Trading as a company in Australia | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Trading as a company vs as an individual 20 replies

What is the best trading company to use? 0 replies

What about a US resident operating a foreign owned trading company and.. 4 replies

Looking for a good trading brokerage company 3 replies

Attachments: Trading as a company in Australia
Exit Attachments

Trading as a company in Australia

  • #1
  • First Post: Jan 28, 2015 4:13am Jan 28, 2015 4:13am
I hope I ask this in the right place.
Because of that CHF trouble I have closed all my accounts as an individual and thinking of trading as a company with limited liability, so I will not loose my last shirt on negative balance in the future. I have a few questions. The experience of Australian traders using Australian providers will be very useful.

1. Are companies with limited liability have an ability to trade as individuals using brokers like IC Markets, Think Forex or FXCM or others on the same conditions as individuals (leverage, spread, swaps, commission, minimal deposit)?
2. What kind of company is better for this kind of activity (trading), (I just came from overseas and I'm not very good rules on companies in Australia, but I know there are problems if you register a company that is not suitable for trading business).
3. Do I need to get an ABN number?
4. Do I need to register for GST?
5. Should I use my home address for a company like that or I can use a PO box?

Thanks in advance for your useful answers.
  • #2
  • Jan 28, 2015 7:53am Jan 28, 2015 7:53am
If I am not mistaken, an LLC will open you up personal liability. I believe it is used when two partners are equally in share with one business. An INC. may be the way to go, or a simple trust which owns the INC and a Roth IRA. This might be the better way to go but please check with a professional first. Presume if you are unsure and go ahead on your own with something, it may be wrong. Use trusted professionals. Hopefully for you there will be posts made by other traders who opened their own company for trading real money.
  • #3
  • Jan 28, 2015 11:11am Jan 28, 2015 11:11am
ABN and tax registration go hand in hand. ABN = Australian Business Number.
Never use your home address - ebay and alibaba you would

I would visit a Tax Accountant first and ask questions - especially regarding tax benefits, requirements and limited liability (where to hide your money in case of bankruptcy). you should be able to get this free as they want your business.

if you wish to proceed then visit a lawyer and ask how/what you need to do to setup a business/company with the least amount of liability.

A 'Trust' is safe in terms of creditors, as they are only allowed to touch your percentage in the trust funds (so long as your not the only name in the trust). But Im not sure if Forex trading is allowed for Trust accounts.

I would also be interest if any other members trade as a company, the pros and cons would be interesting

Pipshot has a good point...
Quoting PipShot
This might be the better way to go but please check with a professional first
  • #4
  • Jan 28, 2015 6:26pm Jan 28, 2015 6:26pm
Thank you guys. I will certainly go to a lawyer and an accountant when I find one. I've heard that it is hard to find a good accountant who knows the specs of trading. I hope someone with resent experience trading as a company will step out and shine some light on the subject.
  • #5
  • Jan 28, 2015 6:53pm Jan 28, 2015 6:53pm
I would visit a Tax Accountant first and ask questions - especially regarding tax benefits, requirements and limited liability (where to hide your money in case of bankruptcy).

If I would trade as a company and have LIMITED liability, so in this case I wouldn't have to worry about my other assets, would I? Because if I would have to worry about it there is no point in starting a company, it is easier and safer to stop trading completely.
  • #6
  • Jan 28, 2015 7:22pm Jan 28, 2015 7:22pm
You can probably just set up an LLC. One of the earlier posts said that you would still be personally liable, and this is true. However, to get around that what you do is make the (and I can't remember the correct name here) 'managing' partner that will be fully liable into a corporation. All the other partners of the LLC are then, in a fashion, like shareholders in that they are only liable upto the amount of equity they put into the LLC. This is the structure that hedge funds generally use.
  • #7
  • Edited 9:58pm Jan 28, 2015 7:28pm | Edited 9:58pm
Quoting cold chisel
I hope I ask this in the right place. Because of that CHF trouble I have closed all my accounts as an individual and thinking of trading as a company with limited liability, so I will not loose my last shirt on negative balance in the future. I have a few questions. The experience of Australian traders using Australian providers will be very useful. 1. Are companies with limited liability have an ability to trade as individuals using brokers like IC Markets, Think Forex or FXCM or others on the same conditions as individuals (leverage, spread, swaps,...
Hi cold chisel.

