Is Sole Proprietor taxed at the personal tax rate by the IRS like in Canada or does it enjoy corporate tax rate?
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Professional or Non-Professional Subscriber for Exchange Data Fees
- Thread starter JSOP
- Start date
Is Sole Proprietor taxed at the personal tax rate by the IRS like in Canada or does it enjoy corporate tax rate?
Is Sole Proprietor taxed at the personal tax rate by the IRS like in Canada or does it enjoy corporate tax rate?
Personal rate.
But what if I want to incorporate but my account with my broker is still in my own name NOT in the name of the corporation and I have NO clients and receive no compensation whatsoever, would I still count as individual according to NYSE, AMEX and NASDAQ? It's those exchanges that I worry about. CME has already established they will accept corporation as individuals as well as long as I get no clients and do not advise anyone else and receive no fees and just trade purely for myself.
As far as Canadian taxes is concerned, sole proprietor is different from corporation. With sole proprietor, everything is still taxed at personal tax rate whereas with corporation, the tax rate is half of that of the personal tax rate. I know IRS might be different but I don't care about IRS, I am NOT a US trader.
Not sure, but it seems like it comes down to how the brokerage account is opened. If you open it in your personal name, then you are a non-professional. If you open it in a corporate name, you are a professional. However, if you incorporate (not in your own name), then obviously you can't trade in a personal account and then attribute those profits to a corporation. To me, the grey area is if you incorporate as a sole proprietor under your own name. My best guess is if you have to go through some incorporation process, then you would be a professional.
Personal rate, but the US personal rate is generally cheaper than the corporate rate.Personal rate.
Not sure, but it seems like it comes down to how the brokerage account is opened. If you open it in your personal name, then you are a non-professional. If you open it in a corporate name, you are a professional. However, if you incorporate (not in your own name), then obviously you can't trade in a personal account and then attribute those profits to a corporation. To me, the grey area is if you incorporate as a sole proprietor under your own name. My best guess is if you have to go through some incorporation process, then you would be a professional.
That's what my fear is too. Once I incorporate, I will lose the non-prof. status but then I might be able to claim all the data fees as expenses... I will have to talk to an accountant.
Thanks
Hello all!
I have an LLC (Florida based, Limited Liability Company, taxed as a partnership). I trade in the name of this LLC.
This is an entity and like anything not in a "personal name" (trusts, companies, organizations, etc...), this entity is classified as a Professional by the US Exchanges (NYSE, CME, etc..).
My brokers are IB and Tradestation. They both know the rule.
Entity = Professional
Retail (in your own name) = Non professional
The NFA, CFTC, Exchanges, Brokers and Introducing Brokers, have to classify "entities" as "professionals", by law.
Regarding Sole Proprietorship, it is actually an acknowledgement that an individual is conducting business in her/his own name or even with a business name (DBA, Doing Business As...) and can even separate her/his personal activities and finances from her/his business activities.
But that doesn't mean that is an entity. For that reason, an individual should just apply as a "retail" and not as a Professional or Sole Proprietor (which can be confusing).
Any retail can conduct her/his investments or trading activities in a "business manner", and even day trades 24/7, that will still be a "retail" in that case.
Regarding IRS and "business trader" classification, it is a different topic.
For example, my LLC is classified so far as a trader in securities and MTM accounting + trader in commodities.
"Business trader" = trader in IRS language. Any non business trader is an investor, in IRS language.
FYI, there is "no rate" for that kind of company. This is a "pass trough" company, meaning that owners (members to be precise) of the company will pay the taxes.
As I said, it is a different topic.
Happy trades!
I have an LLC (Florida based, Limited Liability Company, taxed as a partnership). I trade in the name of this LLC.
This is an entity and like anything not in a "personal name" (trusts, companies, organizations, etc...), this entity is classified as a Professional by the US Exchanges (NYSE, CME, etc..).
My brokers are IB and Tradestation. They both know the rule.
Entity = Professional
Retail (in your own name) = Non professional
The NFA, CFTC, Exchanges, Brokers and Introducing Brokers, have to classify "entities" as "professionals", by law.
Regarding Sole Proprietorship, it is actually an acknowledgement that an individual is conducting business in her/his own name or even with a business name (DBA, Doing Business As...) and can even separate her/his personal activities and finances from her/his business activities.
But that doesn't mean that is an entity. For that reason, an individual should just apply as a "retail" and not as a Professional or Sole Proprietor (which can be confusing).
Any retail can conduct her/his investments or trading activities in a "business manner", and even day trades 24/7, that will still be a "retail" in that case.
Regarding IRS and "business trader" classification, it is a different topic.
For example, my LLC is classified so far as a trader in securities and MTM accounting + trader in commodities.
"Business trader" = trader in IRS language. Any non business trader is an investor, in IRS language.
FYI, there is "no rate" for that kind of company. This is a "pass trough" company, meaning that owners (members to be precise) of the company will pay the taxes.
As I said, it is a different topic.
Happy trades!