I have been thinking about using a C corporation too. NOTE: This discussion should not be a substitute for competent professional advice. The biggest disadvantage of a C corporation is trapped losses. If you take a loss in a C corp, there is no way to offset personal gains or income. The loss gets "trapped" until you have C corp gains to offset it. An S corp allows you to pass the loss through to your personal return, but the S corp does not allow the cushy benefits that a C corp does.
If you take corporation profits as a dividend, the gains are taxed twice. If you take profits as a salary, you can maintain a pension, but then you pay self-employment tax (equals SS contribution). As a trader in a C corp, you can also be subject to the personal holding company tax, which is a punitive tax, but that's only a problem if you have taxable income.
Any trading entity (C corp, S corp, LLC, LP, etc) entails extra record-keeping, accounting fees, taxes, etc. If you trade NYSE stocks, NYSE charges a lot extra for quotes for a non 'natural' person.
One of the advantages of an entity is that it is less likely to get audited, as most auditors are not qualified to audit entities, and the ones who are, tend to focus on larger entities.
I have a C corporation that I have not yet used for trading, and I am trying to decide whether to liquidate it or use it for trading. I would like to hear more ideas.
