In rewards-based crowdfunding, the primary transaction is between the project creator and the backer. It is really important to understand whether the transaction is a gift, donation or sale. On a rewards-based crowdfunding platform, such as Kickstarter, the majority of the transaction types is a sale transaction. This is a sale transaction because:
- the transaction meets the legal conditions for a sale to take place;
- the funds that the project creator receives is treated as income or revenue in his accounts, as received from sales.
Rewards-based crowdfunding platforms are very user-friendly, and it is easy to confuse crowdfunding with buying through an online retailer, such as Amazon. In this section, I start by looking at what crowdfunding is, what is the underlying process, and how do I, as a backer, complete a pledge.
The key articles in this section are: