"And do anything illegal, and your corporate veil and negligee will be pierced..." a classic metaphor.
if you go to accountants section of the yellow pages their are accountants who specialize in securities tax rules. guys with 2 million dollar portfolios use their service. for small traders you can't afford the tax accountants fees and should do your own taxes and save couple of hundred bucks UBS being investigated for helping clients minimize their tax obligations..those clients are like million dollar and up clients.
only benefit for incorporation is wash rules so if you keep trading the same stock like prop traders..you can write off losses profits. and writeoff business expenses. becareful with writing business expense,these tax guy do audits if you put your job as stock trading.cause there are few expenses. as for taxes consult your accountant so your don't get audited. it's like 30 days if you have a loss you cannot use it for wash trading. other than that no other benefit from incorporation to individul if you are just a one man operation.
wash sale rule applies to corp\LLC just like to individual trader unless this corp\LLC elect trader status->M2M status. if you trade as an individual-you can do your taxes in hour or so. with corp-you will be totally depended on CPA. from my experience-there is no difference between the guy,who charge $150 for corp. return or $1500. 1K guy actually messed up one of my returns pretty damn well. here is good site about all this stuff- http://www.traderstatus.com/whyanentity.htm i kinda doubt that IRS comissioner will respond to any letter from average joe
Why would most want to do this? If you're using extremely high leverage to the point where getting blown out and owing millions to the brokerage is a realistic possibility, that's one thing. But otherwise, aren't you just adding costs for no real gain? The biggest cost, of course, being SS/Medicare taxes - a huge hit to the bottom line.
Not necessarily. You do not have to run payroll. Let's take an example. You have 1 GP (a corp. in my case), and n LPs. I, the person, is an LP too, and also an employee of GP. I, the person, along with other LPs share in the P&L of the partnership. It's 1099B income. In this case there is no cost from payroll taxes. Unfortunately, if you pay your mortgage out of your profits, you can not deduct the mortgage interest in your tax return, as 1099B is not "earned income". If you have enough earned income from other sources, this is a non issue. GP simply gets nothing, and has no money to pay the employee, and there is no payroll taxes. If however, you have a need to generate earned income, you need to give some of the profit to the GP so it can run payroll, and pay the employee (me) a salary. This is W2 income, that is reduced by various deductions in your tax return, including mortgage interest, property taxes and what not. Of course, you pay payroll taxes. Work out what is cheapest for you. Also, in a LP you can pay whatever % to whoever you like. It is governed by the partnership agreement, not necessarily by the amount of capital contribution from each person / entity. My GP has no investment in the partnership whatsoever.