How to pay one employee, start up prop firm

Discussion in 'Professional Trading' started by EDOptionsMMer, Nov 28, 2012.

  1. Situation: A couple of traders, futures only, proprietary money so no CTA/NFA involvement. Setting up as a split where X % becomes Y % for profits attained beyond the initial benchmark.

    Is his "bonus/salary" a deduction from the general partner's taxes? Is the best way to do this as a 1099 or via an operating agreement defining splits?

    100k in revenue. 80/20 split. How would you do it?

  2. 1245


    If this is an LLC and each party is listed as some type of partner, limited or general, you can use a K1. That way the entity pays no income tax, SS tax, etc. Income will filter down to your individual tax returns. If you claim someone is an employee, the entity will be responsible for paying many things including SS and disability and withholding of income taxes. You will need to talk to an accountant either way. 1099s are for outside "contractors".