Forming an LLC for Trading friends/family accounts

Discussion in 'Prop Firms' started by stephencrowley, Sep 29, 2005.

  1. I'm forming an LLC so that I can get business rates for server leasing, and trade accounts for friends/family.

    My question is, should all of the money be put into the account of the LLC and the members then get shares in the LLC in return. Or should each member open an account with my broker directly and then setup subaccounts under the umbrella of the LLC?

    I'm sure there are some tax and practical implications here.

    Any thoughts are welcome.
  2. Not really, why would I want to pay a wage to myself? I can still take distributions.. LLCs are "pass thru" as far as taxes go in the single-member case.. its treated as if I made the money personally.

    In the more than one member case, it is split according to the level of ownership. So the capital gains from the LLC is owed by the members according to what percentage they own.

    So.. if non-members contribute money and gains are made.. members would be liable for the capital gains. So any contributors would basically have to be made members.

    I was actually thinking of only using the LLC to lease hardware under.. most hardware leasing companies wont lease to individuals and I don't wanna waste capital up front on hardware expenses.

    I'd have members setup clearing accounts with goldman and create subaccounts under the LLC and assign trading rights.

  3. I like the subaccount setup. I was concerned that you could get into an admin nightmare if everyone was a shareholder. Whenever, some one left or redeemed something, I would imagine their ownship would change and thus their pass thru taxes. I can't see ownership paper being a lot of fun to change.
  4. That is what I am leaning towards as well. As far as I know the only way to distribute shares is to ammend some documents and pay fees. Not to mention, distributions would be a hassle as well.

    Just wondering has done this before.. using subaccounts. Either personal or as a llc..