We have a law called "Money Collection act", which states that to gather donations (i.e. payments with nothing in return), you have to get a permit. This permit costs money, is not given to individuals, and is given only for non-profit activities.
So this means that if you see a donation/sponsorship button on a software project where the money goes to a Finnish person, it is illegal (unless they have obtained a permit, which is highly unlikely). If you see a patreon/sponsorship with rewards, it's a grey area. The only clearly legal way is by selling actual things, and of course then you quickly need to set up a business.
I host a free project myself and I've had to set up a business (sole proprietorship) and sell things in order to get money for server costs. Even though people have been interested in donating, I can't do that legally.
What you can do is to "sell" something in lieu of donations:
E.g. - To support me please buy this wallpaper image file of my project logo. Or one-day email support etc.
You can always add a note that Finland laws prevent you from accepting donation, and this is the only way you can accept money from patrons, and even provide a link to the law in question.
(Note that depending on the laws in your country you may have to register as a freelancer / small business and pay taxes. In most countries this will be free or near free, and you probably won't get enough money to reach the threshold aftwer which you have to pay taxes).
[*] Digital artwork = project logo in png format, free to use however they please. You can license the publicly-available logo with any minimally-restrictive license (e.g. CC-BY); this should still count that "you gave them additional rights, in exchange for payment".
Whether all people do it or not is another question, but that is what is required by the law.
What you might need a company for is to pay sales taxes you charge for physical goods, or get insurance appropriate for your line of work. That's likely to be state-by-state. You just get the convenience of an EIN by registering and some additional legal protections by being a distinct entity (i.e. I could sell the company or assign IP to it or hire employees).
I have certainly gotten contractor income to me personally that I just had to account for. In the USA for small businesses you'd have to send the same documentation, so it doesn't even save paperwork. As a sole proprietorship I get the same tax documents from my clients as I would if I were operating directly under my name.
Edit: Also, if this were true in the USA, it implies that all those Uber drivers each have a sole-proprietorship set up. I'm pretty sure that companies can hire contractors as individuals without them becoming businesses.
What specifically the parent was referring to I'm not sure, but that would be why it is consistent to describe a company as both "in compliance with tax law" and also as "using loopholes". If they weren't in compliance with tax law they'd just be breaking the law. No one is accusing the companies of breaking the law, they're accusing the tax system of being biased and corrupt.
Which games don't have edge cases, loopholes, exploits?
Of the games which can be "gamed", are they more or less complex than any given tax code?
Won't protect one guy or a small team in case of legal disputes, it's called piercing the corporate veil. I wonder if the EU has something similar.
No it isn't... In Canada, you can happily accept money from people and just stick it in the "other income" box on your tax return, where it'll get income-taxed appropriately.
If you're trying to do business deductions or want to pay business taxes instead, yes you need a business. If you're trying to set up a physical location, yes you need a business license from your city. But if you don't care about the pennies and your work is digital there's absolutely no requirement.
This is not the case in the USA. There is no general federal legal requirement to register a business or obtain a business license in order to sell things. However, there are specific industries for which business licenses are required (at any of the federal, state and local levels) and forming an LLC might help personal assets if you are sued.
The obvious workaround here is to paywall some tiny feature with choose-your-own-price, or perhaps offer something akin to Reddit Gold. I presume the law already thought of that?
The authors tactic of paywalling things behind a "donation" seems legally much more dubious.
It's so much easier in the US. If you're an individual it's going to be taxable income, but there's no up-front paperwork to do (for that matter, you don't have to "set up" a sole proprietorship here either -- that's just what the tax code calls "some rando doing business by themself"). I've done contract work for years, have a bit of my income coming in through GitHub sponsors now.
Now, if we could only get health care covered for folks who don't have an employer...
> I host a free project myself and I've had to set up a business (sole proprietorship) and sell things in order to get money for server costs.
