Do I really need an entity for trading?

Discussion in 'Professional Trading' started by cunparis, Mar 22, 2008.

  1. This year I'm trading 2-3 days a week and working as a consultant the other days. I just spent 2 hours reading through threads and google searches on the issue of taxes and one thing isn't clear to me.

    My expenses are next to nothing, unless one counts commissions. Internet, books, and a few subscriptions (journals and software).

    My question is how much would an entity save?

    Let's say, just for this discussion, that a trader (not me, i'm not there yet) makes $200k a year. His internet, books, subscriptions, etc. are max $300/month. That's $3600/year. Just paying the capital gains (income tax) on $200k would be 33% (max, not counting deductions or anything else) = $66k, leaving $134k for net income.

    Can someone tell me roughly how much the trader would have in net income using an entity?

    Obvious if the income is a lot more then it's worth it to pay a tax professional which is what I will do.

    I've seen a lot of discussions on this, but I've never seen any hard numbers. I'm hoping someone can make this more clear.

  2. no
  3. You don't have any substantial expenses to write off. Keep it simple for now and forget about C Corps, S Corps, Limited partnerships or LLC's. Just trade and keep getting better.

    When you are larger and prepared to take the time to learn the business end ... you will. You;kk hire an accountant that handles traders and set up as suits the circumstances.

    Until then ... simple, simple, simple.
  4. If you trade futures or index options you fall under the 60/40 rule and you would pay max 23% federal.
  5. Since you don't qualify for trader tax status under IRS guidelines, there is no benefit whatsoever.