I set up an LLC which acts as a husband/wife partnership last year for the mere purpose of fully funding a mini-401k for both me and my wife. You can submit around $45k pp, per year. This means after two good years we will have $180k+ in 401k's which is a great start for our retirement. The downside is the SE tax, but part of this is offset by the 401k deductions. Worth it in my opinion for peace of mind. I use Green Trader fwiw.
opt789, this is exactly the point... Once you trade through an entity, and paying yourself an income, claiming all your deductions, providing company-paid health insurance, providing company sponsored retirement plans, etc, etc, etc self employment tax applies. That said, without trading as an entity, and generating no earned-income there are no good options regarding health expenses, retirement vehicles, and other things requiring earned income. Of course, with no earned income, there is no self employment tax. I might also add, the word "securities" by default, does not apply to all classes of trading instruments. Osorico
That's easy. The wife as an employee of the corp or LLC gets full medical/dental/vision/fishing lessons for her entire family... which includes YOU, the owner, and all of your young children. Work the wife part-time only, just enough to pay for the benefit premiums, and in your benefit statement, list full benefits available to ALL employees, so your wife is covered even though only part-time. Why this workaround? Because as a sole-member C-corp or LLC, it's damned near impossible to get benes for yourself, even if they're not only for you. See your CPA.
You can also set up a separate corp for the health benefits and such. Once you have one set up the second is real easy, and it also makes income shifting easier also.
In 2008 Social Security SE tax is 12.4% on the first 102k and Medicare SE tax is 2.9% on all income with no dollar cap. The cap on the Medicare tax was removed in 1991.
I was looking into this recently and did a little research. I went ahead and formed the LLC, but now I'm not sure if I'm going to use it. I don't need health care and I don't intend to form a retirement fund so it's probably not a benefit for me. Here's an article and a link which gives a good description of the various entities a trader can form: FACTORS AND ADVANTAGES TO CONSIDER ABOUT CREATING A TRADING ENTITY Asset protection from creditors or litigants Section 475 Election Availability 401(k) and Pension Plans Tax Savings from Planning Strategies Fringe Benefits Allowable Retirement Planning Every trader is unique with different needs and different fact patterns such as their assets and liabilities, family considerations, state of residence, etc. Your trading business and entity structure must be custom tailored to meet your particular circumstances. A 29 year old single scalper with gains of $300,000 a year has different needs than a 45 year old married Momentum Trader with 3 children and a full-time job. http://www.taxesfortraders.com/cgi/pp/entities.htm
If I understand the tax code correctly (and I am not sure of that!) The above only works if the LLC is taxed as a corporation and not an LLC taxed as a partnership. Do you agree GermanTrader?
I started a S Corp in in 2002 when I opened my IT consulting firm. I trade under that entity with huge tax benefits. However, if your not grossing at least a million than just file your schedule D. http://www.bankrate.com/brm/itax/tax_adviser/20030905a1.asp
You are making pretty good money. At your level its a good idea to get have your taxes done by a CPA. Most good CPAs have access to a tax attorney who they will consult when necessary. For my circumstances the firm is usually able to find enough savings to pay their own fee. A good firm will supply representation for you in any interaction or dispute with the IRS. I'm thinking you probably already know all of this. Having a relationship with an attorney and a CPA over the long term can really protect you and your assets. Worth the money imho.