What are the benefits from starting a corporation

If you have a corporation you don't claim trader status, that is the point. Just having a corporation allows you to take all the deductions regardless of how you trade.
 
The only reason to incorporate your business as a subchapter S or an LLC is so that you can draw a pension plan. This is a huge reason for profitable traders. You can put 44K out of your first 220K in earnings, or 20 percent of what you earn and put it in a taxed deferred plan...and then trade it...tax free...until it grows so big you can't spend it all:) If you net over 220K, you can hire your wife and pay her the next 176K in salary and then contribute 44K to your pension plan on her behalf. So you can contribute 88K per year and just imagine how fast it compounds if you are a good enough trader to make that kind of dough in the first place (remember it is tax free and expense free as well). Even if you are making a much more modest living as a full time trader, without incorporating you won't even be allowed to make an IRA contribution. If you are going to be in the trading game for the long run, sooner or later you will incorporate and you will form some kind of pension plan to save money tax deferred.
 
You are going about it wrong, you form a corporation that acts as a management company for trading accounts. It manages your account and charges you a fee for it. Then all deductions flow through the corporation. You make the corporation show a profit too, that way it cannot be deemed as a hobby.
 
Quote from hellomarket:

Can you shield yourself from a blow up by trading in a limited liability company? Say you trade commodity futures or sell premium on a regular basis, your net worth is 300K. You don't want to put all this and more at risk in case your account goes into debit because of a limit move or black swan event. You start a company with 100K as capital. It's not that you plan to take up large risks it's just that you don't want to lose more than what is in the account no matter what happens.

I suppose your liability is limited to 100K or whatever the company 's capital is. If this is actually the case, the question I am asking myself then is how can clearing firms guarantee your counterparty since many are llc's ? They could as well default on their obligations, if enough trading firms do that, what would prevent the whole system to collapse?
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This would only work if you happen to have found a sufficently stupid broker.
Any sensible broker would track credit-worthiness, especially in the case of a corporation.
 
I think as long as you can show an intent to make a profit, it is not a hobby but you should make the corporation show a profit to be safe.

I've heard stories of people setting up a corporation to teach people how to hunt. They deduct all the hunting equipment (guns, four wheelers, and stuff) and then go around town put up flyers advertising their business. You have to love corporate America haha.
 
if you are doing business with the public, by all means and entity is the only way to go due to the fact of law suit liability. but in trading, 99% of all fcms have such strick risk controls built into their trading platforms that very few would be allowed to have a catastrofic loss. so the need for an entity is not as critical.
 
Busting the corporate vail of this set-up is easy for an attourney that is worth his salt...


Quote from progers82:

if you are doing business with the public, by all means and entity is the only way to go due to the fact of law suit liability. but in trading, 99% of all fcms have such strick risk controls built into their trading platforms that very few would be allowed to have a catastrofic loss. so the need for an entity is not as critical.
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