Is it possible to start a Business that does nothing related to trading ?

Discussion in 'Taxes and Accounting' started by etrades, Aug 9, 2019.

  1. etrades

    etrades

    Hi guys,

    This question is from perspective of a FT trader and Taxes and accounting and Mortgage etc.

    In general, the advice given to those who want to FT trading in order get Mortgage and other financial services, home for lease etc. is to pay yourself a Sal from a company that you start. Then you can show these earnings and the tax paid in order to avail the services.

    I would like to understand more about how to do this especially if one does not want to start a company that does trading as its business (reason being they do not want to open an institution trading account with the brpkerage, rather prefer individual trading account) then how to go about starting a Business in which one could call themselves an employee and pay a Sal using money they earned by stock trading/ investing ?

    My questions are:

    1. Should it be LLC or Sole Trader.

    2. What should such a business state it actually does when registering the business ? Can it leave the section blank ?

    3. What should the person (doing the stock trading) employ himself as in that company ?

    4. Is it possible to pay the stock trading earnings as an individual to the company bank account ? If so, what service should that company say it did to get paid that amount ?

    5. Can one be both the director and customer of the business ?

    6. Will brpkerage deposit the amount to the business bank account ?

    In general, please let me know how FT traders register a company and pay themselves ?

    Thank you
     
    ArthurWang likes this.
  2. tiddlywinks

    tiddlywinks


    You can not do this. Stock trading/investing produces only capital gains and/or capital losses. You can not pay yourself a salary, which is earned income, with capital gains!! That is part of the benefit and is at the crux of what and why operating through a trading entity with Trader Tax Status(TTS) qualification is all about!!

    Buy yourself a copy of Greens Trader Tax Guide. It will give you knowledge you currently do not possess in addition to answering many of your listed questions.
    https://greentradertax.com/shop-guides/greens-trader-tax-guide/

    I operate an LLC with S-corp tax status elected. The business is trading. Brokerage and bank accounts are titled in entity name. The entity qualifies for TTS. I am an executive of the LLC (treated and operating as an S-corp), therefore I am a W2 employee... salary/wages/bonuses/distributions/benefits/etc are paid to me from the entity, with all taxes including FICA withheld. The business is trading! As an employee, I get a W2 at tax time and as a shareholder of the LLC(treated and operating as an S-corp) I get a K1.

    HTH
     
    Baron, soulfire and etrades like this.
  3. etrades

    etrades


    Thank you for the answer on this Tiddlywinks !

    Do I still need to do this if I do not want to do a TTS but simply go for the tax status of any regular LLC ?

    Also, who is the director of your LLC ? I presume you are correct ?
     
  4. Turveyd

    Turveyd

    Trade with a Spot Spread Betting account, which is classes as gambling and gambling is tax free in the UK, not an issue at all :)
     
  5. tomorton

    tomorton


    Another upside is you get to live here in the UK!
     
    dealmaker likes this.
  6. Turveyd

    Turveyd

    Another? Don’t you mean the only?
     
    tomorton likes this.
  7. smallfil

    smallfil

    You should probably, consult an accountant and or a tax attorney in your country to advise you. Your laws may be different too and I assume you live somewhere else and not in the US. That is the best way to do it.
     
  8. tiddlywinks

    tiddlywinks

    You missed the point... TTS is a requirement. Without it, capital gains are capital gains, and losses are non-business losses. Get Greens book. For a sole proprietorship, or an SMLCC, the "owner" would need to qualify for TTS. For entity structures, the entity needs to qualify for TTS. Entities and individuals are separate taxpayers. An entity that employs an executive, partner, or anyone else with TTS, does NOT qualify the entity for TTS.

    Trading is a different animal in the eyes of the IRS. It is not the same as a shoelace distributor. Trading/dealing is singled out in specific areas of the tax code. By default, capital gains are not earned income. Losses are non-business losses.

     
    Last edited: Aug 10, 2019
    etrades likes this.
  9. sprstpd

    sprstpd

    As an individual, even with TTS, the default gain/loss rules are capital gains/losses and are reported on Schedule D.

    https://www.irs.gov/taxtopics/tc429

    To change from the capital gain/loss rules, an individual must elect MTM. Then the gains/losses will be ordinary gains/losses. To elect MTM, you must qualify for TTS.