I've been talking with a few prop firms, I think I've settled on one, and this particular firm allows a trader to sign on as an individual or under his/her llc, what are the advantages or disadvantages to signing up under each?
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Signing As Individual or LLC With A Prop Firm?
- Thread starter sobepehopeful
- Start date
Bright Trading. Pay above market commissions, have to get series 7 license to trade there. Unless you already know what you're doing, it's a waste of your time and money. But if you are a good trader, the best of both worlds. You get huge leverage, and an environment for prospering. Just don't go in there as a green horn.
An individual is the best way, for a couple of reasons. As an individual you are exempt from Self Employment taxes, and are an actual "limited liability" member vs. having to sign personal guarantees for losses in excess of your capital contribution. Also, each member of the LLC must be licensed if you were able to join as an entity.
Some accountant types try to talk traders into forming "entities" but I have not seen any real reason to do so, quite the contrary.
(Not legal or tax advice, and not representing Bright Trading or any of it's affiliates, just my personal opinion).
Don
Some accountant types try to talk traders into forming "entities" but I have not seen any real reason to do so, quite the contrary.
(Not legal or tax advice, and not representing Bright Trading or any of it's affiliates, just my personal opinion).
Don
fwiw,
You still have to pay income tax, I think what was meant was paying not self employment tax which is somewhere in the neighborhood of 15% or so up to the first 100k and another couple of % afterwards on top of income tax.
Though I think that if you get a K-1 you are exempt from self employment as a trader if I am not mistaken.
Its only if the firm gives you a 1099misc that you have to pay self employment, though there are benefits as far as write offs and retirement contributions etc.
You still have to pay income tax, I think what was meant was paying not self employment tax which is somewhere in the neighborhood of 15% or so up to the first 100k and another couple of % afterwards on top of income tax.
Though I think that if you get a K-1 you are exempt from self employment as a trader if I am not mistaken.
Its only if the firm gives you a 1099misc that you have to pay self employment, though there are benefits as far as write offs and retirement contributions etc.
What we do is allow traders to submit year end expense reports for valid deduction, reduce K-1 by those amounts. Keeps it clean and totally transparent for tax purposes.
And, yes, income taxes must be paid, but not Self Employement taxes (FICA).
Don
And, yes, income taxes must be paid, but not Self Employement taxes (FICA).
Don
Quote from dve250:
So one doesn't have to pay income taxes on trading revenue as an individual?
Here is a link from Robert Green's website regarding taxation issues as it relates to prop firms:
http://www.greencompany.com/PropTraders/TradersTax.shtml#llcmembers
Quote from Jachyra:
Here is a link from Robert Green's website regarding taxation issues as it relates to prop firms:
http://www.greencompany.com/PropTraders/TradersTax.shtml#llcmembers
Just a comment about some of my friend, Bob Green's outline. We do allow traders to take their losses, and we do allow "outside" expenses (as noted previously).
As always, do you due diligence on any firm you may want to associate with.
All the best,
Don