I have an S-corp business and am looking into opening up a new futures account. Would it make more sense to have my company open up the brokerage account, to keep the profits under the company? Or should I open up the account as a personal account? At the moment I do not need to take any money from the profits and receive my income from the other business (which already took the deductions for computer, monitors, etc...). I only trade futures and could probably qualify for trader status but would probably prefer to stay as investor status. The brokerage accounts I've looked into don't have any difference in regards to professional fees, so from a non-tax standpoint the only difference will be the professional fees for the data. As far as I know. What would be the advantages/disadvantages of opening up an account in each case (S-corp or Personal)? Also, would the answer change if I traded stocks also? Thanks, Chicago
a google search for "separate trading entity for the following reasons" with or without the quotes will give you a list of advangtages of using a pure-play trading entity. Whether you trade stocks or futures, the advantages are basically the same for an s-corp.
there is one advantage to trading personal vs s corp. if you are profitable in a s corp, the irs is going to come into your life and demand that you pay yourself a salary and fica and all the employment taxes. thats fine if you want to have a salary so you can start paying yourself ira contribution or profit sharing contribution. but if you don't want that you can avoid all employment taxes by keeping it personal. those employment taxes really add up.
I understand that I can open up a profitsharing plan or something similar through the company. Which I can already do. I don't need to open up the new account through the s-corp. But would I be sending a red flag to the IRS if my company income was just enough to fund a pension plan, health insurance, and maybe a very small income. While the majority of my money comes from an individual trading account? Thanks, Chicago
you can't fund a profit sharing or an ira unless you pay yourself a wage or are paid a wage and pay all the payroll taxes. income from your personal trading is not considered income but cap gains.