What Corporation to Start?

[TSLexi]

You have absolutely nothing to gain by forming an entity with your circumstances and choice of products to trade. With a job, you can never claim this is your business. So you will never be able to turn capital gains into ordinary "earned income". With a S corp, you have nothing to gain either as everything will flow to your personal taxes. Just don't bother.

Hint: Find a trading entity and look up public records as to what is their org structure. They are not corps. They are LP or LLC. And as a single member trading stocks & ETFs, they get you nothing.

Disclaimer: IANAL

Actually, S Corp shareholders who are active in the business can pay themselves a "reasonable salary", and issue a W-2, and that is earned income.
http://www.entrepreneur.com/article/73368

Me and my business partner (who are unrelated) trade futures through an LLC, which are taxed as 60/40 long-term/short-term capital gains, so until the effective tax rate on our profits exceed 7.65% (our effective self-employment tax rate, considering we can deduct the employer's share of the taxes as a business expense), we won't be paying ourselves guaranteed payments (the equivalent of wages for LLC members, since they cannot also legally be employees and receive a W-2), we'll just take distributions.

 

[DarthSidious]

As I have said, if you have a job, it will be very hard to say you have materially participated in the business. Sure, you can claim that and as long as you are not being audited, you are ok. If you are being audited, you have some explaining to do.

In a S corp, you will fill this: https://www.irs.gov/pub/irs-access/f6781_accessible.pdf

And this will flow to your K1 as long / short term capital gain. You have NO opportunity to classify your profit as "business income". If all you do is trade, your S corp has zero income. No money to pay salary. See an accountant please.

Also, employers share of SS tax, while deductible, if a direct expense. You are not "saving" the money.

 

[TSLexi]

As I have said, if you have a job, it will be very hard to say you have materially participated in the business. Sure, you can claim that and as long as you are not being audited, you are ok. If you are being audited, you have some explaining to do.

In a S corp, you will fill this: https://www.irs.gov/pub/irs-access/f6781_accessible.pdf

And this will flow to your K1 as long / short term capital gain. You have NO opportunity to classify your profit as "business income". If all you do is trade, your S corp has zero income. No money to pay salary. See an accountant please.

Also, employers share of SS tax, while deductible, if a direct expense. You are not "saving" the money.

Yeah, my business is the only work I do.

And we do have an accountant, and he'll be doing all this, and our bookkeeping.


Armstrong vs Phinney disagrees that investment partnerships can't issue guaranteed payments. http://openjurist.org/394/f2d/661/armstrong-v-r-l-phinney

When we reach the level where our effective tax rate on our profits exceeds the self-employment tax rate, we'll form a holding LLC, which wholly owns the trading LLC, and another LLC that hires us and leases our services to the trading LLC.

 

[onemoreshot]

Yeah, my business is the only work I do.

And we do have an accountant, and he'll be doing all this, and our bookkeeping.


Armstrong vs Phinney disagrees that investment partnerships can't issue guaranteed payments. http://openjurist.org/394/f2d/661/armstrong-v-r-l-phinney

When we reach the level where our effective tax rate on our profits exceeds the self-employment tax rate, we'll form a holding LLC, which wholly owns the trading LLC, and another LLC that hires us and leases our services to the trading LLC.

Cart before the horse?

 

[TSLexi]

Cart before the horse?

Yes, but we like having some sort of plan in place.

 

[garachen]

3 LLCs in California. You must really like paying taxes, accountants and attorneys. Any idea how much it would cost to get the paperwork for this structure able to get member rates on CME?

 

[TSLexi]

3 LLCs in California. You must really like paying taxes, accountants and attorneys. Any idea how much it would cost to get the paperwork for this structure able to get member rates on CME?

Actually, I forgot to update my location, I left California last year. My LLC is formed in Delaware, and it's registered and operates in West Virginia.

 

[garachen]

Actually, I forgot to update my location, I left California last year. My LLC is formed in Delaware, and it's registered and operates in West Virginia.

At least then not totally crazy on the fees but CME will probably push back quite a bit on that structure and you'll go through lots of revisions.

Just stick with 1 LLC. If all is going well it will always be better to take distributions rather than a salary.

 

[TSLexi]

At least then not totally crazy on the fees but CME will probably push back quite a bit on that structure and you'll go through lots of revisions.

Just stick with 1 LLC. If all is going well it will always be better to take distributions rather than a salary.

I just have one LLC, and I really don't want to deal with forming any more for the time being.

 

[TSLexi]

At least then not totally crazy on the fees but CME will probably push back quite a bit on that structure and you'll go through lots of revisions.

Just stick with 1 LLC. If all is going well it will always be better to take distributions rather than a salary.

Why would the CME push back?