What's your side project? Speaking of Sandstorm, I'm wondering if it might be relevant; dealing with the problem of developers needing to monetize things in order to cover hosting costs was one of the motivations for the project:
A single member LLC provides some benefits but those benefits often require a lawyer to invoke (i.e. you're getting sued, gotta file things and work the legal system). If you have insurance you just tell the insurance company and they hire the lawyers.
Then there's a technical issue at launch and orders are being rejected left and right.
They could be out basically the whole value of the marketing campaign which is 10x your salary. You might owe them compensation for that, unless of course you got paid through an LLC and only have the $100 in your account.
(ps. With some careful lawyer drafting to exempt things which can't be limited in that way (negligence etc.), while carefully wording the exemption so any part voided doesn't take the whole limitation with it.)
On the other hand various types of corporate insurance cover you for particular risks. Depending where and how you operate you may have to have them by statute or by practicality. So you may have to carry liability insurance by law if you have an office where people visit, or a contract may require that you hold E&O insurance up to a certain amount. In a way the latter is actually your customer protecting themselves from your use of a LLC. Without it, in the case of a settlement against you, you could easily just turn around and say "fine, the corporate account has $5 in it, here you go" and then fold up the company leaving them with no recourse. With E&O coverage for certain types of errors, they know they can get covered in a settlement up to a certain amount.
E&O covers you for particular failures in providing the service you are contract for. Say you were an electrician and did some work on a new building. They sue you claiming your work wasn't to code and caused them $100k in trouble with the city - you disagree. E&O insurance covers your court costs and potentially your settlement if it goes that way. It isn't going to cover you if you get sued for libel because of things you said about them, etc.
This is also why, for example, it may be hard/impossible to get underwriters for some software consulting. Because there are not professional standards groups that are well recognized and because potential damages from software can be difficult to asses (your script change cost us $10mm in AWS fees) insurance companies may not want anything to do with it.
So that leads to a third prong of protections which you didn't mention, which is you need to pay attention to your contract terms (and set them as much as you can). Depending on your situation this can range from easy to impossible, but can have a huge impact. For example, I've successfully added clauses to limit all liability to actual spend on previous 6 mo.
 this is hugely dependent on jurisdiction, particularly with single member variants.
But it's a one-time fee, so you're probably still right in general, but for the moment I'm mostly coasting on savings & sponsorships, focusing on the stuff I care about while I have the breathing room. I might consider being a bit more organized if/when I ramp up business again and am considering looking for new clients.
It's mainly for fun and I want to keep it free, but of course I wouldn't mind if there was some money coming in to pay for the costs and motivate to work on it more. Currently I'm selling stickers and in the future I will implement some kind of paid accounts which will have some minor features that free accounts don't have – the dilemma is to keep it balanced so that free users don't feel second class.
In the UK it's even simpler if you are recieving less than £1,000 a year in donations or similar. HMRC have basically decided taxing people's side hustles would costs more than it returned. https://www.gov.uk/guidance/tax-free-allowances-on-property-...
$7 = 700 random bytes
$15 = 1500 random bytes + 500 bytes free!
$99 = lifetime* subscription for 25k random bytes per year
* your lifetime or my lifetime, whichever terminates earlier
Truth in advertising and all that.
If you're not allowed to sell copyright licenses in Finland, then your whole software business is screwed.
My non-Scandinavian girlfriend never understood why people pay for the bus there if they never get checked. Or why people bother to leave money in a little box at an unmanned coffee/waffle/etc stand in the middle of nowhere. But most do as it is the right thing to do, guilt free.
And if there is a slight chance the tax authorities might contact him the guilt/embarrassment is worse than any token fine.
They aren't the same from an ethical perspective.
You understand that you enjoy living in a system that you can trust. You understand that being able to trust the system means that the system has to trust you. You value a working system more than a petty dollar or some other short-sighted piece of self-interest, because you get more benefit from having the system work in your favor than taking a little for yourself but eroding/ruining the system in the same go. If most people do the right thing, the system works and everyone benefits.
