Would I benefit by setting up a corporation (or some business entity) in order to trade? I'm speaking more so on the issue of being taxed and potentially raising capital in the future. I currently trade by myself using my own money. From what I understand, it can be costly to go through the process of setting up as a financial advisor if you plan to raise capital, but what about establishing an entity for my own one man operation (I'd like to call it a Hedge Fund, LOL)? Is that process any different?
I don't know how it is now, but we talked a lot about that a while ago (like 10 years) and the general consensus was better to stay independent and just pay cap gains, once you form an entity you are subject to SE taxes. But maybe people think differently today.
You might check the Green & Company website. There is a lot of free information (documents, videos). If nothing else, the information should help you form specific questions you'd like answered during a free (but brief) consultation with Green or other professional services firms. Note: I'm not a client of Green & Company. I came across their website while surfing for trade accounting software. I did buy Trade Log from Armen Software and I'm happy with it.
wow, that Trade Log looks pretty nice. How does it get the info from the broker? I see my broker (ib) is listed, but what is the procedure to enter the trades into Trade Log?
It is a Simple procedure, you set up the account in the program, IB import Brokerconnect, it connects to IB, signs you on, prompts you for your secureID, then imports transactions automatically. Then you run a few filters to match a few open transactions, if you do it monthly it isn't much maintenance at all. Best time to do it is 1st of year, and try to be flat at end of year to avoid the nuisance of identifying positions to be carried over If you choose Mark to Market accounting, once you do the initial setup, it is painless each year. If you primarily trade futures and Forex, do not believe it makes much difference. Standard license should be fine. In any event, it comes with sufficient tutorials which walk you through the setup procedure. It definitely saves money with my accountant each year Ref: Creating a business entity or LLC for personal trading, doubt it necessary, as others pointed out - best advice is to ask YOUR accountant for YOUR personal situation.
OldTime - There are two options for data transfer. 1. Log into your broker and download the transactions into a .csv file then import the .csv files into TradeLog. 2. Allow TradeLog to log into your broker's account and grab the data it needs. In the case of IB, you'll need user ID, password and the code from your security device. Since the code is constantly changing, you're still controlling access to your IB account. I tried the 2nd method with IB, OptionsXpress and Scottrade. It worked like buttah with IB and OX. With Scottrade I had to use .csv files which was a pain. That was another reason to move some relatively inactive IRA accounts out of Scottrade. Note: In the Scottrade example I was using TradeLog to build a dbase of all activity over several years, regardless of whether I had to prepare tax forms for certain accounts. Trade Log is pretty simple to use. It's primarily a trade matching database but it will prepare the pertinent tax forms and do some cursory analysis on closed trades. Once all your activity is matched you can export the whole dbase and analyze to your heart's content in Excel, Access or something else. The price is right and I think it will save most people a lot of time, even if they are not a BSD with thousands of trades.
Think ahead several steps. Look up the pay schedule for the CEO's of leading foundations and where they worked before to build their nest eggs. When you have opulence, what is your game plan and life style? you too can grow trees inside your front door. Keep your organizational structure simple and tax free. Avoid getting into the AIR loop with the IRS when you set up. right now you are going step by step. If you must, do a "C" corp but you do not need to keep it too active. Otherwise skip ahead and be a NGO (501 or 509 series) and tax free with respect to all earnngs and incoming gifts. Help Big Bird occasionally by paying no taxes on profits. Go for freedom.