There are no problems to setting up a company as a vehicle to trade with. You will of course need to be appointed as a Director and despite limited liability, if there is proof that you shuffled funds to avoid meeting liability or creditor obligations, ASIC will come at you personally as a Director for any shortfall. Not much you can do about this unfortunately. You can try and shuffle your assets into the name of your spouse etc. which may offer some protection, unless of course you are wilfully evading your obligations.

In setting up the company your broker will require Certificate of Registration and the Company's constitution as well as details of directors/ officeholders and shareholdings etc. They will also require ID obligations to satisfy anti-money laundering (AML) obligations.

You will need GST registration, ACN, ABN and TFN but these are all arranged in your registration processes by either your accountant or yourself. You will also need to set up a bank account in the name of the Company and the banks will validate for AML obligations as well.

You cannot avoid stating the correct address of the company's office/s as well as the postal address (which may be a PO box) and the registration address (which may be your accountants). These are all validated by your AFS licenced broker and banking institutions using Dun & Bradstreet, Veda Advantage etc.

Bottom line is that the type of legal structure you choose in Australia will not necessarily protect you from shonky practices so I wouldn't even attempt to be clever about this. You could register an offshore account if you want to test the metal of the regulators here but your brokers and their obligations to the regulators such as Austrac, ATO and ASIC may restrict your abilities here in Aus.

I hope this helps. :-)

PS If you are confident you are going to bring in the dough with your trading it would be worthwhile looking into a discretionary trust with a corporate trustee as the ultimate tool to disburse your income tax effectively but this will take a few grand to set up, but is definately worth it. All brokers here in Aus accept this structure but there is more paperwork and increased ongoing costs of management. Your accountant needs to advise you here of the most tax effective and/or flexible structure to suit your personal arrangements.

Hybrid trusts used to be able to offer a degree of asset protection and tax benefits, but there use in Aus has declined in recent years with changes to legislation which raise the red flag to the regulators when you use them triggerring audit warnings.

PS Just as an aside, if as a company to seek to open an account with a broker here in Australia, you will need to demonstrate that you have sufficient finances (net assets) to provide risk assurance with respect to your trading activities. If the broker concludes that these net assets are insufficient to cover trading risks then you will be required to sign a Directors Guarantee that makes available additional personal assets to meet this requirement. These processes are established for exactly the reasons you wish to avoid as stated in your original post....so be aware that here in Australia, there are not many available loopholes in regards to this matter.
  • #8
  • Jan 28, 2015 7:57pm Jan 28, 2015 7:57pm
Hi I am still dont know why all this happened. Why are you liable when you can only trade into enough of a negative as you have available in your account and the trade will close automatically when that is exhausted?
Winners add to winning trades!
  • #9
  • Edited 8:24pm Jan 28, 2015 8:04pm | Edited 8:24pm
Quoting marshalmax
Hi I am still dont know why all this happened. Why are you liable when you can only trade into enough of a negative as you have available in your account and the trade will close automatically when that is exhausted?
Here in Australia your deposit represents effectively sufficient funds to meet day to day margin obligations unless your broker specifically states that it offers limited liability protection (after satisfying ASIC that it has risk management practices sufficient to guarantee that stated client protection). Despite the rhetoric your broker may spin, unless this guarantee can be delivered and is approved by the regulators, the brokers only other legal recourse is therefore through the investor/trader to satisy counterparty obligations. Unlke options, the potential liability associated with forex, futures or CFD's (in fact any leveraged instrument) is unlimited, despite the deposit you hold with the broker. Rather than reading what your broker says about it, go to ASIC's website and see how the regulators view it. That is the best way to become familiar with your risk obligations.

