I need a little pointer now that I'm seriously considering changing my tax status. Is anyone currently wearing the LLC or S-Corp badge? What are the pros and cons that I should consider before plunging in? Did the tax basis work out to your advantage as a trader? Were there any unanticipated pitfalls?
Why not check with your local certified public accountant? If you've not done that yet - do it! You should find that there are no tax advantages for the typical trader. FWIW, once you are incorporated via S, LLC or whatever, the primary function is to put an impervious wall between your personal funds and your corporate funds. IOW, if someone sues your corporation, they cannot tap into your personal funds. If they sue you, they cannot tap into your corporation's funds. Other than that, there are no advantages to incorporating. I'm no CPA so DO NOT TAKE MY WORD FOR IT......Ask your local CPA. Steve
the key advantage to incorporate is so that you don't have to pay self employment tax. If you make $250,000 you pay yourself a salary of say 40,000 or which you do pay self employmet tax, then the next 210,000 is not subject to self employment tax. So you save a ton another thing is that if you do go the LLC route the new tax changes are that you HAVE to HAVE another memeber in there for the LLC to count. Just say your g/f owns 1% and you own 99%
taxes, in particular employment/self-employment tax declarations. Check out this link to get a better idea: http://www.powerhomebiz.com/vol136/structure.htm
Thanks folks. I have yet to speak with my tax accountant largely because he doesn't know shit about futures and commodities. At least not this one that I currently have. I've been scouring over the net in the recent days to see what the advantages and disadvantages of incorporating or going LLC, particularly in terms of tax purposes, might be for the futures trader. Is there any futures or commodities trader who took this route? Besides the basic information that is freely available on the internet, I would like to hear some personal insight into what you find as beneficial as well as what to avoid. Thanks in advance.
Sir We've discussed this before - maybe search I have an LLC, and a Corp, and yes it's worth it hands down... I set up the LLC first, then the Corp later on to manage the LLC. (eta I trade under the LLC) I used leagalzoom.com both times to set them up Take Care Redneck
There are many things to look at and tax savings and benefits are a consideration. It isn't an all or nothing proposition when choosing a tax structure. If your wanting the benefits of a C corp but want to trade as an individual there are many options you could pick from. You could form a corp. that leases computer equipment and then as an individual lease the computers from you corp. This would allow you to have the benefits from your corp. without putting your trading operation under the corp structure. If you have health issues a C corp. can help you out there. The ones who say there are no tax advantages haven't looked at the complete picture, there are many tax advantages. Taxes are one of the main reasons to incorporate, benefits are another. Good luck.
This is great info. I used to operate my trading bus under an S-corp, but I opened an LLC late last year. I didn't realize the difference in the self-employment tax. I see the form deadline to change the filing as LLC to S-corp is tomorrow. Just in the nick of time!