Crowdfunding and donations: legal basics

In short: Collecting money from many supporters is possible but not legally uniform. What matters is what supporters get and who you are (private person, trade, non-profit association).

Types

1. Reward-based: supporters get something in return (product, access). Legally this is usually a sale or pre-sale: trade, consumer law, invoices, turnover counts as income.
2. Donation: no consideration. A real donation in the tax sense requires a non-profit recipient; only then is there a donation receipt.
3. Gift to private persons: possible but not with a donation receipt, and for larger amounts gift tax rules apply.
4. Participation/loan (crowdinvesting): heavily regulated (securities/investment law). Usually not suitable for beginners.

Taxes

• Income from reward campaigns is business income and belongs in the cash-basis profit statement; costs (platform fees, shipping) are expenses.
• Even “support” for a hobby project is examined for tax if it regularly leads to profit (intent to make a profit).
• For donations to an association its non-profit status applies; as a private person you may not issue donation receipts.

Platform rules

Platforms such as Steady, Patreon, Ko-fi or Kickstarter have fees and their own rules. Payouts often require full age or a legal representative (Payment services for minors).

Duties

State honestly and clearly what the money is for and what happens if the goal is not reached. Keep promises; consumers have rights also for pre-orders (withdrawal, see Withdrawal and cancellation for digital subscriptions). Contracts with minors as providers: Contracts and terms for small founders.

Not legal or tax advice.

See also: Marketing for beginners