Simple as that! It's the opposite of the tragedy of the commons.
In non-utopian countries, you have to make an advance deposit into the system and may never do enough to make it universally trusted. People may never stop jaywalking, or taking a free coffee/waffle/etc. from the unmanned stand, or cheating your taxes with family income and business expenses. But I'm doing well for myself, so what am I really losing by doing the right thing? Life already put me ahead. I'd rather contribute a small part to a working system I can trust, than to grab another small pie just for myself.
This only works if you never piss anyone off, have no enemies and the government only stands to look bad from going after you.
Obviously accepting donations in an illegal manner is a stupidly low hanging fruit for someone who wants to screw you over. Sure you'd probably only have to pay back taxes (or whatever) in the end but it's a massive hassle and better to just keep it on the down low.
...which they probably wouldn't.
Also, if you receive more than a few hundred dollars, perhaps the Finnish IRS will start noticing.
I have seen some gamers in India asking for donations and giving direct account details(UPI details), but I am very cautious against this. I am just waiting(selfishly) for Income Tax dept to serve notice to someone and get this clarified via court case.
In other words, they are not given in exchange for something; the something is freely given without the donation.
Of course there is the question of whether something is truly a donation. But charities have to deal with that question, so there are formulaic approaches to it, and advisors. Sometimes the wording that accompanies a donation must be written carefully, to clarify what is and is not expected for it, because donations can be directed to a purpose, which isn't (apparently) the same as paying for something.
I assume it's similar elsewhere?
Like my work?
* all donations automatically receive (whatever)
The software (Or service in your case?) is the product.
Currently our air carrier Finnair is under investigation because they offered a climate compensation payment for flights. They say the payment went towards biofuel and other compensation methods but it's being investigated if it was considered a donation.
Also OPs explanation is not so straightforward, the money collection act is being contested all the time and many succeed in collecting money here.
Finnish peoples problem isnt the laws, but the fact that they are total pussies when it comes intrepreting the law.
Seems like there would be a clear value exchange here.
Surely gettings lots of monetary gifts from foreign friends would probably not hold during a tax audit (they'd accuse you of trying to evade taxes unless you could provide a plausible reason why all these people would be sending you gifts) but it's an interesting counter-example nevertheless.
Not something to be impressed by; gifts are tax free in the US under $15,000 per one year.
Another would be to regard such a construct as income. Report your income. Pay your taxes and be happy.
It only becomes "gray" areas when people think it is possible to have non-taxed revenue streams.
This may be true in some countries, but it's definitively not an universal truth. Some business models are not allowed even if you pay taxes on the income. This is what the user is describing, and reading the (English translation) of the text of the Act, I'd be worried too.
That you would need to open a business is probably something most countries require though.
Finland is probably too far the opposite direction, but the whole sector could use a lot more scrutiny over here.
The IRS doesn’t seem to give these orgs much scrutiny unless they’re egregiously bad or become a big news story.
It's extremely frowned upon to begin with, but at least the laws make it illegal.
(Not that it necessarily hinders those that really want to scam someone. Some of these BS "organizations" just contract their work to foreign call-centers. Every year a lot of young European people are lured to some low-cost country in southern Europe, where they'll have to work for some call-center at below minimum wage - and these centers will sometimes work for anyone...)
Donation regulation is not a 'socialist' policy, and at a stretch, you could only say it's simply a policy which happens to be implemented in a capitalist social democratic country, in this case Finland.
If you did, you got rightly called out. If you didn’t, then I don’t understand what you meant.
The platforms help style all the payments as "donations" or "sponsorships" or "patronage". That avoids harshing the project vibe with overtly commercial overtones that turn off the financially immature and preternaturally entitled. But in reality, they're often really payments for products, services, access, and so on. Some people do simply donate, usually small dollars, and don't receive or care about "perks". Others buy the perks on offer specifically, as a simple exchange. Somewhere in between, people and companies may be inspired by donation-like feelings, but use the benefits to get their payments approved and expensed.
