Futures tax treatment for entities

Discussion in 'Taxes and Accounting' started by ExchangeBonds, Oct 19, 2012.

  1. Before anyone says it, yes going to a cpa would be best, but I'm only at the point of exploring what is best for me but not at the point where spending money figuring it out is best. I've been looking at the ES volume incentive program, and it looks like something I will want to apply for next year. My question is if you create an entity for the purpose of getting an electronic corporate membership, do you lose the 60/40 tax treatment of futures?
  2. No. Create an LLC, that is a disregarded entity by the IRS, and just choose pass though taxes so you are taxes like a sole proprietorship. While it wouldn't matter how you choose your LLC to be taxed, this way there is zero question period. I formed an LLC for the same reason as you mentioned. Let me know if you have any other questions about the process and I will be more than happy to help. I'm feeling nice today.
  3. Thank you for the reply. That helps a lot for me to decide what path I'm going to choose because I did not want to constantly lease a seat and don't want to buy an IOM seat either for my current situation. The volume program is looking to be the best option for as long as they keep it open.
  4. NoBias


    LOL, I know how that goes.
  5. An honest man ... lol.

  6. Just because 95% of people here are douches or trying to sell something doesn't mean I am. Once in a while I like to help people out becuase of people who have helped me in the past... I do have some LCD monitors I am selling on amazon however...

    Reguarding the program being renewed for next year most likely it will. I actually lease a seat now so I don't utilize the program anymore but I still trade through my LLC for all exchanges except the KCBT becuase it only costs me $50 per year and adds some legitamacy to my business. Setting up an LLC is easier than filling out the CME Membership Application (at least in Colorado) so there is no reason to pay anyone to do it for you. The only exception would be if you are trying to keep you personal assetts seperate from your business's which it doesn't sound like you are trying to do.
  7. Isn't the appeal of an LLC that it limits liability ... hence the name: Limited Liability Company?

  8. That is not what he is trying to acomplish in this situation.
  9. Yea, I'm not trying to limit my liability from trading losses. I just day trade, so am not worried about some major crash that puts me in bankruptcy. I don't leverage myself up that far, and I also believe the broker would probably just have me sign a form that I agree to back the llc financially, so I'm not going to worry about that. My main goal was to see if i could lower my trading fees while maintaining the preferential tax treatment.
  10. The type of account does not determine the tax treatment of 1256 contracts. Therefore your concern of maintaining the tax treatment of 1256 contracts while trading through an entity is a non-issue.

    What you failed to look at however is that a trading entity will incur additional expenses and taxes such as the dreaded self employment tax, currently 13.3%, set to increase in 2013 to 15.3%, and higher data fees as example.

    You must run the numbers... additional costs (including entity setup and the ongoing entity accounting/legal/maintenance expenses) plus the additional taxes and fees versus the transaction cost savings.

    On the plus side, an entity allows you to generate earned income, which means retirement plans, health insurance, and other "company" benefit plans and programs, along with associated tax benefits become available.
    #10     Oct 19, 2012