Hello,
I am a relatively small retail trader (~$20k) who was been developing some automated algorithmic trading software over the last couple years that I am getting ready to take live in the coming months. My strategies are geared towards the Globex Futures market (I know that is relevant for tax purposes).
As a retail trader, are there any benefits from a tax stand point (or any other standpoint) to forming a LLC or corporation for my trading activities as opposed to just operating a personal retail account as a I am currently doing?
It is my understanding that as an individual, profits from futures trading is taxed 60% at the short term capital gains rate, and 40% at the long term capital gains rate. Do corporations or LLCs get a better deal (i.e 100% at the short term rate..... or worse, 100% a the corporate income tax rate)? LLCs and S-Corps are set up as pass through tax entities, so does this mean If I make some profit trading futures, these profits are passed onto me and taxed at my personal income tax rate, or can I still treat them as capital gains?
One downside that I can think of to incorporating would be that I would likely have to pay "Professional" data fees.
One upside would be that I could start building a track record if for some reason in the future I wanted to seek outside investors (I have no intention of selling my software or seeking outside money right now or in the foreseeable future, but I like to consider all options all of the time)
What other benefits are there to incorporating (or forming LLC) for a "successful" retail trader?
If it matters, I do have a day job (not trading....engineering stuff) and have no immediate plans to leave that job.... but I would be lying if told you that it isnt a dream of mine to trade for a living.
What are your thoughts?
Thanks!!
Brad
I am a relatively small retail trader (~$20k) who was been developing some automated algorithmic trading software over the last couple years that I am getting ready to take live in the coming months. My strategies are geared towards the Globex Futures market (I know that is relevant for tax purposes).
As a retail trader, are there any benefits from a tax stand point (or any other standpoint) to forming a LLC or corporation for my trading activities as opposed to just operating a personal retail account as a I am currently doing?
It is my understanding that as an individual, profits from futures trading is taxed 60% at the short term capital gains rate, and 40% at the long term capital gains rate. Do corporations or LLCs get a better deal (i.e 100% at the short term rate..... or worse, 100% a the corporate income tax rate)? LLCs and S-Corps are set up as pass through tax entities, so does this mean If I make some profit trading futures, these profits are passed onto me and taxed at my personal income tax rate, or can I still treat them as capital gains?
One downside that I can think of to incorporating would be that I would likely have to pay "Professional" data fees.
One upside would be that I could start building a track record if for some reason in the future I wanted to seek outside investors (I have no intention of selling my software or seeking outside money right now or in the foreseeable future, but I like to consider all options all of the time)
What other benefits are there to incorporating (or forming LLC) for a "successful" retail trader?
If it matters, I do have a day job (not trading....engineering stuff) and have no immediate plans to leave that job.... but I would be lying if told you that it isnt a dream of mine to trade for a living.
What are your thoughts?
Thanks!!
Brad