Cool. Are we trying to make money, or are we trying to influence the fed? I’m happy to make money.
Using an LLC to protect oneself from a margin call?
- Thread starter kevinwork24
- Start date
To your point, the regulatory nonsense imposed by the over-arrogant entity and the bureaucratic government oversight invites the complexity of the answer.
However, the answer can be found through a link in the above linked doc...
From the linked doc...
1. What are the criteria to qualify as a Non-Professional Subscriber? The criteria to qualify as a Non-Professional Subscriber are outlined in the Non-Professional Subscriber Certification Form.
2. What is the definition of “small business entity?” Small business entity is not a defined term. The limiting factor is found in point “H” on the Non-Professional Self-Certification Form.
The link within to the Non-Professional Subscriber Certification Form...
https://www.cmegroup.com/market-dat...it-a-to-schedule-4-non-pro-self-cert-form.pdf
Per the form...
Non-Professional shall mean and include either (i) an individual, natural person Subscriber(s) who, or (ii) certain small business entities (limited liability companies, partnerships, trusts or corporations) that, receive and use Information (excluding any pit traded data),
POINT H
(h) be via a maximum of two trading terminals per Distributor, permissioned for Real-Time Information and capable of routing orders to the CME Globex Platform (an “Order Routing Device”).
Thank you.
Short answer? No.
Move to Florida (ugh) and mortgage the biggest crib you can afford. No matter what you structure the courts will simply see it as a pass-thru. They cant take your house if you can make the payments.
Can you or anyone else give an example of how this would work? How do they justify piercing the veil for a margin call? Unless the operator somehow committed fraud in their agreements with the broker, it seems like the broker should eat the losses here as they agreed to let the LLC trade without a personal guarantee.
It's a little bigger picture/higher level than that. The situation would be that your LLC was indebted to the broker and tried to avoid paying that debt by declaring bankruptcy, i.e. they had a margin call and even after the broker liquidated all the securities in the account it had a negative balance. Bankruptcy is a legal process, and in that process the creditor's attorney's do their best to recover as much of their funds as possible. The very first thing they do with a single person LLC is attempt to "pierce the corporate veil" by showing that it's not really a legitimate entity in and of itself and therefore the sole owner is responsible for its debts. That's pretty easy to do if you didn't file your paperwork properly, didn't set up a real operating agreement, didn't hold annual meetings, didn't hold meetings to approve events like setting up a bank account.... All of these things seem a little silly for a single person LLC, so you tend not to do them.
This is all a legal process, so what it seems like the broker should do isn't really the question. It's what the broker will do, which is use the law to its fullest extent to recover their funds using their attorneys who are on salary so it doesn't cost them a lot compared to what it costs you to defend. IMHO it's far easier to just be an upstanding guy/gal who doesn't trade beyond your means and pays for your own mistakes instead of trying to hide behind an LLC. The legal costs alone of both maintaining and defending your LLC will dwarf any benefit you get from taking advantage of the bankruptcy code to avoid paying a debt you incurred until you get to 9 or 10 figures like Trump.