Much easier to spend the "Company's" money Pre-Tax with out any flags than writing off personal expenses for business. It is really not that big of a deal to form an entity. If you have no expenses and/or income it is pointless. Owning/leasing real estate and vehicle(s) takes on a whole new meaning!
I concur, especially if you plan on trading professionally. If one of our traders wants to trade through an LLC, they have to personally guarantee everything, even losses in excess of their deposits.....but if they are simply a member of our LLC, they are limited to the amount put up. Keep it simple..... Don
Don, thank you. Appreciate everyone's input. By "trading professionally," do you mean for a living or becoming licensed? I plan to trade for a living, but my money, no loans. Which loans are why you want to limit your liability in the first place; or trading other people's money, which I haven't reached that point. I'm looking for a tax advantage, that's why I'm barking up this tree. Nice to have a place to come kick ideas around before shelling for a business tax advisor.
Unless you trade prop, according to Don, you have to PG losses whether it be personal trading or trading through an LLC. I just opened a new LLC account and I had to sign the PG. If you are an established LLC with extra funds and corp. history you may not have to PG. Of course you need to do your own due diligence before making important decisions such as these. As I recall if it is a 2 members LLC is the way to go, otherwise you have to go S Corp, atleast in the State of Colorado. Single member LLC are disregarded entities for tax purposes.
The whole concept of the "stock exchange floor trading" business model that we use is getting "use of" capital (not "abuse of"), without "borrowing" or "raising" a million or two. We incorporate all the tax advantages, provide the capital to trade with, and the traders only risk $20K or so to use a $million or more (on proper strategies, no "cowboys" of course)...but we help with the training as well, of course. No FICA, "triple net" K-1....one number tax filing. All the best, Don
I don't think you will really get much from forming a 1-man LLC. For all intents and purposes it is treated as an alternate identity for you. Anything you could accomplish as a 1-man LLC, you could do as a sole proprietor with a mark-to-market election. Forming a c-corp is a different story. But it sounds like you are more interested in creating income rather than growth, so you'd get screwed in a c-corp. Personally I like the c-corp, but I have an alternative income so I don't pay myself dividends. But if you don't plan on withdrawing significant amounts of money by way of dividends, then you might consider a c-corp. A couple flaws that I seem to remember from your earlier posts. You don't get double taxed on salary, only on dividends. Salary is written off pre-tax for the c-corp, as are other benefits. The advantage for the c-corp is the corporate tax rate. It will allow your capital to grow faster than the LLC. Also, if it was you who mentioned a company car, be careful. The IRS is getting sticky about things like cars and cabins at lake tahoe. Too many companies abusing the loopholes to buy luxury company cars, and vacation homes used for corporate mtgs.
Thanks to everyone. Good stuff. If anyone else was faced with deciding to incorporate or not, I'd appreciate hearing your reasons for deciding one way or the other. I realize every situation has its own circumstances, but every little bit helps. Barry
LLC only really starts to apply when you need to protect yourself and capital from others, usually investors, partners and other businesses. Also if you're giving out services an LLC becomes important. I really wouldn't worry too much about it unless you're going to start taking in money from friends, family, etc. As long as you're trading your own money in your own account and most of your overhead is just yourself (especially if a spouse has you under their insurance), an LLC really isn't that sensible. If your business eventually starts to branch out into things like rental property and investment property then the LLC becomes important. If you start to take on any kind of "partners" then you REALLY need to start investigating LLC's and LLP's. Just my .02 over the internet. Good Luck
***I am not a tax pro, simply posting my 2 cents*** jbingo, It is important to identify if you qualify as a "trader" under IRS code. If you do, then there really is little difference between going sole prop or LLC. However, if you DO NOT qualify as a trader, then an LLC is a better solution. Otherwise, all your "investing" expenses as a sole prop will be subject to adjustments. In this situation, an LLC allows you to deduct business expenses more efficiently. This is simply my understanding of the tax code. I am in a similar situation and considering either option (simply based on deductions for business expenses). Currently, I do not qualify as a "trader" per IRS.
Thank you ---------------------------------------- If your business eventually starts to branch out into things like rental property and investment property then the LLC becomes important. If you start to take on any kind of "partners" then you REALLY need to start investigating LLC's and LLP's. Just my .02 over the internet. Good Luck [/B][/QUOTE]