Incorporate as a small trader

Discussion in 'Professional Trading' started by Acuario, Mar 25, 2010.

  1. Acuario


    For those living in the US: is it possible to form a small corp (s corp) or single member LLC for your activities as a trader? I don't see why this would be a problem, but can't find anything on this. Any input would be greatly appreciated.
  2. Yes its possible, why though? The most common is the LLC structure but taxes pass through to you either way.
  3. Surdo


    Why bother forming an entity?

    Just print business cards if you are looking to impress chics, file a schedule C if you need to write off your iPhone but have less deductions than a "large Trader".

    What exactly does a "small" trader do?
  4. Redneck


  5. 1) When your year-to-date losses hit $3000, stop trading until next year.
    2) You don't need to "complicate" things if you have a "simple" set-up. :cool:
  6. Incorporating protects you from personal bankruptcy. I have not reached there yet, but it sounds like the natural thing to do when going professional, even if you're just trading for yourself.

  7. I always thought that an individual can elect trader in securities with the irs to eliminate wash sales and write off commissions but once elected, the irs won't let you 'un'select it. Which is why, I thought at the least, many individuals would trade in an llc to have the business rules of no wash sales and the $3000 rule scratched? This is a grey area.
  8. Acuario


    Thanks for the input everyone. I posted this question for two reasons, both tax-related:

    -As tigerbalm pointed out, incorporating provides personal protection from any liabilities, lawsuits, etc.

    -When you file a Schedule C, you're paying a 1/2 self employment tax on net earnings from your trading. This is in addition to your marginal tax rate on any other income you may have (wages, etc.) By forming an entity, you're not subject to this self employment tax, which could be large if you're making a lot of money.

    I appreciate the links provided, good stuff!
  9. Incorporating is just an exercise in mental masturbation until you're trading profitably.

    That said, an acquaintance incorporated in Nevada which he said was a really good tax deal, much better than incorporating in our home state of Maryland.
    #10     Mar 29, 2010