambling Tax Basics > LLC Considerations for Professional Gamblers

LLC Considerations for Professional Gamblers

I’ve received numerous requests to discuss the various considerations when contemplating the creation of a limited liability company (“LLC”) for purposes of conducting a business. Forming an entity may or may not be advantageous, as each person’s particular situation is different. I will focus on the primary considerations as they apply to professional gamblers in general. Keep in mind every state has its own laws governing the limited liability company, and although my focus is on New York law, the laws may be similar or different in other jurisdictions. Consult local counsel.

The New York limited liability company has been around for almost sixteen years, and over a half a million have been formed or registered to do business in New York. What makes the LLC a popular entity for a business?

The LLC protects its owner(s) from most personal liability. For example, let’s say I want to open a restaurant. I can form a LLC to serve as the business entity, making myself the sole Member of the LLC (100% ownership). Suppose a restaurant patron sustains head trauma when a light falls from the ceiling, and wants to sue for recover for her injuries. Generally, the injured party may recover from assets of the LLC, but not my personal assets.

The protection from personal liability does not seem particularly useful for a professional gambler, unless he/she is doing more with the profession than just playing poker full-time. If the professional gambler starts earning income from coaching poker, then the LLC could serve as personal liability protection if a customer initiates a civil suit for breach of contract, for example.

You might wonder whether there are any downsides to forming a LLC. New York is the only state in the U.S. that has a LLC “publication” requirement. One action necessary to meet the requirement is that upon formation of the LLC, notices must be published in two newspapers, once each week, for six consecutive weeks. A description of the publication requirement can be viewed here.

Another downside to LLC formation, particularly to professional gamblers, is the uncertainty surrounding the self-employment tax application to LLC members. Rules addressing this issue were proposed back in 1997, but they have yet to be finalized, and they are not particularly straightforward. A general discussion of the self-employment tax as applied to professional gamblers can be viewed here.

Categories: Gambling Tax Basics
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