Incorporate as a small trader
- Thread starter Acuario
- Start date
if LLC does not elect M2M wash sale rule does apply.
all this incorporation stuff is one big gray area, because regular CPA's doesn't know shit about LLC and trading and ones who does-cost waay more than just regular CPA. i would consider incorporation only if you making 200-300K or more every year
http://www.traderstatus.com/whyanentity.htm
and any decent lawyer is not going to have a problem to identify your ownership and contributions in this LLC and take them away. it's all myths. i'm going to order some books about asset protection, but even without them,after some reading on internet, it's pretty clear to me that LLC is not going to protect your assets.
you must be joking. Which broker is going to accept a $15,000 account of a one-man Livermore wannabe, under an entity that forswears personal liability?
Any serious broker will make you sign a personal guarantee for your entity's major loss, so you cannot close up show and they swallor the loss. That is how suppliers/vendors to small entities do things. You want credit, just sign right here on the dotted line, with your John Hancock, so you will be on the hook if your "entity" does not pay up.
Seriously people, don't accept advice from dime store professionals. Do your homework and get real professional advice before wandering out onto the minefield...
tigerbalm is badly mistaken. Traders do not face "liability" like a restaurant or supermarket. No one slips on grapes and sues you for everything. THAT is the kind of liability that S-corp/LLCs provide. And do anything illegal, and your corporate veil and negligee will be pierced...
Lose a lot of money, and you will still be on the hook for everything, as I just said, above.
Interactive Brokers accepted mine. Granted, it wasn't exactly 15,000, but still...
Don't be so sure of things of which you have no personal knowledge. My "entity" is an Illinois Limited Partnership with a S-Corp as the General Partner. All regular folks, including me are Limited Partners. Being cheap, I set everything up myself. And, yes, I am confident the setup as as good as it would have been done by a professional.
But I did not do this for "protection". It's a very long shot that you would blow your account and end up with a negative balance. Not unless your broker is a bucket shop and does risk management on the back of an envelope while providing clients $400 day trading margin. If I get caught in a sticky situation, IB will liquidate my positions long before that negative balance happens. Guaranteed. Even the $4.5k maintenance margin of ES is good for a drop of 90 points. How many scenarios can you come up with where ES would drop 90 points and your broker would have no opportunity to react? Sure, there is always a remote possibility, but no one can make a living on that slim odds, methinks.
I should note that I do not know about the equities side of the business. I do futures only. Also, The entity setup thingie hasn't really paid off that much for me (financially). I did this to be able to pool funds from friends & family and be able to give them a K-1 end of the year. That worked out okay.
Here's another grey area I have with structuring. I was always under the impression that when adding the additional layer of separation from the money by adding the limited partnership, the limited partner I thought was suppose to be the one set up with all the voting rights as well as the control of the money whereas the general partner was suppose to be the one that holds all of the debt and the one who does the "business" with the outside world, thus if a lawsuit gets triggered, the plaintiff goes to court with the part of the fortress that holds no value.
Am I right so far or do I have some things mixed up?