I think you just register the trader and put his profits in the capital account of the entity. I think as long as the entity is not getting money for comissions then its ok. I think.
Yes, the issue is the entity being a part of a prop account. I don't know if there are any regulatory issues or if it is a gray area. Obviously it is much more desireable for income to go to an entity rather than individual. There are a number of reasons for this. If anyone knows for sure of a firm that does allow this, please post so here. Thanks.
There really is no reason to trade as an "entity"...we have eliminated the tax reasons by being excluded from FICA, and giving out K-1's. To trade as entity, every member of that entitywould have to be licensed and registered individually, and even then, I doubt the regulators would go for it. Don
There are numerous reasons to trade as an entity. Ask any decent accountant. He or she should be able to enlighten you as to the tax advantages of having your income flow into an equity rather than straight to you as an individual. Anyone who is making decent income would be a fool not to become an entity in any business. I am a bit surprised that someone in business as long as you could be ignorant to this. Since the entity would basicly be just the one person who is also the trader, all persons would be registered.
There are intersting implications about prop firms having bullets as a entity versus as various traders having their own bullets. The laws just changed in Canada....how does that work in the US?
Sorry, but I beg to differ. I was in Public Accounting prior to trading, and we have the best accountants on Wall Street...and when we are able to disregard a minimum of 15% of all of our incomve for Self Employment taxes alone, then having a Sub S or C corp or LLC just doesn't make any sense. We have convinced hundreds of traders about this, and all of they're accountants finally had to agree. I hate to cut off all this "easy money" for the accountants, but this is the way it is for traders making 6 figures. As always, you're welcome to make your own decisions, and I am NOT giving tax advice, (disclaimer) Don
It seems that the only advantage you can cite about a sole proprieter recieving k-1 income is his not being required to pay 15% s.e. tax. You fail to mention any of the advantages of being an entity. A retirement plan is a notable one. Having the entity provide you with such things as a company car, for example is another. And your odds of having to deal with the hassle of an audit drops by a factor of about 4 to 1, depending on the type of entity used.