Basic questions about running a properietary trading LLC

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pgo1970

A few questions about starting a proprietary trading LLC in the US. I'll be trading with my own funds but I want to do it in a separate entity.

  1. I don't need any licenses for this since the firm only trades with its own (my) funds, right?
  2. What funds am I trading with, the money issued through shares in the LLC, or some other funds?
  3. How do I deposit more capital into the firm or withdraw capital? Is this done by issuing more shares in my name or removing shares, or are there some other legal ways to deposit/withdraw funds back and forth to/from an LLC?
 
pgo1970 said:
A few questions about starting a proprietary trading LLC in the US. I'll be trading with my own funds but I want to do it in a separate entity.

  1. I don't need any licenses for this since the firm only trades with its own (my) funds, right?
  2. What funds am I trading with, the money issued through shares in the LLC, or some other funds?
  3. How do I deposit more capital into the firm or withdraw capital? Is this done by issuing more shares in my name or removing shares, or are there some other legal ways to deposit/withdraw funds back and forth to/from an LLC?
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1. no licenses needed
2. the money you deposit in your brokerage acc
3. transfer from your bank to your broker

doesnt need to be a "proprietary trading" llc
Any llc can be used ex. IT consulting will work
 
TexasTeaTrader said:
2. the money you deposit in your brokerage acc
3. transfer from your bank to your broker
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I can't just transfer money between person <-> company at whim without legally accounting for it somehow, right? That's why I imagined doing this through shares. Wouldn't any other boost in capital have to come through ordinary income which is subject to corporate income tax, or are there other mechanisms for capital deposit/withdrawal that I don't know about?
 
pgo1970 said:
I can't just transfer money between person <-> company at whim without legally accounting for it somehow, right? That's why I imagined doing this through shares. Wouldn't any other boost in capital have to come through ordinary income which is subject to corporate income tax, or are there other mechanisms for capital deposit/withdrawal that I don't know about?
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You only pay taxes on the earnings from your trading. The money you deposit in your business acc to get started isnt taxed.
I dont know what your talking about with the shares, if you are the only one on the llc you have all the shares. You cant issue more.

You just deposit $ in your business acc, then wire it to your trading acc that you opened under the llc name. Thats it. When you withdraw it has to go to your business acc.
 
pgo1970 said:
I can't just transfer money between person <-> company at whim without legally accounting for it somehow, right? That's why I imagined doing this through shares. Wouldn't any other boost in capital have to come through ordinary income which is subject to corporate income tax, or are there other mechanisms for capital deposit/withdrawal that I don't know about?
More...

You need to research Here's a short start...
http://smallbusiness.chron.com/pay-myself-llc-3658.html

And be sure to consider this.... the entity is in business to generate gains and/or losses through trading financial instruments. Taxation of different types of financial instruments carry different tax treatments. For example, self employment tax is not payable on "investment income", futures carry 60% long term 40% short term capital gains tax, and interest from specific bonds may be tax-exempt from federal and/or state taxes. Additionally, for specific instruments, the entity structure itself determines available tax treatments. Perhaps a default single member LLC (ie. disregarded entity) is NOT an appropriate structure for YOUR trading.

You need to do your due diligence!
 
depending on tax jurisdiction....
you dont generally want to issue shares - there are tax complications and its a hassle.
Often the best and easiest way to do it is to lend the money to the company.
However - just remember where any tax gains or losses get recognised and how they might best be used. There is not much point having tax losses in a company that cant be offset elsewhere. There is also the additional costs of accounts etc.
(again depending on jurisdiction - often using a trust and a company structure is a good option - but you will want to look into that yourself)
 
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