It's hard to draw any broad conclusion from outliers. But it all points to there being strange value in muddying the concept of paying developers with a lot of ambiguity, on both the buy side and the sell side. It's like one of those statues that looks like one thing from one angle, and something completely different from another.
I don't think I personally will ever know if this is just an accident of the system (being happily exploited), planned, or a little bit from column A and a little bit from column B.
Enough notable success stories satisfies the Availability heuristic in your brain, but that often tricks you into thinking things are quite different than they actually are.
Same for startups, by the by.
I don't think it's necessary to personalize the rules, odds, and constraints that reinforce these outcomes. We could find individuals who see how it works and like it. But I haven't seen evidence to show they add up to any kind of conscious conspiracy. I'm more concerned about the smaller players who aren't winning and haven't seen how the game is skewed.
Why are we calling this 'sponsoring'? It just factually is selling a product to people for a specific amount. Sponsoring/donating is more like people giving money for something that would otherwise be free. Otherwise Microsoft could also require a 500 usd 'sponsorship or donation' for a Surface Go. And requiring it monthly is just plain subscription service payment.
Also, one of the dictionary definitions for sponsor is: "provide funds for (a project or activity or the person carrying it out)."
So it seems accurate enough of a term to me.
So does a subscription or purchase. So not sure what you are trying to imply with this.
He gives access to stuff if you pay him money, with a promise of more stuff in the future. This just sounds like an subscription to me.
While I do agree there is a disconnect between open source dev payment and business, I don't think mislabeling a subscription as a donation does anyone any good.
He implies nothing, he states that sponsor definition covers the OP use case. Having more than one word to describe the same thing is not surprising.
You imply that your definition of sponsor exclude OP use case and there is mislabeling.
The interesting point is the revenue issue in open-source business. This guy solved it for him and present for all how he did it, with no lies and no hypocrisy.
That someone got hung up on a correct word usage shed an interesting light on where this disconnect between open source dev payment and money really lies.
He's selling courses using a freemium model.
The software is the inbound content.
> You can set sponsor tiers with different prices and rewards
Caleb hasn't discovered some secret means of convincing people to pay for OSS they can download for free. What he's done is create a commodity (the open source package) and then once it's popular, make a tidy profit off its complimentary product (training videos).
Unfortunately it's still true that people generally won't pay for software they can download for free, but if you're willing to dip into some other types of work (e.g. consulting, creating training videos) then you can make more than enough profit top keep going indefinitely.
Here is more viable freelancing:
- create framework/library that everyone needs
- for feature requests/bug fixes, prioritize sponsors
- do office hours for sponsors
- invite sponsors/allow them to vote for future road map
- offer consulting credit to sponsors
The spirit of open source isn't so sacred. In most cases it is hundreds or thousands of businesses benefiting financially from the work you've done.
Implying his approach is not viable is weird, given that what he's doing is demonstrably working (at least at the moment). He's making free software and then selling subscriptions to training content, which is where he seems to be making something like 80% of his revenue. It's like Railscast, Laracast, Egghead.io (originally just angular tutorials!) etc.
The main difference to railscast, egghead.io etc. is that he's using Github as a payment processor & to manage subscriptions.
- Consulting, usually means the project is too complex and hard to use without help. Changes to make the project easier to configure are often not even considered...
- Donations, not sustainable for the developer (no users need to pay anything).
- Open-core, one of the worst strategies, as the developer's motivations are almost completely opposed to the open-source community. The developer wants people to upgrade to premium, so the premium features are always prioritised over community features, and people can't extend the software themselves...
- Hosting, not a bad strategy, but is slowly becoming less relevant as deployment of services is becoming increasingly easy.
I'm not sure how sponsorware is the opposite to the spirit of open source but your proposal would essentially allow someone to buy out the product roadmap which seems worse.
The truth is that many developers have taken the high road, and done the right thing, and they have been unable to make a living out of their open source efforts.
I hate that the ecosystem is so weak the OP has to resort to this model, but I have nothing but sympathy for the OP.
The whole entitlement that devs and companies have around open source drives me crazy.
- Thanks/gratitude: $5
- Prioritise issues raised by sponsors: $25
- Sponsor influence/vote on project roadmap: $300
- 1hr/month video-call/consult with sponsor's company/team: $600
- Add sponsor's logo on the project's home page (say for 1 year) - in a fun and engaging way, of course: $1000
 - I've done this, except for the bit where I convince everyone that they really, really need to use the library.
 - I've not yet seen a way on GHSponsors to limit the number of people who can sponsor a given tier. Which puts me off offering this sort of tier as over-subscription could quickly steal all my time and ruin my project's home page.
I'd also argue that this is one of the most ethical ways to pay developers fairly for their work, even if the author wasn't able to make that much money from it. The product the developer creates is FOSS, available to everyone after some time, and they still get paid for it (bonus; they're paid by the open source community for their work, rather than from one person/corporation that dictates their salary).
If it is trully open-source from start then anyone can freely dostribute the copy outside of the elite group.
It doesn't seem to be working great though, at least on the page. I end up making a living through ad-hoc client work, which sometimes supports the open-source side as well.
I am a little bit heartbroken it is not working out yet. Hoping you the best of luck.
Isn't this equivalent to "keep code secret until someone sponsors you?" Except in his case, the work is done before you're sponsored, and in yours, the work is done after?
Because there is always a infinite amount of work to do.
Usually you do the most rewarding work.
With no money involved, then it is usually the most fun part.
And with money, it is what other people want. That can be the same, but does not need to.
On the other hand, his amounts are going up, so I'm interested to see how high they will go, and what it will consistently level out at.
As I understand it, NHS comes from general taxation.
Obviously there is no actual "fee" to use the NHS at the point of use - it is all free apart from prescriptions which are the same price regardless of what you get (and you might get it for free anyway depending on your circumstances)
Isn't that enough to fund the programs you are speaking of?
Some outliers are home office and utilities and things like that.
The IRS has rules (typically unenforced) regarding this. You are supposed to draw a salary that matches your job in your local area. So if you are based in Tinyton, Flyover State, you could probably get away with paying yourself $30k/yr, but in NYC (where I'm based), my accountant told me $70/hr is basically as low as I can safely go. So I do $70/hr and then $14/hr in my retirement account.
The $70 turns into ~$78 after all the employer taxes add into it, and I take home only $52 after employee side of taxes are taken out of it.
What's the risk - audit? And if so, what's the risk from the audit? A fine for tax fraud? Jail time?
I'm freelancing currently myself, and available deductions are honestly miniscule and well-defined.
It's actually a very interesting little booklet.
The broader point still remains, for a business (a 1099 is considered a sole-proprietorship) generally net income is taxed, and as a W2, your taxes are witheld per pay period.
Gross Income: $112k
- SEP IRA 25%: -$28k
- Owner Health Insurance: -$15k
- 199-A Deduction (20%): -$12k
Total business income for taxes: $47k
- Married Filing Jointly Deduction: -$24k
- Total taxable income: $23k
Tax on $23k (10% of first $20k, 12% of next $3k): $2360
Another gem many people don't know about is "Increasing Research Activities", for certain industries this essentially translates to 5-10% of your total payroll becoming a credit. That's huge.
WTF? Who pays $15k PER YEAR for health insurance? That's nuts. In most countries USD$15k would pay for healthcare for 2 or 3 people for their entire lives.
So sure $15k is ridiculous to pay for health insurance, but in the US, its the cheap option for a family.
