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Trading as a company vs as an individual

  • #1
  • First Post: Feb 16, 2015 3:04am Feb 16, 2015 3:04am
Hi all,

We seen during the CHF episode that it is very possible to lose considerably more money than you have in your account, otherwise known as negative balances.

One of the ways around this would be to set up a private limited company (PLC) and trade from there, that way if you make a mistake and incur a huge loss, you can be insulated from that loss because you are a trading company, and not an individual.

My question is, how would you be regarded if you traded as a PLC, versus and individual?

Can you still be regarded as retail by your broker, or would become one of the brokers creditors?

Thanks
  • #2
  • Feb 16, 2015 4:25am Feb 16, 2015 4:25am
Whether an individual or a company,you would be regarded as retail by the brokers. What matters to the broker is what you put in.
  • #3
  • Feb 16, 2015 5:32am Feb 16, 2015 5:32am
Quoting jing
Whether an individual or a company,you would be regarded as retail by the brokers. What matters to the broker is what you put in.
Is that the only criteria?

I thought that if you were a company, you would automatically not be considered retail.

If that is the case, why aren't we all trading as our own private limited companies to protect ourselves?
  • #4
  • Feb 16, 2015 6:25am Feb 16, 2015 6:25am
Quoting verv
{quote} Is that the only criteria? I thought that if you were a company, you would automatically not be considered retail. If that is the case, why aren't we all trading as our own private limited companies to protect ourselves?
Why aren't we all trading with good and regulated brokers only?

Why are we all using chart and candlestick no-brain patterns which don't work?

Why are we still trading after 7 years of losing trading?

Why are we looking for advice on FF which is one of the greatest unprofitable trader's base?


BECAUSE we are just retail traders and we have TO lose. It's written in our DNA.
  • #5
  • Feb 16, 2015 6:34am Feb 16, 2015 6:34am
Quoting Unabletrader
{quote} Why aren't we all trading with good and regulated brokers only? Why are we all using chart and candlestick no-brain patterns which don't work? Why are we still trading after 7 years of losing trading? Why are we looking for advice on FF which is one of the greatest unprofitable trader's base? BECAUSE we are just retail traders and we have TO lose. It's written in our DNA.
What's the point of your post lol
  • #6
  • Feb 27, 2015 4:29am Feb 27, 2015 4:29am
I do not think that a retail trader (person or company) can incur losses beyond the account size if the trader chooses wisely the broker; choose regulated brokers that stipulates in the contract that the trader cannot incur losses larger than the account size. I am advicing this from my own experience. I think that trading as a company also it is different from country to country based on legislation but i do not know this for certain.
  • #7
  • Mar 3, 2015 1:35am Mar 3, 2015 1:35am
In my opinion company or individual I think that a trader should never trade the money they can't afford to lose, no matter the legislation of your country.
  • #8
  • Apr 14, 2017 8:02am Apr 14, 2017 8:02am
Quoting verv
Hi all, We seen during the CHF episode that it is very possible to lose considerably more money than you have in your account, otherwise known as negative balances. One of the ways around this would be to set up a private limited company (PLC) and trade from there, that way if you make a mistake and incur a huge loss, you can be insulated from that loss because you are a trading company, and not an individual. My question is, how would you be regarded if you traded as a PLC, versus and individual? Can you still be regarded as retail by your broker,...
Hello Verv,

I am waking a long dead thread.

Curious, Did you find the answer you were looking for? Currently are you trading as an individual or as a Business Entity?

Thanks
  • #9
  • Apr 14, 2017 11:58am Apr 14, 2017 11:58am
Quoting aaven
{quote} Hello Verv, I am waking a long dead thread. Curious, Did you find the answer you were looking for? Currently are you trading as an individual or as a Business Entity? Thanks
I'm not trading as a business entity.

my understanding is that you can trade as a company and reduce your maximum losses

however it is also my understanding that you will to create an account with your broker as a company and not an individual - and the rules will be different, such as lower leverage, and I don't think you are entitled to insurance
  • #10
  • Apr 14, 2017 12:27pm Apr 14, 2017 12:27pm
Some FX providers force company Directors and/or Shareholders to sign personal guarantee(s).

If such is the case, someone is still on the hook to guarantee repayment, despite a company's Limited status.
  • #11
  • Apr 14, 2017 1:31pm Apr 14, 2017 1:31pm
Quoting verv
{quote} I'm not trading as a business entity. my understanding is that you can trade as a company and reduce your maximum losses however it is also my understanding that you will to create an account with your broker as a company and not an individual - and the rules will be different, such as lower leverage, and I don't think you are entitled to insurance
Verv,

Thanks for the response. By Insurance, you mean something like Negative Balance Protection etc...?
  • #12
  • Apr 14, 2017 2:41pm Apr 14, 2017 2:41pm
Quoting aaven
{quote} Verv, Thanks for the response. By Insurance, you mean something like Negative Balance Protection etc...?
my understanding is that as a company, you don't get FCA protection (for example)

take the alpari broker going bust in 2014

when alpari went bust those who traded as individuals got their money back because the FCA guarantees it

however those who traded with alpari as companies didn't have FCA protection, and had to share what was left over after debts were paid
  • #13
  • Apr 14, 2017 2:50pm Apr 14, 2017 2:50pm
Quoting verv
Hi all, We seen during the CHF episode that it is very possible to lose considerably more money than you have in your account, otherwise known as negative balances. One of the ways around this would be to set up a private limited company (PLC) and trade from there, that way if you make a mistake and incur a huge loss, you can be insulated from that loss because you are a trading company, and not an individual. My question is, how would you be regarded if you traded as a PLC, versus and individual? Can you still be regarded as retail by your broker,...
You could also try not trading any pair associated with the CHF symbol.
  • #14
  • Apr 14, 2017 2:50pm Apr 14, 2017 2:50pm
Quoting verv
{quote} my understanding is that as a company, you don't get FCA protection (for example) take the alpari broker going bust in 2014 when alpari went bust those who traded as individuals got their money back because the FCA guarantees it however those who traded with alpari as companies didn't have FCA protection, and had to share what was left over after debts were paid
Thanks Verv. FCA protection is something new you have shared...

