easiest thing to do is to trade prop. You get a K1, you get to deduct expenses. And you don't have to pay the self exmployment tax
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Benefits/Drawbacks to trading through an LLC?
- Thread starter DragonDog
- Start date
Quote from DragonDog:
So you are saying that the managers of hedge funds would sign off on such a personal guarantee and make their personal assets fair game for lawsuits from disgruntled customers? This doesn't sound right to me but if you know this to be the case do let me know.
You are saying that brokers require LLC's to sign the personal guarantee in order to trade with them? Is that form optional or required to be signed?
I'm not saying you don't know what you are talking about but this just doesn't sound right because then every manager on the street could be personally sued and I know such managers do everything they can legally to assure that their personal assets are untouchable in lawsuits against the LLC.
Instead of going with what you "think" sounds right or not, I again direct you to download an LLC application from you broker and see.
Stop guessing. Real simple.
Quote from comintel:
Not if the broker requires a personal guarantee (which they probably will) and not for negligence.
I've never seen a "personal guarantee" requirement as such. Can you provide an example of the language used for this? It would seem to completely negate the primary purpose of an LLC.
Quote from Occam:
I've never seen a "personal guarantee" requirement as such. Can you provide an example of the language used for this? It would seem to completely negate the primary purpose of an LLC.
That is what I am finding so confusing here. So there is protection via LLC but then such protection is not real? And do all hedge fund managers who trade in financial markets give such a "personal guarantee" which would open them up personally to lawsuits from brokers who have made mistakes on their end or from disgruntled customers?
this doesn't sound right to me.
Here's two examples (I use IB and tried to link their language but couldn't, however...)
Advantage Futures:
http://advantagefutures.com/LLC_US.html
8th document
OK, now maybe semantics, but applications also have language in it that says the undersigned are liable for all obligations of the LLC. Not exactly a "personal guarantee" but language to the same effect:
RCG:
http://www.mirusfutures.com/sites/default/files/RCGAcctForms/RCG_LLC_PARTNER_APP.pdf
Booklet D, page 8, section 24:
24. The undersigned, being all of the General Partners/Members of the Partnership/LLC identified in the Commodity Customer Agreement agree to be jointly and severally liable for all obligations assumed in or arising out of the Commodity Customer Agreement. Further, any one or more of the General Partners/Members shall have full authority to act on behalf of the Partnership/LLC as if (s)he alone were interested therein, all without notice to the others interested in said account and all for the account and risk of the Partnership/LLC.
I am sure you could find you more of these examples.
Advantage Futures:
http://advantagefutures.com/LLC_US.html
8th document
OK, now maybe semantics, but applications also have language in it that says the undersigned are liable for all obligations of the LLC. Not exactly a "personal guarantee" but language to the same effect:
RCG:
http://www.mirusfutures.com/sites/default/files/RCGAcctForms/RCG_LLC_PARTNER_APP.pdf
Booklet D, page 8, section 24:
24. The undersigned, being all of the General Partners/Members of the Partnership/LLC identified in the Commodity Customer Agreement agree to be jointly and severally liable for all obligations assumed in or arising out of the Commodity Customer Agreement. Further, any one or more of the General Partners/Members shall have full authority to act on behalf of the Partnership/LLC as if (s)he alone were interested therein, all without notice to the others interested in said account and all for the account and risk of the Partnership/LLC.
I am sure you could find you more of these examples.
If "Dorman Trading LLC" can Protect their own Ass With LLC structure why can't I protect Mine?
Found in risk disclosure statement on their corporate account application.
"4.
Limitation of Liability
Exchanges offering an electronic trading or order routing system and/or listing the contract may have adopted rules to limit their liability, the liability of futures commission merchants (such as Dorman Trading L.L.C.), and software and communication system vendors and the amount of damages you may collect for system failure and delays. These limitations of liability provisions vary among the exchanges. You should consult the rules and regulations of the relevant exchange(s) in order to understand these liability limitations."
pg13
http://www.genuinecta.com/Dorman_Corporate_Account.pdf
I'm trying to find the part where they make individuals responsible for loss even though they are trying to trade through LLC.
Is page37- 39 it??
http://www.genuinecta.com/Dorman_Corporate_Account.pdf
Found in risk disclosure statement on their corporate account application.
"4.
Limitation of Liability
Exchanges offering an electronic trading or order routing system and/or listing the contract may have adopted rules to limit their liability, the liability of futures commission merchants (such as Dorman Trading L.L.C.), and software and communication system vendors and the amount of damages you may collect for system failure and delays. These limitations of liability provisions vary among the exchanges. You should consult the rules and regulations of the relevant exchange(s) in order to understand these liability limitations."
pg13
http://www.genuinecta.com/Dorman_Corporate_Account.pdf
I'm trying to find the part where they make individuals responsible for loss even though they are trying to trade through LLC.
Is page37- 39 it??
http://www.genuinecta.com/Dorman_Corporate_Account.pdf
Quote from Zr1Trader:
If "Dorman Trading LLC" can Protect their own Ass With LLC structure why can't I protect Mine?
Because they have more bargaining power than you do and get to write the contract and decide who they will accept and on what terms.
If you have a large enough trading account, it often does become negotiable.
By the way, it is not just brokers. Every bank will also require a personal guarantee for any loan or extension of credit to a small newly-formed company.
There may be a few brokers who will not require the personal guarantee.
Quote from comintel:
Because they have more bargaining power than you do and get to write the contract and decide who they will accept and on what terms.
If you have a large enough trading account, it often does become negotiable.
Yeah I suppose,
So it looks like as far as protecting my Liability to the broker; trading with an llc isn't of much help.
Keeping risk and leverage in check at all times is all anyone can do.
just hope that the perceived "closed positions" you have weren't left wide open due to broker error. It has happened.
Broker" it was your end"
Me " it was your end"
Broker +1 Me -1
Quote from DragonDog:
So you are saying that the managers of hedge funds would sign off on such a personal guarantee and make their personal assets fair game for lawsuits from disgruntled customers? This doesn't sound right to me but if you know this to be the case do let me know.
You are saying that brokers require LLC's to sign the personal guarantee in order to trade with them? Is that form optional or required to be signed?
I'm not saying you don't know what you are talking about but this just doesn't sound right because then every manager on the street could be personally sued and I know such managers do everything they can legally to assure that their personal assets are untouchable in lawsuits against the LLC.
Depends on the structure of the LLC and how many partners you have. To keep it simple, a single member LLC your personal assets are at risk. If you have a 2nd partner who is not a family member, then your personal assets are not at risk.
If your LLC is sued and the judge discovers that your partnerships are bogus, you're screwed regardless.
Quote from Lights:
Depends on the structure of the LLC and how many partners you have. To keep it simple, a single member LLC your personal assets are at risk. If you have a 2nd partner who is not a family member, then your personal assets are not at risk.
If your LLC is sued and the judge discovers that your partnerships are bogus, you're screwed regardless.
How would he determine the partnerships are bogus? Because i have all family members as partners?