Best state to form a LLC?

Discussion in 'Professional Trading' started by m4a1, Feb 7, 2011.

  1. m4a1

    m4a1

    I want to form a LLC and use the LLC to open a friends and family advisor account with Interactive Brokers.

    What is the best state to form the LLC? The ongoing fees in my state are high, so I would prefer not to form the LLC in my state.
     
  2. If you incorporate in another state you still have to register and pay fees in the state your working in, so that will make two states you're paying fees, at least that's the way it is where I've worked. So there isn't a way to get away from the fees. But check with a good CPA or tax attorney to be sure.
     
  3. m4a1

    m4a1

    My unsterstanding is that if the LLC is not "doing business" in the state you're in, then you are not liable for the taxes in your state. Let's just assume that this is true. What is the best state to form the llc? Least cost, least administrative burden, good protection, etc.
     
  4. Wrong, for tax purposes it's just a pass-thru..

    http://en.wikipedia.org/wiki/Limited_liability_company#Income_taxation


    If you file out-of-state, in addition to what bigarrow mentioned, you also need to have a registered agent in that foreign state. You can pay for a registered agent service, but that will likely surpass the cost of filing your LLC in-state.
     
  5. yeats

    yeats

    Wyoming is a really good state to form an LLC in. There are several advantages:

    1. There is no personal or corporate income tax in the state of Wyoming.

    2. An LLC is relatively cheap to file in the state.

    Montana is good to have an LLC in for the purpose of registering vehicles. There are lots of useful sites out there on Montana LLC's and vehicle registration.

    The previous poster is correct that you must have a registered agent in each state, but those are relatively cheap considering the potential to have huge tax savings.
     
  6. 100% wrong. Zero potential tax savings. LLC's are pass-thru entities.

    It doesn't matter where they are formed, an LLC passes thru to YOU, and thus is taxed in whatever state YOU live in.
     
  7. bone

    bone ET Sponsor

    There is no tax advantage to trading under an LLC. You can claim the same deductions as a sole proprietor. You form an LLC to shield your personal assets from tort litigation claims. Seriously. You want a lower tax bracket? Trade futures instead of stocks. 1256 Blended Capital Gains.
     
  8. Bone and KGB are correct on this one.

    There is no advantage in creating an LLC for a f&f account in a different state. In fact, quite the contrary; you might end up getting yourself into trouble.

    The LLC is a pass-thru entity and you'll still pay tax on income where you reside. The problem is that most states require state registration if you do business in that state. IOW, you can go right ahead and start an LLC in a different state, but if your F&F live in your home state, you won't be able to manage their money unless you also register the business in your home state.

    In a nutshell, the 'LLC in a different state' argument is misrepresented and actually dangerous for most people. The only tax advantages you might receive in an LLC would be the direct result of electing to have the LLC taxed as a corporation. Then you would get the lower corporate tax on retained earnings. But if you are profitable in your trading business, that benefit runs out in a hurry (once you've accumulated $250K) and then you end up with the worst tax vehicle you can imagine for trading as you begin to pay an outrageous accumulated earnings tax.
     
  9. Cotton

    Cotton

    LLC's can either be pass-thru entities or taxed on corp level, even if it is a sole-member LLC

    http://www.irs.gov/businesses/small/article/0,,id=98277,00.html
     
  10. Depends on how you structure the LLC.
    LLC can have foreign and business members.
    An LLC can be held in trust subject to a Trust Agreement.


    Two Hops makes transactions difficult to trace.
    You can get around SEC ownership and control requirements by using a combination of these vehicles to shield the identity of individual owners.

    S-Corps are pure pass through requiring all shareholders to be US Individual citizens/tax payers.

    LLC's depending on purpose and jurisdiction can be used to make all expenditures tax deductible without the IRS limits imposed on individuals.

    LLC's can be strucutured to take advantage of tax laws between foreign jurisdictions. ie. report income overseas while taking advantage of tax credits in the US.

    Have an attorney and a CPA review and provide a memorandum of law. This way if you are later found to be liable for any violations or deficiencies you have your ducks in a row.
     
    #10     Feb 22, 2011