For a brief period I lived in Virginia and had no medical coverage through my employer. The legal minimum coverage was $1,400 / month for my family of four... and it was basically worthless; I would have had to have paid out something like $40k in a single year for medical services before I would have broken even.
is more than they make in their entire lives.
Trying to compare US COL to "most countries"
And if you wanna only look at western countries that's obviously demonstrably false.
Whatever people pay as part of the healthcare tax is gonna come out to about $15K for someone who is making $100K in most EU countries.
And still none of that considers things like Simplified Employee Pension Plan (SEP), health insurance, home maintenance, etc, etc.
The list can go on and on depending on the type of your business, jurisdiction, and supporting documentation.
* Talk to someone about your local tax rules before taking action.
I only pay my accountant around $2000 to handle a bunch of housekeeping at the end of the year that I'm to lazy to do during, and to file my taxes. For years I did my own taxes using Turbo Tax Self Employed and Turbo Tax Business Editions, but in 2016 I decided to outsource all of that headache, the first year, my taxes were half of what they were the year before with similar income. Then after the TCJA in 2017, my taxes were only 1/5th what they had been before the accountant, with close to double the raw income.
The biggest changes from doing it myself: I got an accountant; I incorporated (s-corp) instead of doing self-employment income; I draw W2 income now (using Gusto); I set up a SEP-IRA and put 20% of my W2 earnings as an automatic debit from my business account (in Vanguard); TCJA chops off 20% of my distributions on my K1; and I'll state again, I hired an accountant.
I feel like I'm doing 90% of the work already, having organized all my expenses and income. What are they doing other than typing it into their own Turbo-Tax-equivalent?
“TurboTax will take what I did last year and minimize my taxes. My accountant will tell me what to do differently this year to minimize my taxes next year.”
In other words a good accountant is a forward-looking advisor, not just a calculator.
Almost every accountant out there will be better than an H&R Block or Turbo Tax.
It’s pretty easy find an accountant but they might not be good and it’s hard to tell, especially in advance.
somewhat relevant reading on what can be done if you're well versed with tax laws: https://scottestill.com/buy-new-used-car-2018-get-100-tax-de...
Surprisingly, this dealer has an entire page dedicated to it this, and why you should buy one of their SUVs: https://www.landroverhuntvalley.com/business-tax-advantage.h...
So he is nearly there, but not yet.
I think you're confusing it with personal projects.
There is nuance in that statement. The IRS has a test for whether a person is an employee or a contractor.
Nice work, I should think about having paid only videos as well, I believe I can do that pretty easily on Patreon. Good tips in here.
Additionally, GitHub is just so much closer to the actual open source work and more easily discoverable for users of your product.
As a supporter, I'll pick GitHub over Patreon anytime.
That seems superior to basically every single platform out there. It's an instant win for GitHub Sponsors.
Say you are a marketer and you bring hundreds of paying users to a platform, 5k is cheap.
Do calling it "work" it is too little. Won't pay the time spent on a job.
At the same time it is an amount of money, causing responsibility. Giving the feeling that one has to return something for it ...
So how does at affect your fun-level?
If anything the fun-level has gone way up because a community has formed around one of my projects, which has been great.
I had started another company before that I spent over a year on and I made $0. Not fun.
Not really serving industry, self-hosters and home-labbers.
> Create a cool piece of software
> Make it exclusive to people who sponsor you until you reach a certain number of sponsors
> Then open source the project to the world
This is how ICOs worked, for the teams that actually delivered anything. Without any other monetization path they resorted to taking presales of tokens shoehorned in convulated ways into products that didn't need them, but frequently involved open source code for a community. This resulted in many misaligned interests for people that eseentially were sponsors.
It's nice to see the same sentiment reflected in other parts of the tech industry in a way that more people respect and can relate to.
If you're interested in the issue, however, you might start by reading a little about "money transmitter" regulations. An early payments platform for open projects shut down at least partly on account of it. I suspect the concept of "perks" became widespread in part to differentiate fundraising platforms from money transmitters.