For those who own a trading corporation, how do you track "income"?

S

Sammel

I'm an active USA-based trader, who is considering incorporating my day trading business into a C Corporation. What I'm wondering is how do you do the "accounting" for the corporation based on your daily trading activity?

Most traditional businesses generate invoices and recognize "income" when an invoice gets paid. However for day traders, our "income" is the profit from each day's trading. So if I use something like QuickBooks or Xero to manage my books, would I have to enter each days profits as "income"? That seems look a lot of hassle, especially when some days have a negative profit.

I'd love to hear how other trading business owners are tracking their "income" in accounting software, and if there is a preferred accounting software for this kind of business.
 
We offer our clients a basic version of Nirvana Solution for free. It provides, in addition to other features, P&L reporting.
 
I trade under my own C corp, but you could do this as a sole proprietor. Your income is based on your tax statement. For a broker, its a 1099 (with another letter, I cannot remember), and for a prop firm, its the partnership K-1 form. From this you deduct expenses. Just be careful as you have to be an active participate, not a passive investor. I would consult a tax professional if you are in doubt.
 
Prefaced with; always use / consult a tax expert (such as Green Trader Tax)


If doing short term trading only..., QuickBooks

If doing short and long term trading..., Quicken


QuickBooks will create balance sheets and income statements...., Quicken will not


When filing..., use Turbo Tax (Turbo Tax Business) it'll create the balance sheets and income statements

Then if you also use Turbo Tax Premier for personal taxes - it'll allow you to auto load your K1s.., and e-file the whole kitten kaboodle



Aside

Should you go LLC - verify whether or not your home state has franchise taxes


Again - consult a Tax Professional - I am not..., nor claim to be - one

RN
 
Sammel said:
I'm an active USA-based trader, who is considering incorporating my day trading business into a C Corporation. What I'm wondering is how do you do the "accounting" for the corporation based on your daily trading activity?

Most traditional businesses generate invoices and recognize "income" when an invoice gets paid. However for day traders, our "income" is the profit from each day's trading. So if I use something like QuickBooks or Xero to manage my books, would I have to enter each days profits as "income"? That seems look a lot of hassle, especially when some days have a negative profit.

I'd love to hear how other trading business owners are tracking their "income" in accounting software, and if there is a preferred accounting software for this kind of business.
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I don't recommend a C-Corp for a trading business. There is double taxation on income, no pass through of losses to your individual return, no lower 60/40 tax rates for Section 1256 contracts and other problems. You can't deduct investment expenses if all you do is invest with a C-Corp.

For trade accounting on securities I recommend Tradelog. It calculates wash sales correctly and also allows use of Section 475 MTM accounting if you timely elect it.
 
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