How to Form a Lottery Club

A lottery club is a collective of lottery players who pool their money to buy many lottery tickets, usually 50 to 100. By purchasing many tickets for a single drawing, the overall chance of winning a prize increases dramatically. If you look at past lottery drawings, you will discover that club members often win the top prizes, including the lottery jackpot.

To form a successful lottery club, you must comply with laws regarding businesses and taxes. This means filing paperwork with the IRS and your state's lottery commission, as well as drafting bylaws for your club. The step-by-step guide below will help you form your own lottery club.

First, choose a name for your lottery club and set up a limited liability company, an LLC. You need an LLC in order to obtain an Employer Identification Number (EIN) from the IRS, and you need an EIN in order to claim prizes for several people. Once you have established your lottery club as an LLC, visit the IRS website and fill out form SS-4 to obtain the EIN.

An alternative to the LLC requirement is to obtain an EIN for a sole proprietorship. In this case, you will need to designate one person as the lottery club representative, and that person will run the lottery club.

After you have registered your lottery club with the IRS, the next step is develop club policies, including to how to split the money. Should your club happen to pick a winning lottery ticket, how much will everyone receive? Ideally, each player's portion of the winnings should be proportional to how much he/she contributed to the pool.

For example, suppose A, B, and C contribute $5, and D contributes $10 toward the purchase of several lottery tickets. If one of their tickets won, then A, B, and C would receive 20% of the lottery winnings, while D would receive 40%.

Decide how to pick the lottery numbers. The best way to avoid squabbles among lottery club members is to use easy picks, that is, letting a computer generate lottery numbers randomly. When you buy the tickets for your club, simply fill in the box that says easy pick or quick pick. Each combination of numbers has an equal chance of winning.

If club members want to pick the numbers, make it clear that no one's share of the winnings will increase if they happen to choose the winning lottery numbers for the group.

Make sure every member of the lottery club signs a contract of agreement to the club's terms.

If your club holds a winning ticket, fill out form 5754 to claim your lottery prize. You can find this form on the website of your state's lottery commission. (The form number is the same no matter which state you live in, but each state has slightly different form.) On the form, fill out the names of your club members, their SSNs, and their portion of the winnings.

Each member can decide individually whether to take their lottery winnings as an annuity or lump sum.

Keep in mind that there is no way to pick lottery numbers so that you always win more money than you spend. Even if your lottery club purchases several hundred tickets, you may still lose several hundred dollars. Play responsibly.

© Had2Know 2010