How to start an exempt CPO?

B

bulat

On the encouragement of some friends, I've decided to start a CPO fund to mange some of their money, and since the initial amount of money in the fund is under $400,000, the pool is exempt from all the various registrations.

Does anyone have some experience with the logistics of such an operation? In particular, since I plan to deduct performance fees, how are the taxes calculated and reported both on my end and for the investors in the pool? To save money, I'm trying to figure out a way to do this without an accountant, so any pointers would be greatly appreciated.
 
(1) Take these with a grain of salt---------------miramar-research.com, greentradertax.com & tradersaccounting.com. (2) Your clearing firm should be able to provide some of that info for you if you dangle the possibility of them landing a 6-figure trading account from you.
 
it might be best to not cut corners and get a good accountant - and also - a non exempt CPO Fund has to have an annual certified returm from an account - check to see if the same exists for an exempt fund
 
Quote from bulat:

Does anyone have some experience with the logistics of such an operation? In particular, since I plan to deduct performance fees, how are the taxes calculated and reported both on my end and for the investors in the pool? To save money, I'm trying to figure out a way to do this without an accountant, so any pointers would be greatly appreciated.
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Your fund is going to be a limited partnership or LLC. So you are going to have to form this entity and get a tax id number from the IRS (I'm assuming you are in the US, although you don't say). You'll probably have to file something with your state and county. There is a Turbotax version for businesses which will help you do the taxes on your LP or LLC. You'll also need to file an exemption statement with the NFA and give a copy to your investors.

Best of luck and good trading,
Aaron Schindler
Schindler Trading
 
Quote from Aaron:

There is a Turbotax version for businesses which will help you do the taxes on your LP or LLC.
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Thanks Aaron. So this version of Turbotax can properly classify which income is short-term cap gain, which is long-term cap gains, and which is just regular income, after accounting for all the performance/management fees?
 
Quote from bulat:

Thanks Aaron. So this version of Turbotax can properly classify which income is short-term cap gain, which is long-term cap gains, and which is just regular income, after accounting for all the performance/management fees?
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No, you don't split the trading profits of your LP or LLC into short and long term capital gains on your pool's tax return. Your investors will do that on form 6781 of their tax return. Your LP or LLC is a pass-through entity for tax purposes and doesn't actually pay any taxes itself. The tax return for your pool will be an informational return with some forms to send to the IRS and a K-1 (for partnerships) to send to your investors.

If your pool is a limited partnership it will file a Form 1065. You can download it from the IRS website if you want to see what it looks like.

Aaron Schindler
Schindler Trading
 
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