I see that you are in States and you seem to have good knowledge of FCA which is for UK. At some point in the past were you looking to set a company in UK instead of States?
  • #15
  • Apr 14, 2017 2:52pm Apr 14, 2017 2:52pm
Quoting TGS
{quote} You could also try not trading any pair associated with the CHF symbol.
Hi TGS,

I mean at that point no one could know about CHF. Hence this is to protect in scenarios that are unforeseen/Black Swan...

Thanks
  • #16
  • Apr 14, 2017 5:28pm Apr 14, 2017 5:28pm
Quoting verv
{quote}my understanding is that you can trade as a company and reduce your maximum losses however it is also my understanding that you will to create an account with your broker as a company and not an individual - and the rules will be different, such as lower leverage, and I don't think you are entitled to insurance
Correct although leverage or insurance comes down to the brokers choice/regulatory rules. Additionally you're complicating your tax situation as all the winnings are not your money (just as the losses shouldn't be yours), it is your companies money and paying it out to you will almost certainly result in additional taxation - income tax or dividend tax.
On the bright side, it would allow traders in countries with complicated regulatory situations (like the US) to trade with potentially better brokers.

FSCS compensation is indeed a consumer protection. As a company you're obviously not a consumer anymore.
  • #17
  • Apr 15, 2017 3:13am Apr 15, 2017 3:13am
Quoting verv
Hi all, We seen during the CHF episode that it is very possible to lose considerably more money than you have in your account, otherwise known as negative balances. One of the ways around this would be to set up a private limited company (PLC) and trade from there, that way if you make a mistake and incur a huge loss, you can be insulated from that loss because you are a trading company, and not an individual. My question is, how would you be regarded if you traded as a PLC, versus and individual? Can you still be regarded as retail by your broker,...
Verv, I wouldn't worry about negative balances. You're a UK citizen, so anyone suing you would have to go through a UK Court of Law. We have responsible lending, meaning the onus is on the lender to have done their due diligence on whether or not you can afford the loan. At the very least that means a credit check. It is also an unsecured loan. That is leverage. So, I would just have lots of small accounts rather than one big one and go for as much leverage as i can get because i would rather use their money than my own. And if it all goes tits, they can go swing for it. They don't have a leg to stand on.
  • #18
  • Apr 15, 2017 3:57am Apr 15, 2017 3:57am
Quoting jen101
{quote} Verv, I wouldn't worry about negative balances. You're a UK citizen, so anyone suing you would have to go through a UK Court of Law. We have responsible lending, meaning the onus is on the lender to have done their due diligence on whether or not you can afford the loan. At the very least that means a credit check. It is also an unsecured loan. That is leverage. So, I would just have lots of small accounts rather than one big one and go for as much leverage as i can get because i would rather use their money than my own. And if it all goes...
Hello Jen,

In our previous interaction You mentioned about using as much leverage as you can. After delving more into leverage, i understood the meaning.

We can use the leverage to drastically reduce the margin needed to take a position and still have the same position size and the same risk.

There was so much confusion out there, if not for your inputs i could have either ignored it at my own peril or would have put in back burner...

I kid you not, you saved me from a great misstep, i am extremely happy that you shared your wisdom...

Thanks
  • #19
  • Apr 15, 2017 11:37am Apr 15, 2017 11:37am
Quoting aaven
{quote} Hello Jen, In our previous interaction You mentioned about using as much leverage as you can. After delving more into leverage, i understood the meaning. We can use the leverage to drastically reduce the margin needed to take a position and still have the same position size and the same risk. There was so much confusion out there, if not for your inputs i could have either ignored it at my own peril or would have put in back burner... I kid you not, you saved me from a great misstep, i am extremely happy that you shared your wisdom......
Hey steady on! Don't give me an ego complex!

The flip side to having small accounts and using high leverage is that often you will get crap spreads. However there are some brokers where it is possible to have it all and one of my favourites is Vipro Markets. You get super leverage with Exness, but move away from the main pairs and the spreads are pretty awful. Not that it bothers me too much as I only open 1-3 trades a week and they can last 2 weeks. If you're scalping though, it will be a different story. Good luck!
  • #20
  • Apr 15, 2017 1:26pm Apr 15, 2017 1:26pm
Quoting jen101
{quote} Verv, I wouldn't worry about negative balances. You're a UK citizen, so anyone suing you would have to go through a UK Court of Law. We have responsible lending, meaning the onus is on the lender to have done their due diligence on whether or not you can afford the loan. At the very least that means a credit check. It is also an unsecured loan. That is leverage. So, I would just have lots of small accounts rather than one big one and go for as much leverage as i can get because i would rather use their money than my own. And if it all goes...
Thanks Jen for the reply
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