Pros and Cons: LLC vs S-Corp

Quote from Sky123987:

the key advantage to incorporate is so that you don't have to pay self employment tax. If you make $250,000 you pay yourself a salary of say 40,000 or which you do pay self employmet tax, then the next 210,000 is not subject to self employment tax. So you save a ton

another thing is that if you do go the LLC route the new tax changes are that you HAVE to HAVE another memeber in there for the LLC to count. Just say your g/f owns 1% and you own 99%
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WHAT??????????????? I owned a serious S Corp. You read a book. The income is PASS THROUGH. In other words, you pay self employment tax on EVERYTHING that is not some kind of bennies. And you pay TWICE as much as an employee - like 14-15%.

The only sane way to do this, it to be "unemployed" and put all gains under cap gains, not as income.

Corps/LLCs offer little benefit and a lot of nuisance
 
Quote from sandygray66:

This is great info. I used to operate my trading bus under an S-corp, but I opened an LLC late last year. I didn't realize the difference in the self-employment tax.

I see the form deadline to change the filing as LLC to S-corp is tomorrow. Just in the nick of time!
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Again, S Corps or LLCs are a waste of time for the trader. Extra cost, extra filing, little benefit.

Just put your earnings down as cap gains. Forget the stupid structures. Yes I did this in the past. YOU WILL PAY 14-15% SELF-EMPLOYMENT TAX IN ADDITION TO OTHER TAXES. ANY OTHER OPINION IS NOT AN INFORMED ONE. TALK TO A CPA WHO IS NOT SELLING YOU A CORP STRUCTURE.
 
Quote from Redneck trader:

Sir

We've discussed this before - maybe search

I have an LLC, and a Corp, and yes it's worth it hands down...

I set up the LLC first, then the Corp later on to manage the LLC. (eta I trade under the LLC)

I used leagalzoom.com both times to set them up

Take Care
Redneck
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if you don't mind me asking, about how much money did it cost to initially set up the LLC? and how much money does it cost to maintain it, and what state is it in?
 
I know Traderzone is an all knowing genius, in his own mind at least, but it is worth checking out the benefits of a C corp. And like I just wrote you don't have to have to run all your business through the corp. I'm sure Traderzone didn't set his corp up to his benefit but that isn't proof it can't be done and isn't being done. Read up on what the corp can pay in addition to the basic medical insurance payments, that alone would be worth the effort to set up a corporation for someone who has serious medical expenses in their family.
 
Quote from DataCruncher:

if you don't mind me asking, about how much money did it cost to initially set up the LLC? and how much money does it cost to maintain it, and what state is it in?
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No problem Sir

Initial set up $770.00 (hardest part was coming up with a name)

The only reoccurring cost (Fed / State taxes non withstanding of course) is for a Registry Agent (Think official mailbox for the business) ~$169.00


But all this - along with “everything” associated with running / operating / maintaining the business is tax deductable

Training
DSL
Platform Fees
Quarterly off site meetings
etc, etc, etc


State = Texas (NOTE Texas now has a franchise tax on earnings more than $300K)


Redneck
 
redneck your accounting knowledge is light if i may say. i can write off all the expense you listed as a sole prop outside the bogus meeting. in that case i'll just right off a trip or 2 and say it was trading related so no big deal. and yes in a llc all your income less expenses flows thru so self employment taxes are due. The only advantage in trading in a llc is you get to write off health ins and a retirement plan but with the medicare portion of unemployment being accessed to unlimited income its a liabiltyto have a llc if you make 200k or more. also if you trade futures you lose the 60/40 benefit i believe.
 
Quote from jnorty:

redneck your accounting knowledge is light if i may say. i can write off all the expense you listed as a sole prop outside the bogus meeting. in that case i'll just right off a trip or 2 and say it was trading related so no big deal. and yes in a llc all your income less expenses flows thru so self employment taxes are due. The only advantage in trading in a llc is you get to write off health ins and a retirement plan but with the medicare portion of unemployment being accessed to unlimited income its a liabiltyto have a llc if you make 200k or more. also if you trade futures you lose the 60/40 benefit i believe.
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No Sir

My accounting knowledge is non-existent – My wife is the CPA, plus we have a tax lawyer on retainer


The meetings are not bogus – they are quarterly meetings

No self employment taxes due, I am a employee of the LLC (my personal salary is relative small and so are the taxes “I” pay)

The LLC protects us and our personal assets

The LLC completely eliminates any question the IRS may have about trader status – period

We have a Corp managing the LLC

The Corp allows me to set up a 401Ks for my wife and myself and trade them (tax deferred of course) No shorting only longs, which include longs on a short ETFs

The Corp allows me to set up medical accounts

We chose to manage our trading business this way because of the benefits, and it offered the best possible solution for our situation

As with any business venture it is up to the individual to due the due diligence and determine the best solution for their situation

Take Care

eta - name one other business you would set up "NOT" like a business - please
 
Redneck,

That's very interesting setup you have. But would you please explain what you mean by "We have a Corp managing the LLC"?

By this, are you currently operating under both LLC and x-Corp? That sounds really complicated but obviously you know this stuff more than me. Again, would you provide more detail on what the tax benefit might be under such an elaborate structure?

Thanks.
 
Quote from TraderZones:

WHAT??????????????? I owned a serious S Corp. You read a book. The income is PASS THROUGH. In other words, you pay self employment tax on EVERYTHING that is not some kind of bennies. And you pay TWICE as much as an employee - like 14-15%.

The only sane way to do this, it to be "unemployed" and put all gains under cap gains, not as income.

Corps/LLCs offer little benefit and a lot of nuisance
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Wow you are an idiot, or your accountant is.

First I'm not sure what you understand what pass though means. Pass through just means the income is passed on to the owners of the companies rather than being taxed at the corporate level and then at the personal level like a C-Corp (double taxation)

from... http://www.powerhomebiz.com/vol136/structure.htm

In an S corporation, only the salary paid to the employee-owner is subject to employment tax. The remaining income that is paid as a distribution is not subject to employment tax under IRS rules. Therefore, there is the potential to realize substantial employment tax savings.


-----> maybe you thought that everything was subject to self employment tax because you never made anything more than what would be deemed "a reasonable salary" hence you couldn't classify for having any distributions
 
Quote from TraderZones:

Again, S Corps or LLCs are a waste of time for the trader. Extra cost, extra filing, little benefit.

Just put your earnings down as cap gains. Forget the stupid structures. Yes I did this in the past. YOU WILL PAY 14-15% SELF-EMPLOYMENT TAX IN ADDITION TO OTHER TAXES. ANY OTHER OPINION IS NOT AN INFORMED ONE. TALK TO A CPA WHO IS NOT SELLING YOU A CORP STRUCTURE.
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If you are making under 100k and are trading PROP this is good idea. You pay 0 self employment tax by doing this, also the paperwork for filling out taxes is simple.

Cons:
- you can't deduct anything.
- You can't contribute to a 40 something thousand IRA per year
- You can't elect to do mark to market accountant. Basically the problem here is you are subject to the wash rule!!!! HUGE MISTAKE. If you are trading prop you just receive a K1 and do have to worry about the wash rule.
 
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