Pros and Cons: LLC vs S-Corp

If your wife works a regular 9 to 5 then you should have no problem. It sounds as though you didn't. You can still list our name on the mortgage. Just change your job title to whatever you think is appealing to the bank. Self-employed investor? Just tell them you use Schedule C and report with you SS# but they may ask for the tax return. Either way, as long as your wife is working you'll get a mortgage with the credit score you mentioned earlier.

Quote from Bob111:

that's why i said it all depends on your filing status..and marital :p
many times you don't have to mess with LLC's and fancy titles in it. if you have a wife, and she has steady job-it's good enough for TYPICAL mortgage(unless you are planning to buy a f* estate with 25K payroll).same for health insurance. cheaper to buy from her employer than buy on your own. you know the bottom line probably better than i'm: everyone's situation is different and it is up to them to find the solution that would fit.



we got approved after 10 minutes talk in 2 companies and third one give us 0.25 less, without my name on mortgage,but i paid cash for my house(which i bought about year ago)..
simple math-if my house value drops 50%(which is very unlikely,but possible)-i will loose little tiny portion of my equity..but with mortgage and interest payments-it's like playing futures with 5K account and no job..one miss-and you are dead for very long time..
i prefer old fashion way,when it's comes to hard assets: cash only
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Quote from Bob111:

i'm not paying myself anything either,no SS taxes for me. for same exact reasons you mention above. however-it might be worth it to pay absolute minimum SS taxes,to meet the required minimum and be eligible for SS at the retirement age. i would appreciate,if someone can explain to us how SS works and if i'm right or wrong.
would it be possible for guys like us(traders) to pay less and collect later more than we did contribute to SS?

Thank you!
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You always want to pay the maximum SS contribution possible. Which means you ideally have at least an income up to the limit for SS purposes. This is still true, even though you are in the upper income range and will end up subsidizing those at the low end to some extent. Despite this SS is still a very good deal for you compared to private plans that will require you to contribute far more per month to insure the same monthly payout that can't be outlived. This is because of the shared risk feature of social security that defined contribution plans lack. Also because SS can operate at cost, and does not require that a profit be made from your contributions, it is very efficient compared to private plans. The only thing that threatens to wreck social security are Wall Street lies, and a congress that insists on stealing indirectly from your social security entitlement to pay for corporate welfare, primarily via subsidies of the "defense" industry. Though social security funds are protected by law and can't be tapped directly, The money borrowed at interest from the trust fund can't be paid back without further borrowing. This will cause inflation. The government is using a method of computing inflation for social security purposes that underestimates real inflation, and in this way money is taken indirectly from social security. Private plans that hold U.S Treasuries in them suffer from the same defect.

There are several good threads on SS here. Every U.S. citizen should take the time to thoroughly understand how the social security system works so they won't be easily misled by all the misinformation and lies spread by Wall Street. Wall Street wants to kill social security for very obvious reasons.

I am always surprised by the number of ET folks who haven't a clue how social security really works. Some even think it is a Ponzi scheme! These folks are easy marks for Wall Street and are playing right into the hands of Wall Street hucksters. A favorite tactic of those that want to weaken social security is to lump SS in with medicare when discussing the problems of entitlements. They are two very different programs. SS has only very minor problems going forward that are very easily fixed. Medicare, on the other hand, because of the greed of the medical cartel, is a disaster waiting to happen, and together with out of control military spending, threatens to bring down the entire U.S. economy.
 
Quote from opt789:

Bob, I am not really sure what you are asking but it seems like I keep saying the same thing over and over. Capital gains are not subject to SE tax, period, end of statement.

If you do something, like become a member of an exchange or choose to pay yourself a salary through an entity you set up, then your capital gains are not treated as capital gains and you have earned income and are subject to SE tax on that salary you pay yourself or all of it if you are a Dealer (as opposed to a Trader). Electing MTM or just forming an entity does not automatically subject your gains to SE tax.

In other words, you choose whether or not you want to pay SE tax. The reason to do so is that you will now have earned income and can contribute to a deductible retirement plan and do various other things. On simple pass through entities like a partnership or LLC there is no requirement that you pay yourself a salary. On other entities like a C corp there are so many complexities that you can do a large number of things on how and what to pay yourself, but all that is best a addressed by an attorney.
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Your information about exchange members is wrong. Capital gains are subject to FICA taxes for members of futures and options exchanges. Exchange members have no choice in the matter.


Read the IRS code and relevant forms and instructions (Form 6781 and Schedule SE of Form 1040). Section 1256 gives all futures traders 60/40 treatment. Section 1402(i) makes the futures profits of members of futures exchanges subject to FICA tax. Income defined as self-employment income for purposes of section 1402(i) does not redefine the income from its nature as capital gains.

Note that only futures profits of futures exchange members is subject to FICA tax, profits from other capital transactions (stocks, bonds, real estate) is not subject to FICA tax.

The tax rules applying to members of futures and options exchanges are very specific and are different from those that apply to members of securities exchanges.
 
I've done a bit of reading in the past about LLC vs Corp vs Nothing and here is what i found:

Corp: bad because you will have to pay double taxes

LLC: advantages
1. business deductions
2. personal liability protection
3. can write off losses in addition to $3000 against your other ordinary income.
4. Legal entity (auditible by 3rd party vendors); more about this..

You can get benefits 1 and 3 by simply filing as a trader and choosing markt to market. Liability protection is not important for the trading business; it mostly for businesses involving machinery etc where someone can get hurt and sue you.

The only advantage that i know of that is left with LLC is you have a form that you can provide an audited record for. So 3-4 years down the lane it would be somewhat easier to get funded externally; but recently i found there is another way of getting this funding; simply by going prop and using the 1:10 - 1:20 leverage you get. In some ways its better because you dont need to deal with the headaches of LLCs corps etc but its somewhat less secure (not insured).

So if anything LLC is good for this last reason. I myself am not able to decide whether the additional work is worth the effort.

-gariki
 
Quote from syswizard:

This was terrific information.....thanks for that.
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It was very helpful to me and answered alot of questions I had! The accounting company that provided this information also sees pretty reliable as the person who does my taxes charges just a bit less they what they claim to charge for doing taxes and setting it up.
 
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