Trading Partnership taxation question

I will be trading $10,000 of my fathers capital.

Does anyone have input on how to best setup a partnership so that we minimize taxation and maximize liquidity?

Would this be a good idea:
Form a Limited Liability Corporation where I would be the managing partner responsible for day to day operations, my father only a contributing partner, but pay us both wages and re-invest remaining profit back into business?

Also, are capital gains paid if I keep all the money in the broker account?

Thanks much.

In the United Kingdom income from Forex Trading is free from taxation under the current law.

I forgot to mention that I am in the good ol USA...

I'm pretty certain I am going to be trading with Forex.com but I need to know best practices for arranging a partnership where one partner (me) will be living off the profits and the other partner (dad) will be in it for long term investment.

Here is my suggestion: go to www.simscpa.com. I don't work for them but I have been a client. On that web site is a lot of free information. You might want to do a half hour chat with them for your personal situation.

First make profit and then worry about taxation.

Couple of things, first it's a Limited Liability Company and NOT a corporation this is important because LLC's do not have stock like corporations. Secondly, yes you will be taxed on any gains you make no matter where they sit (brokers account or your account). You need to talk to a CPA however a few things off of the top of my head: if you form a LLC you need to designate what % of ownership you and your father have. Let's say 50/50 for this example, an LLC is what's called a flow through entity meaning the money you make is NOT double taxed like it would be with a c-corp. What this means is let's say you earn 100k in profits for the year, since you and your dad are 50/50 partners then you will each have 50k roll onto your personal income (or flow through the company to it's owners), well I say it will roll onto your personal income but what will really happen is 60% of each of yours and your dads profits will be taxed at long term capital gains (15%) and the other 40% rolls onto your personal income meaning it adds to your tax basis. The main benefit to having an LLC is to protect your assets, so if you personally got sued they cannot touch the LLC (but there are rules that must be followed). There are a few other entities you may want to look into such as an LP (limited partnership), I don't remember the intricacies of an LP but from what I do remember I think it will serve you better but I could be wrong, talk to a CPA

fxRichard gives excellent advice. This is exactly what I do. My sister is my partner but I do all the work. She is in the partnership with 1%. Make sure you do the IRC 1256 status when doing your IRS returns.

Two separate accounts.

Lost us here ... what is two separate accounts?

Hi,
MT states that income from Forex trading is free of tax
in the UK.
This is incorrect. It is only free of tax if you "bet" through
a spread betting. co.
If your profits are generated through an MM then it is
taxable - either CGT or Income Tax.
If Iam wrong please let me know !!
I suggest you get your facts right before giving advise.

CT: Tax is one's least concern when doing partnerships. Simplicity of operation and clarity of duties is important. Two people. 10K money. #1-short term trader. #2-long term investor. Not technically very doable in one account and not feasable from a personal relationship standpoint. (I know - sub-accounts and all that jazz etc).

Hey there... I think you missed the point.

Actually the reason why LLC is used is because of the best tax breaks. LLC recommends that two people are listed for the ownership. Also, both members are not required to trade.

I hope that this helps you in understanding why a trader uses the LLC when trading the forex as a business.