Starting a LLC (Hedge Fund Alternative)

I would say "solely on behalf of named account holders" as well. This way, IB is only dealing with the company. The issues with taxes and proper setup are then between you and the IRS and the SEC respectively. That said, the key is that you MUST get appropriate legal and accounting advice from folks you trust and who will stand by you when the aforementioned folks come calling - as they sooner or later will.

Another thing to keep in mind is that as a "non-individual", you will be paying professional fees at IB - $200+ per month - and if your numbers are strong enough, you will be eligible for private placements. Most of that stuff is only slightly better than what the market will give you publicly and is often restricted (you can't flip it for a while), although there are a few solid debt offerings available these days.

Good Luck.
 
Thanks for help.

I don't have the problems with the sec or advertising cause I don't allow american people to invest in the llc.

I am from europe and for an european trader an us llc can act as a legal offshore solution like bahamas or BVI.
AS LONG we don't accept us costumers. just for info.

But there is one further question I have and I would appreciate anny information.....

As an LLC I am not pretected with the SPIC. Are there anny solution on this topic for professionals like a private insurance.

thanks

Sunwalker :)
 
Just a note. I think the most important part of setting up a an entity is to be aware that you are taking in and trading other peoples money. Make sure the entity you set up meets all blue sky laws in your state. The LLC, Corp. or LLP should be set up by a tax professional or Lawyer who is familiar with tax laws in your state . The investors or partners should be aware that trading involves risk and only risk capital should be invested in the Corp.
or L.L.C. As Don mentioned, for many traders a one page agreement may be all you need( and a TAX ID#). Before anyone
starts a trading partnership or corp., the trader should consider
many factors including legal liability, the amount of capital traded,
tax consequences and the amount of money necessary to set up the trading LLC or Corp.



Gene Weissman
Lieber & Weissman Sec., L.L.C.
gweissman@stocktrade.net
 
Originally posted by DisciplinedHedg
tntneo & ktm - thanks for the replies. helpful.

Don - i understand what you mean by "bar napkin." like i said, these are family and friends and as long as the arrangement of fees/profits are clear, it could be done on something as simple as a bar napkin.

The problem is with the income/profits. In other words, mainly the IRS. This has to be structured so that its legitimate and taxable. I don't think a bar napkin is legit to the IRS.

So what I was asking was what type of entity suits this purpose. Perhaps an LLC is something on the right track...

Thanks all...
More...

Again, anything (even a "dba" will work). You can schedule C your profits, deduct your "payouts" to the people who loaned you money, and pay tax on the balance. They will simply pick up the Profits as ordinary income, which is what it would be if you're trading for a living anyway.

Keep it simple..
 
I am a prop trader coming to the end of a two year contract with my company. most of the traders in my office have been offered membership in a LLC run by the owners. I am debating the pros and cons of joining and would appreciate any info about accounting discloser that the LLC must make to limited partners.

if i remember my series 7, limited partners are somewhat restrained in the day to day operations of the partnership. does this apply to demanding access to accounting records and the like???

i realize that the nuts and bolts of the accounting will probably be inaccessible (the general partner does not want to disclose his profit margin), and really i am more concerned with the long term financial stability of the partnership.

any help would be appreciated

"trust but verify"
 
ziggurat,

LLC's are not subject to the same protection as customer accounts. I would talk to the LLC Managing Members and express
your concerns. LLC members should get a copy of the firms LLC agreement .The agreement should give information about capital contributions, withdrawl of capital , the class A members and other information.If you are getting a higher payout by making a capital contribution and you have developed a good relationship with the firm, this may be an ideal situation for you. If you are not comfortable with this firm, there are other established LLC's that can offer you similiar services for Series 7 professional traders
including Van Buren,Bright, ECHO, ETG, Lieber & Weissman, Genaric and several other firms . I feel the LLC structure is a real benefit to true professional traders , since you use your capital very efficiently.



Gene Weissman
Lieber & Weissman Sec.,L.L.C.
gweissman@stocktrade.net
 
To MOONWALKER.

"As an LLC I am not pretected with the SPIC. Are there anny solution on this topic for professionals like a private insurance. "



I am about to start a hedge fund ( located BVI) specialised on short-term trade on US market ( just waiting for the agreement).
You have two possibilities :
As you probably already know, many Hedge Funds keep their money at a Prime Brokerage, (Bear Stearns, SSB, etc.) in which case you execute the trades using thee platform of your broker and they DVP the trades to your Prime Brokerage.

In other cases the Hedge Funds deposits a portion of their assets with the broker and they trade that account as a normal LLC or corporate account.

My choise was to keep the fund of my customers at a prime bankso the problem you are speeking about does not exists.

I am european like you
 
Originally posted by spieler
To MOONWALKER.

"As an LLC I am not pretected with the SPIC. Are there anny solution on this topic for professionals like a private insurance. "



I am about to start a hedge fund ( located BVI) specialised on short-term trade on US market ( just waiting for the agreement).
You have two possibilities :
As you probably already know, many Hedge Funds keep their money at a Prime Brokerage, (Bear Stearns, SSB, etc.) in which case you execute the trades using thee platform of your broker and they DVP the trades to your Prime Brokerage.

In other cases the Hedge Funds deposits a portion of their assets with the broker and they trade that account as a normal LLC or corporate account.

My choise was to keep the fund of my customers at a prime bankso the problem you are speeking about does not exists.

I am european like you
More...

A private LLC is a retail customer; would be provided SIPC coverage; however the limits are not high enough, look to your prime brokers excess coverage.
 
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