lets say 5 traders are trading in a sub llc. i put in $10k. if one of the traders loses his capital, plus an additional $20k but doesn't blow out the llc, who takes the $20k loss? do the remaining 4 traders share that loss? i'm new to this so any info would be much appreciated. also, what if a trader blows up and loses everything in the sub llc plus an additional $100k. who is liable for the $100k loss? i assume my original $10k is history, but would i also be responsible for for part of that loss??? is there anything illegal about the sub llc's... they seem really sketchy. thanks for your reply in advance.
yes if one of the four blow out, you loose your money. That is the risk of pulling a LLC with capital from all traders involved. Also, i beleive you dont get the tax write offs. The LLC gets it. The LLC should have tight risk control, however the risk of some idiot blowing out the entire fund is still there. It's not a scam, its a way to get you say, 10 to 1 vrs 4 to 1. They can give you a bigger line on your small amount.
You would of course lose your money in the above (too common) scenerio. There is absolutely no reason to join a "sub llc"...even a couple that I know personally wish they hadn't even STARTED ONE. These guys were convinced to put up over $1Million with the offer of lower commissions (that they could mark up to the newer, unititiated traders)....well now they are stuck, cannot get their money back....and of course no one really wants to join them. And...to make matters worse, they didn't even get a good deal on the net costs. It's things like this that realy upset me, not that it has to do with our firm (obviously), but because it is really bad for the industry. I would just like the "owners" of these types of firms to rethink this path....if an office is worth opening, then open it....if it's right across the street from us, then go for it....just don't put good people in a horrible position by trying to hide behind these franchises and "sub llc's"..... Don