Here is a sample of what ASIC have to say about it.
  • #10
  • Jan 28, 2015 11:02pm Jan 28, 2015 11:02pm
Quoting cold chisel
I hope I ask this in the right place. Because of that CHF trouble I have closed all my accounts as an individual and thinking of trading as a company with limited liability, so I will not loose my last shirt on negative balance in the future. I have a few questions. The experience of Australian traders using Australian providers will be very useful. 1. Are companies with limited liability have an ability to trade as individuals using brokers like IC Markets, Think Forex or FXCM or others on the same conditions as individuals (leverage, spread, swaps,...
Asic regulated brokers will ask you to repay the debt (negative balance) and won't cover it themselves. Am I right?

Otherwise it doesn't make a sense to obtain the place under the umbrella of LLC...
  • #11
  • Jan 28, 2015 11:03pm Jan 28, 2015 11:03pm
Quoting Copernicus
{quote} Here in Australia your deposit represents effectively sufficient funds to meet day to day margin obligations unless your broker specifically states that it offers limited liability protection (after satisfying ASIC that it has risk management practices sufficient to guarantee that stated client protection). Despite the rhetoric your broker may spin, unless this guarantee can be delivered and is approved by the regulators, the brokers only other legal recourse is therefore through the investor/trader to satisy counterparty obligations. Unlke...
Thank you very much Copernicus for your great posts. You answered all my questions. I read your previous post and this one and came to a conclusion that I'm not safe from the dodgy practices of brokers in retail forex like the one that made IC Markets on a USD/CHF pair on the 15th of January. All you are saying that whatever I do I'm still risking more than my deposit even with a company structure and limited liability.
It is sad. It means I have to leave forex for good. I have traded for the last 12 years and finally started to make constant profits, but if I'm powerless in front of brockers or LP's errors it's sad. I didn't loose any money, I even made some profit, but this showed me that retail forex is no good any more you can loose 100 times more than you bargain for. And in my case with my trading systems and my exposure it means a lot so I can be financially ruined in one day.
Thank you again for your response.
  • #12
  • Jan 28, 2015 11:05pm Jan 28, 2015 11:05pm
Quoting leebsurag
{quote} Asic regulated brokers will ask you to repay the debt (negative balance) and won't cover it themselves. Am I right?
Yep, they certainly have that option available to them provided they have informed retail traders of this risk...... but if they are after market share, you might be lucky in that they will cover the deficit themselves.
  • #13
  • Jan 28, 2015 11:06pm Jan 28, 2015 11:06pm
Quoting leebsurag
{quote} Asic regulated brokers will ask you to repay the debt (negative balance) and won't cover it themselves. Am I right? Otherwise it doesn't make a sense to obtain the place under the umbrella of LLC...
Yes it seems to be like this. Even if the brokers themselves create this problem like it happened on the 15th of January on some swiss pairs. It happened once it can happen again. My money is worth more than that.
  • #14
  • Jan 28, 2015 11:10pm Jan 28, 2015 11:10pm
Quoting cold chisel
{quote} Thank you very much Copernicus for your great posts. You answered all my questions. I read your previous post and this one and came to a conclusion that I'm not safe from the dodgy practices of brokers in retail forex like the one that made IC Markets on a USD/CHF pair on the 15th of January. All you are saying that whatever I do I'm still risking more than my deposit even with a company structure and limited liability. It is sad. It means I have to leave forex for good. I have traded for the last 12 years and finally started to make constant...
No probs cold chisel....but remember ASIC is on your side provided you play by the rules. They specifically regulate for the benefit of the retail client (not the professional investor) and they have the small guys interests at heart. If you can demonstrate to ASIC that your broker has not played according to the rules, then there is a good chance the error will be redressed or better still, that the offending institution comes to the negotiating table. The threat of losing their AFS licence is enough to make them listen to reason. Use the channels available to you to report them if you have concerns.

They put all licenced brokers through significant compliance hoops to make the game safer for us here in Aus. Don't give the game away, just think differently about risk and ensure whatever technique you use, you have risk management at the forefront in your mind. There is great money to be made in this game if you can manage risk well, so don't lose heart.

