Pros and Cons: LLC vs S-Corp

Discussion in 'Professional Trading' started by saliva, Mar 14, 2009.

  1. WHAT??????????????? I owned a serious S Corp. You read a book. The income is PASS THROUGH. In other words, you pay self employment tax on EVERYTHING that is not some kind of bennies. And you pay TWICE as much as an employee - like 14-15%.

    The only sane way to do this, it to be "unemployed" and put all gains under cap gains, not as income.

    Corps/LLCs offer little benefit and a lot of nuisance
     
    #11     Mar 15, 2009
  2. Again, S Corps or LLCs are a waste of time for the trader. Extra cost, extra filing, little benefit.

    Just put your earnings down as cap gains. Forget the stupid structures. Yes I did this in the past. YOU WILL PAY 14-15% SELF-EMPLOYMENT TAX IN ADDITION TO OTHER TAXES. ANY OTHER OPINION IS NOT AN INFORMED ONE. TALK TO A CPA WHO IS NOT SELLING YOU A CORP STRUCTURE.
     
    #12     Mar 15, 2009
  3. if you don't mind me asking, about how much money did it cost to initially set up the LLC? and how much money does it cost to maintain it, and what state is it in?
     
    #13     Mar 15, 2009
  4. I know Traderzone is an all knowing genius, in his own mind at least, but it is worth checking out the benefits of a C corp. And like I just wrote you don't have to have to run all your business through the corp. I'm sure Traderzone didn't set his corp up to his benefit but that isn't proof it can't be done and isn't being done. Read up on what the corp can pay in addition to the basic medical insurance payments, that alone would be worth the effort to set up a corporation for someone who has serious medical expenses in their family.
     
    #14     Mar 15, 2009
  5. Redneck

    Redneck

    No problem Sir

    Initial set up $770.00 (hardest part was coming up with a name)

    The only reoccurring cost (Fed / State taxes non withstanding of course) is for a Registry Agent (Think official mailbox for the business) ~$169.00


    But all this - along with “everything” associated with running / operating / maintaining the business is tax deductable

    Training
    DSL
    Platform Fees
    Quarterly off site meetings
    etc, etc, etc


    State = Texas (NOTE Texas now has a franchise tax on earnings more than $300K)


    Redneck
     
    #15     Mar 15, 2009
  6. jnorty

    jnorty

    redneck your accounting knowledge is light if i may say. i can write off all the expense you listed as a sole prop outside the bogus meeting. in that case i'll just right off a trip or 2 and say it was trading related so no big deal. and yes in a llc all your income less expenses flows thru so self employment taxes are due. The only advantage in trading in a llc is you get to write off health ins and a retirement plan but with the medicare portion of unemployment being accessed to unlimited income its a liabiltyto have a llc if you make 200k or more. also if you trade futures you lose the 60/40 benefit i believe.
     
    #16     Mar 15, 2009
  7. Redneck

    Redneck


    No Sir

    My accounting knowledge is non-existent – My wife is the CPA, plus we have a tax lawyer on retainer


    The meetings are not bogus – they are quarterly meetings

    No self employment taxes due, I am a employee of the LLC (my personal salary is relative small and so are the taxes “I” pay)

    The LLC protects us and our personal assets

    The LLC completely eliminates any question the IRS may have about trader status – period

    We have a Corp managing the LLC

    The Corp allows me to set up a 401Ks for my wife and myself and trade them (tax deferred of course) No shorting only longs, which include longs on a short ETFs

    The Corp allows me to set up medical accounts

    We chose to manage our trading business this way because of the benefits, and it offered the best possible solution for our situation

    As with any business venture it is up to the individual to due the due diligence and determine the best solution for their situation

    Take Care

    eta - name one other business you would set up "NOT" like a business - please
     
    #17     Mar 15, 2009
  8. Redneck,

    That's very interesting setup you have. But would you please explain what you mean by "We have a Corp managing the LLC"?

    By this, are you currently operating under both LLC and x-Corp? That sounds really complicated but obviously you know this stuff more than me. Again, would you provide more detail on what the tax benefit might be under such an elaborate structure?

    Thanks.
     
    #18     Mar 15, 2009
  9. Wow you are an idiot, or your accountant is.

    First I'm not sure what you understand what pass though means. Pass through just means the income is passed on to the owners of the companies rather than being taxed at the corporate level and then at the personal level like a C-Corp (double taxation)

    from... http://www.powerhomebiz.com/vol136/structure.htm

    In an S corporation, only the salary paid to the employee-owner is subject to employment tax. The remaining income that is paid as a distribution is not subject to employment tax under IRS rules. Therefore, there is the potential to realize substantial employment tax savings.


    -----> maybe you thought that everything was subject to self employment tax because you never made anything more than what would be deemed "a reasonable salary" hence you couldn't classify for having any distributions
     
    #19     Mar 15, 2009
  10. If you are making under 100k and are trading PROP this is good idea. You pay 0 self employment tax by doing this, also the paperwork for filling out taxes is simple.

    Cons:
    - you can't deduct anything.
    - You can't contribute to a 40 something thousand IRA per year
    - You can't elect to do mark to market accountant. Basically the problem here is you are subject to the wash rule!!!! HUGE MISTAKE. If you are trading prop you just receive a K1 and do have to worry about the wash rule.
     
    #20     Mar 15, 2009