I'm not going to argue with you but you are misinformed except 3).
Pros and Cons: LLC vs S-Corp
- Thread starter saliva
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FIRST: In an S-corporation, the employee-owner is subject to DOUBLE FICA tax. 14-15% rather than nothing when just putting as unemployed and putting your gains as your cap gains. This dboule FICA, in addition to the fed/state/other taxes alone wipes out most of the clever benefit to all the extra work and expense involved.
$80K?? Unemployed - ZERO FICA. S Corp owner, tries to get salary of $40K, pays the double FICA and winds up like paying on a normal salaried job of $80K. Why is it hard to get through to you????????
SECOND, the FICA tax cuts off for everyone at about $94K, so if you do well, it is quibbling over this amount.
THIRD, if you think you will be clever, and put something like $10K annual salary and $50-90K as distributive, this will not pass muster. The IRS is not stupid. The salary must be reasonable. Many clever people get lanced when they try to lowball this. As I said, I owned an S corp. Most of the stuff that people pass around is theoretical fluff. S Corp owners draw much more scrutiny.
FOURTH, spouses are considered as a single person, so there is not a marriage out using the wife as another owner.
FIFTH, a lot of the extra benefits people think they will realize are wiped out be the standard deduction. It takes a lot of looking around for deductions just to reach that amount.
Even an unincorporated person can put away into an IRA. And if married, can double it. And if kids, can do other types of IRA, including Educational.
No not at all!!!
You get several benefits from incorporating
1) Less self employment tax
2) Legal protection
3) Retirement plan
#2 is correct for many businesses and recommended for business that may be dangerous or have high liability such as construction, auto repair and many others. But I don't see how this would apply to trading.
Income splitting is also an advantage of a C corporation having a different tax year than 12/31.
For a futures trader I don't know if it would be worth the time and effort to set up a separate corp or not.
You get several benefits from incorporating
1) Less self employment tax
2) Legal protection
3) Retirement plan
#2 is correct for many businesses and recommended for business that may be dangerous or have high liability such as construction, auto repair and many others. But I don't see how this would apply to trading.
Income splitting is also an advantage of a C corporation having a different tax year than 12/31.
For a futures trader I don't know if it would be worth the time and effort to set up a separate corp or not.
every self employed person should make sure he(and his wife) has accumulated enough medicare quarters to qualify for medicare. medicare is a gift. traders are making a mistake if they never contribute to their future medicare.Quote from jeb9999:
This is wrong.
Medicare tax (1.45% x 2 for self employed) has no income limit.
The Medicare tax adds up fast when you are making millions.
Quote from bigarrow:
You get several benefits from incorporating
1) Less self employment tax
incorporated people pay double SSI as compared to a person who puts "unemployed" and just reports cap gains, who pays nothing. No SSI, no medicare...
2) Legal protection
correct - this legal protection is basically to prevent a supplier or customer from attaching someone's personal assets. However, vendors/suppliers require the owner to also personally sign for any debts or other things. Legal protection is essentially useless to traders.
3) Retirement plan
Anyone can set up IRAs. And an unincorporated person can still set up a retirement plan for up to 25% of self-employment income. I forget the exact program - 403? something else?
You get several benefits from incorporating
1) Less self employment tax
incorporated people pay double SSI as compared to a person who puts "unemployed" and just reports cap gains, who pays nothing. No SSI, no medicare...
2) Legal protection
correct - this legal protection is basically to prevent a supplier or customer from attaching someone's personal assets. However, vendors/suppliers require the owner to also personally sign for any debts or other things. Legal protection is essentially useless to traders.
3) Retirement plan
Anyone can set up IRAs. And an unincorporated person can still set up a retirement plan for up to 25% of self-employment income. I forget the exact program - 403? something else?
Hey TraderZones, I was reply to rolextrader's response to Sky123 post, that wasn't my original post.
Overall your right, for traders I think, the hassle would be a lot for a little benefit. For most businesses the leagl protection is much more than credit protection, the reason I have a corp for my construction business is if an accident happens, someone dies, a building burns down, a car wreck by one of my subs, then I am (hopefully) removed from the lawsuit. This of course doesn't protect me from negligence.
But my corp does save me taxes also and some benefits. A trader wouldn't need that kind of legal protection.
Overall your right, for traders I think, the hassle would be a lot for a little benefit. For most businesses the leagl protection is much more than credit protection, the reason I have a corp for my construction business is if an accident happens, someone dies, a building burns down, a car wreck by one of my subs, then I am (hopefully) removed from the lawsuit. This of course doesn't protect me from negligence.
But my corp does save me taxes also and some benefits. A trader wouldn't need that kind of legal protection.