C :-)
  • #15
  • Jan 28, 2015 11:29pm Jan 28, 2015 11:29pm
Quoting Copernicus
{quote} No probs cold chisel....but remember ASIC is on your side provided you play by the rules. They specifically regulate for the benefit of the retail client (not the professional investor) and they have the small guys interests at heart. If you can demonstrate to ASIC that your broker has not played according to the rules, then there is a good chance the error will be redressed or better still, that the offending institution comes to the negotiating table. The threat of losing their AFS licence is enough to make them listen to reason. Use the...
Thanks again. In my 10 years of trading I never lost my deposit even when I started out. But this situation now in unpredictable. What you say about ASIC in theory is interesting, but what about practice. Had these problems happened before? Was there anybody compensated for a dodgy scam of a broker or LP? Is there any chance there are statistics on the subject? Sorry to ask you that, but it seems you know the topic well.
  • #16
  • Edited 11:55pm Jan 28, 2015 11:38pm | Edited 11:55pm
Quoting cold chisel
{quote} Thanks again. In my 10 years of trading I never lost my deposit even when I started out. But this situation now in unpredictable. What you say about ASIC in theory is interesting, but what about practice. Had these problems happened before? Was there anybody compensated for a dodgy scam of a broker or LP? Is there any chance there are statistics on the subject? Sorry to ask you that, but it seems you know the topic well.
They have a very busy track record. They continually publish legal proceedings demonstrating that they are doing a good job in keeping on top of the industry's shady practices. Have a look at the lists here that demonstrate their activity and extent of surveillance. Of course they rely on feedback from aggrieved retail clients (eg. traders) before they can initiate surveillance and possibly enforcement.

I worked extensively in compliance for many years in the funds management and brokerage sector and am fully aware of their power and reach. We had several surveillance visits undertaken and I had to shove a toothbrush up my ass to ensure it was clean first/ tic.

PS In relation to the CHF debacle, I know ASIC are aware of it and are currently investigating issues raised with respect to ECN brokers and liquidity providers but just acknowledge that it is going to be a lengthy exercise before issues are possibly resolved.
  • #17
  • Jan 29, 2015 12:06am Jan 29, 2015 12:06am
Quoting Copernicus
{quote} They have a very busy track record. They continually publish legal proceedings demonstrating that they are doing a good job in keeping on top of the industry's shady practices. Have a look at the lists here that demonstrate their activity and extent of surveillance. Of course they rely on feedback from aggrieved retail clients (eg. traders) before they can initiate surveillance and possibly enforcement. I worked extensively in compliance for many years in the funds...
That's good. Because if ASIC will let IC Markets and others who made that error get away with it, retail forex will loose not only me. I will wait till the outcome of this case, than I will make a decision. Thank you again, you are great.
Few last questions. How long do you think it will take ASIC to resolve the matter with CHF? How can an ordinary bloke like me who is not a part of this investigation know of it's outcome?
  • #18
  • Jan 29, 2015 12:14am Jan 29, 2015 12:14am
Quoting cold chisel
{quote} That's good. Because if ASIC will let IC Markets and others who made that error get away with it, retail forex will loose not only me. I will wait till the outcome of this case, than I will make a decision. Thank you again, you are great. Few last questions. How long do you think it will take ASIC to resolve the matter with CHF? How can an ordinary bloke like me who is not a part of this investigation know of it's outcome?
Probably the best thing to do is to contact them by email and let them know that you wish to be informed of issues surrounding complaints raised by retail clients in relation to the recent CHF price anomaly and get their guidance on how you can be kept informed of any progress in the matter. If you have no joy from them directly, then write a letter to the Finance Minister who will be required to respond to you (via his assigned public service representatives). Most people don't worry about going through the channels, but from past experience, they work so give it a shot if you want to. Remember you are a tax payer and as such have a right to be informed.

Resolutions to these issues can be lengthy. I think Storm Financial took a few years to resolve....but best to get their guidance on this.
  • #19
  • Jan 29, 2015 12:27am Jan 29, 2015 12:27am
Thanks for your time. You are the best. In the meantime I will find out all the information about a company structure for trading according to your advice. I will closely monitor the outcome of this investigation. You have made my day. Happy trading.
  • #20
  • Jan 29, 2015 12:32am Jan 29, 2015 12:32am
You are most welcome CC.

Nice avatar by the way.....*sings*...Once I smoked a Danneman cigar....... :-)
0 traders viewing now