Do I Need an LLC for my Discord Group?

October 15, 2020
Do I Need an LLC for my Discord Group?

A Discord server can be useful for promoting goods, services, or for discussing a common interest. However, if you generate an income from your Discord group, it could mean that you must report an income, whether as self-employment income or as ordinary income. It might also suggest that any services or goods that you provide, even if the leads are obtained through the Discord group, still contribute to your business and are subject to the same liabilities as other businesses. Getting an LLC for your Discord Group depends on your business’ needs.

Why Would You Need an LLC

In general, a business owner would register a business as an LLC in order to protect their personal assets from being compromised if the business were to be sued, owed debts, or went bankrupt. An LLC is not a separate business entity, but instead, it provides the flexibility for business owners to file their taxes while also providing limited liability. An LLC may be allowed to file as an S Corporation, which would provide a tax break since it requires income to be distributed to business owners. Taxation as an S Corporation is far more affordable than filing net income as personal income due to the self-employment tax. However, it is not required, which gives the company a lot of flexibility. Generally, though, you should consider registering your Discord group as an LLC if you are seeing significant income from the group. Even if the business does not incur liability, you are able to get liability protection (which protects your personal assets) from potential liabilities that could occur in the future.

Monetizing a Discord Server

A Discord server can be monetized in several ways, but the way that you operate the Discord server will depend on how the money is classified. Even if you operate a Discord server, you don’t always generate an income as some owners/operators volunteer to monitor the Discord group.However, a Discord server that speaks to a niche group and makes a profit can be monetized in the same way that email marketing or email monetization can.

Running a Discord Group for Profit

If you operate a Discord server and request that the user group pay a membership fee in order to access the Discord server, and in return provide a service, goods, or knowledge, you might need to report that amount as income. Some people try to find a work around by providing free services or products, asking for “donations”, or only asking for partial payments, but these methods are still considered to be generating income. Therefore, if you run your business through the Discord server, it acts as the main platform for earning that income, requiring you to claim that income appropriately on your taxes.

Donations or Gifts Received Through a Discord Group

Volunteers of Discord servers can ask for a donation or gift, which is commonly referred to as “buying a coffee” for the Discord organizations. This is far different from seeking to gain a profit from the group. Income received that was donated to the Discord server operators would be considered a gift or donation on behalf of the giver and a cash gift on behalf of the receiver. While it is considered a donation on Discord, the amount is not considered tax-deductible as a donation because the person receiving the amount is not a 501(c)(3) organization. Instead, the person receiving the sum would consider the amount a gift and would not report any gift tax. Gift sums for the receiver do not need to be reported to the IRS as they are neither taxable nor tax-deductible for the receiver. The sender of a gift must report the amount when it reaches $15,000 in a single year.

When a Discord Group Could Be a Liability

All things are considered, anything that generates an income can be a liability. This is because money conveys value and if you are providing a good or service for money and that good or service is not believed to be rendered, then a consumer can come back to the business and request the issue be rectified. Consumer protection laws in the United States provide consumers with a range of laws to fall back on to protect their rights. Businesses must also abide by privacy laws and can incur liabilities for not staying up to date with those privacy laws. Businesses can also sue other businesses for things like copyright infringement and a number of other business disputes. Something as simple as a business name being too closely related to another business’s incorporated name could be a major hassle and financial hardship for your company. Therefore, regardless of the goods, services, or knowledge that you provide, there are areas where your business can incur liabilities.

Why You Should Consider Getting an LLC for Your Discord Group

An LLC offers benefits and protections for business owners. An LLC can protect business owners from risking personal assets should the business assets come into financial trouble. And when it comes to taxes, registering as an LLC can provide business owners with a number of potential tax benefits. Whether you realize it or not, registering your Discord group (or registering the business that operates through a Discord group) as an LLC can have significant advantages. Therefore, if you’re unsure, there is limited harm or effort in registering your business as an LLC so you should consider doing it anyway. If you are unsure whether or not your Discord Group can incur liabilities, it is recommended that you consult a legal expert, accountant, and lawyer.

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