Trading Forex with you own Corporation

Does anyone trade Forex with their own corporations like a S-corp, LLC ?
Please let me know what are the pros and cons.
Also what are the procedures of registering your corp?
Does it have to be registered as a fund?
Whats the total time frame?
If you have any investors how to track their funds an accounts?

I'm in the process of setting up a C-Corp that manages a LLC. The LLC is the trading entity. There are a ton of advantages, though it's a little more complicated to manage the numbers. Mostly you open yourself to many more deductions, and (once you're profitable) you can save quite a bit on taxes by distributing some profits through the C-Corp (as well as save on payroll taxes by taking distributions from the LLC).

I'm JUST NOW turning in the paperwork to get everything underway and expect that by August I'll have everything to open bank accounts. At that point I'll open a new trading account through the LLC and then transfer funds from my current one.

My thinking is this... the more I treat this like a profitable business and less like a hobby... the more it becomes a profitable business and less like a hobby.

Hope that helps!

Hi AggieTrader,

Thanks for your reply. I am a bit confused here. why do you plan to open a C-Corp which will manage the LLC? Can't you trade just with the LLC?

Are you using any online website to register yourself?

Hi.. What is a C-Corp? What's the difference btw C-Corp & LLC?

Please don't start a trading entity until you've at least read this article:

http://www.greencompany.com/Traders/...sMarch2007.pdf

and maybe read some of the topics at their web site:

http://www.greencompany.com/index.shtml


There are too many variables that need to be answered before choosing the proper entity, and sometimes the answer is NOT to incorporate, or not to incorporate at this time.

Some questions that need to be answered:

Are you doing this alone, or with a partner?

Are you married?

Do you have accumulted trading or investment losses from prior years?

Do you "trade" only forex? How about futures, equities, etc.

Are you electing and declaring MTM (Marked to the Market) accounting to the IRS? (MTM is also known as "trader" status).

Are you electing MTM for ALL your trading?

Do you know that declaring yourself a trader in certain transactions can expose you to higher taxes?

Do you know the self employment tax liabilities of each type of entity?

These are questions that need to be raised BEFORE incorporating, and you're NOT going to get any advice from a $99 online incorporation website. I'd even doubt that your local CPA or attorney is knowledgeable enough in the different tax implications of forex, futures, equities, etc. as they pertain to trader status or a trading entity. The IRS has reserved a special section of hell just for us, and I'm not joking. I don't think the IRS makes any other business jump through so many hoops just to prove to them that you ARE a business.

At the very least I would pay someone like Green the small hourly fee for a consultation. Or if you're in San Diego this weekend, they're going to be at the Traders Expo where Green will be a speaker.

Good luck and good trading!

CarlC

Aggie,

I've listened to guest speakers about the C-Corp managing an LLC trading corp. (These same speakers talk about more complex tax strategies that may raise questions with the IRS). For most small traders this might be too complex and too costly to set up and maintain. The advice of another trader accountant is to start with something simple that can usually achieve the same results. You can always add the other entity later. But what are we talking about, tax savings from a small salary and health plan vs. a corporate tax rate?

CarlC

CWH,

The C corporation, S corporation, and LLC are all limited liability entities, meaning they are their own separate entities in the eyes of the law that shield their owners from (most) liabilities.

The main differences (as far as you and I are concerned) is in the way the IRS taxes the profits.

C corporations are themselves taxed on the profits they make. Profits are taxed at corporate rates, and the money stays inside the corporation until a dividend is paid to the shareholders. These dividends are then taxed again by the IRS (double taxation).

The S corporation has the same limited liability as a C corp, but the profits or losses "pass through" to the shareholders and are only taxed once on the shareholders personal tax form at the shareholders personal tax rate, not a corporate rate. This pass through income is NOT considered wages or salary, and is therefore NOT subject to employment taxes (FICA, SS, Medi). The owner is expected though to take a reasonable salary that IS subject to employment taxes.

LLC's or LLP's again have the same limited liability as a corporation, and the net income or loss is passed through to each shareholder or partner like an S corp, taxable at the shareholders personal tax rate. ALL the pass-through income IS subject to employment taxes, to the maximum contribution level. LLC's are not subject to the stricter corporate structures and meetings like a C or S corp.

As they relate to traders, again, here is a good article written by a CPA specializing in traders taxes:

http://www.greencompany.com/Traders/...sMarch2007.pdf

CarlC

CarlC wrote everything better than I could have! In addition to Green... check out this thread on FF...

http://www.forexfactory.com/showthread.php?t=8177

It has some great info as well.

Best of luck!

Go LLC and your not double taxed.

Thanks everyone for all the good information. I think it would be better to start a company asap to maintain your track record. And hey if you are doing great you may find investors.

I am going to do some more research to this

Has anyone used an online service such as bizfilings.com or something similar to start their own corp? Is it a good idea to have bot a C-orp and an LLC.

C-corp is the managing entity and LLC will hold the brokerage account?

Please shed your valuable thoughts on this

Any CPA's on this forum who can shed some light?

Most individual traders use an LLC and not a C-Corp. Think about it, single taxation or double taxation.

Contact a tax attorney and get your answer from them.

Thanks WHTEN for your reply. The above strategy was suggested by tradersaccounting. I donot know if any one has experience with them

i have to be very quiet about this so ima throw some words out there then im ghost ( offshore ibc own by offshore trust, offshore broker account in ibc name control by trust), you figure out.

Moe can you elaborate more how did you do it.

no i can't sorry, something you have to look into yourself, offshore banking , offshore investing , key search words.

why a C corp and not an S? C are more for Lawyers medical professionals I thought, can anyone recommend a broker that accepts entity accounts?