Incorporate?

Can anyone weigh in on whether incorporation (LLC) for a trader has any advantages over sole proprietor (assuming it's a one-man operation)?

 

Many advantages aka taxes and benefits. And more costs too. My least favorite cost being professional data fees.

 

So if you were single, under 21, living in an apartment, would it be worth it to incorporate or pass on it?

I day-trade and scalp stocks.

 

Before everyone get on my case, no one is going to know if you pay professional fees or not, if you trade under an LLC. You can sign up for fees under you own name and write them off against the LLC just the same. As long as you are a managing member it shouldn't be a problem. Trading under an LLC you get many more write offs, it would take me too long to make a list, sorry. Plus if you have a losing year you can write the whole amount off against any other income you may have as opposed to having the 3k limit per year as a personal investor. I used daytradertax.com, Paul is good and reasonable priced. I used him.Tradersaccounting.com is good, but the want to sell you the cadiallac when most new business need a Toyota Corolla.

Dan

 

Interesting approach. Refuse data feed from broker since account is titled as LLC, and subscribe as individual to third party datafeed.

Will give it some investigation, thanks.

 

Thanks for the input so far. I appreciate it and any further advice. I understand I should probably talk to a tax or legal adivsor, but every little bit helps.

 

that's bs. there's no tax advantage for a single trader to get a llc vs a sole pro return. the only thing a llc can do vs a an individual is do a retirment plan and write of your self employed health ins. but the downside is you must pay fica on all your earnings to get that benefit vs paying no fica as an individual. some will mistakenly say you can write off more things which is false and they'll say the chances of being audited are less for a corp vs an individual which i don't believe. now if your funding traders you must have an llc

 

I am not here to argue with you, just trying to help someone out. I looked into this for over a year before doing it. You are right you will have to FICA though, although I have been advised by a professional, that I only have to pay myself 10% of the gross earnings as salary the rest can be used to repay my loans to the LLC. Legit loans, not ADP or Enron type.

 

you can also pay out as a dividend but there's a limit to that. if you make 200k i promise you you can't take 20k salary and take 180k as loan. i've studied every trader info in detail from robert green to ted tesser. let me put it this way. you can do what you want and file whatever way you desire until the irs comes calling. for someone who makes udner 100k a year trading and has a family and especially if the wife has ins from her work it's crazxy to file a llc. you'll ahve very little taxes to pay anyway.

 

Thanks. I started looking this direction (LLC) thinking I could have a company car, not have to worry about tracking mileage, pay the kids a little, but being this small a business, didn't know whether it was worth the hassle of all the extra paperwork. Plus the taxes pass through, which I thought would be a bad thing, but found out it was good because you pay corporate tax on business earnings when it doesn't pass through and then tax again on your salary/income. Lots to consider.