Link: Entities. Start on this page first.
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On this page, we focus on entities for operating a trading
business trading your own funds. If you want to trade other peoples' money,
then visit our investment
Use entities to avoid Obama-era tax hikes on upper-income individuals.
We explain it all here: "Post
fiscal cliff planning for traders."
- We suggest a middle man S-corporation to receive a larger administration
fee from the trading business entity to reduce the ObamaCare 3.8% Medicare
tax on unearned income. Then pay a smaller administration fee to the
owner's Schedule C — the original amount planned — to unlock
the AGI deductions for health insurance and retirement plans.
- For high-income business traders, we suggest a C-corporation to own
your trading business intellectual property (IP). Your trading business
entity pays the corporation a royalty, shifting income from your individual
tax return to a corporation tax return. This strategy avoids some of
the Obama-era tax hikes on the top individual income tax brackets.
Business traders should consider an entity for 2013. Read
our blog, "New
entities effective Jan. 1, 2013 reap many tax benefits." Excerpts:
- It’s better to consolidate your entire 2013 trading
business activity on an entity tax return. Otherwise you will
have to file an individual tax return with trader tax status for the
first part of the year and an entity tax return for the balance of the
year. Why deal with trader tax compliance complexities on two separate
tax returns, when you can do it on one? Also, entities don’t have
to file that dreaded tax form 8949 for cost-basis
reporting like individuals do.
- Entities help avoid wash
sale losses at year-end. A new entity for Jan.
1 is your ticket out of wash sale loss deferrals and related problems.
If you stop trading on your individual taxable accounts at year-end
and continue trading in a new entity account on Jan. 1, you successfully
break the chain on wash sales. You will be free to buy back the securities
in your entity account without waiting 30 days, and it doesn’t
matter if you elect Section 475 MTM in 2013 or not. This works because
the entity and the individual are considered different taxpayers.
- Watch our recent webinars
*Close out 2012 with smart year-end tax planning and start 2013 with
a new entity
*Last Chance to Form an Entity for Meaningful Tax Benefits in 2012
*The Best Entities for Traders and Investment Management Businesses
- Watch our new videos
produced by MoneyShow.com:
If you're not sure you will qualify for trader
tax status and you don't see the benefits of having an entity, wait to
form one. You can trade an individual account and transition into an entity
when you're ready.
Special entity strategies for traders
As pointed out in Green's 2012 Trader Tax Guide, there are many
reasons to consider a pass-through entity, including: attracting less
attention from the IRS on trader tax status (vs. a Schedule C); financially
engineering AGI deductions including retirement plan and health insurance
premiums; and having a “do over” on Section 475 MTM or electing
Section 475 MTM within 75 days of entity inception.
Year-end AGI-deduction strategies and more
Setting up an entity before year-end is a great way to save tax
money this year and next. You can pay yourself a fee or salary to create
earned income as late as right before year-end, which unlocks a full year
of AGI deductions for retirement-plan contributions and health-insurance
premiums. Most traders save over $5,000 in net taxes with this strategy,
with income tax savings being greater than SE tax costs on the related
fee amount paid. Married couples often save over $17,000. Sole proprietor
business traders don't have earned income from trading, so they can't
take advantage of these AGI deductions on their trading business.
If you have an entity in place already, it's important to execute
year-end transactions before Dec. 31. This includes paying fees
or salaries, opening an individual 401(k) plan, reimbursing expenses and
more. We covered year-end planning strategies in our 12/6/12 webinar.
If you have a new late-year entity, consider an emergency Section 475
MTM election. If you set up your new entity in Q4, your 75-day deadline
for electing Section 475 MTM is just after year-end, so you can see how
things finish out on the year first. You also break the chain on wash
sales in your individual account by switching to an entity with Section
Strategy for Q1 2013: A clean start
As you approach the April 15 tax deadline for 2012 tax returns and 2013
Section 475 MTM elections for existing individuals and partnerships, consider
making this special
Section 475 MTM election. The deadline for existing S-corps is March
15. Section 475 MTM is great for delivering business ordinary loss treatment,
exempting traders from wash sale loss deferral rules and the puny $3,000
capital loss limitation.
New 2013 entities have 75 days from inception to elect Section 475 MTM
under the "new taxpayer" exception. No matter what you decide
to do individually by April 15, you can have a do over on Section 475
MTM in the entity for the balance of tax year 2013.
For example, if you have a large trading loss year-to-date 2013, elect
Section 475 MTM by April 15 (March 15 for S-corps) or within 75 days of
the formation to lock in a business ordinary loss with Section 475 MTM.
If you have material capital loss carryovers to use up, you can generate
capital gains in a new "do over" entity by skipping MTM going
Conversely, if you have year-to-date capital gains as of April 15 and
you want to apply them against a material capital loss carryover, then
skip the MTM election and consider a do over in a new entity for the rest
of 2013. Consult with Robert Green, CPA about all these strategies.
More entity benefits
* Entities are needed now more than before to defend trader
tax status because the IRS is turning up the heat on trader tax status
(see our blog
article on this topic).
* Retirement plans: Our strategies are customized for GreenTrader tax
benefit strategies. They offer special features such as plan loans and
the ability to trade forex and futures at many leading brokers and invest
in hedge funds. Learn more here.
A Mini 401(k) (otherwise known as an Individual 401k) retirement plan
— the preferred plan for business traders — needs to be established
(but not funded) before year-end.
*Some retail business trader entities morph into an incubator
fund, which can have a historical performance record to attract
other investors. During the incubator fund phase, you can't take compensation
of any kind, but you can share expenses with your close friends and family
investors in the fund. Click
here to learn more about incubator funds.
We specialize in entity
formations for traders in all parts of the country. Start with a consultation
to find out if an entity is right for you.
Look before you leap. Don't rush into an entity if you don't
Consult with us before forming one. Either way, we will save you money.
If you proceed with an entity, you can upgrade to our entity formation
service (the best-priced service around), and if you don't, you save formation
and annual filing costs.
Robert A. Green, CPA and CEO of GreenTraderTax, will consult with you
on whether or not you need an entity, the pluses and minuses, the costs
and benefits and which type of entity is best. The consultation also covers
your trader tax status issues, mark-to-market accounting and much more.
Ready for help? Click here.
Before jumping into an entity,
find out all the costs and benefits first. Make sure the benefits far
outweigh the costs.
Following are the entity formation costs you can expect to pay with our
firm. We are proud to say our prices are significantly less than our competition.
Our full entity formation price is very competitive.
Through our alliance partner for online filings, you pay state filing
fees, currently ranging from $70 (Oregon) to $505 (Illinois). Click on
the BizFilings link below to see their state price chart. BizFilings charges
$97 for their excellent basic service, plus $60 additional for their expedited
service (we suggest this). Partnerships aren't filled by state, so you
save the BFI costs and state filing fees. Everything you need is included
in our fee, so click here to learn more about
In addition to these entity formation costs, you should have other annual
costs related to your entity if it's an LLC or S-Corp; generally there
are none for general partnerships.
Tax return preparation fees: All entities other than
single-member LLCs (with disregarded entity status) must file a separate
income tax return each year. That separate tax return is the goal of our
strategies. Most of our entity formation clients also use our tax preparation
service. Most traders form entities to take advantage of AGI deductions
like retirement plans and health insurance deductions. There are many
nuances and complexities to executing these strategies right. Click
here to learn more.
Annual state costs: Many states have annual report fees,
minimum franchise taxes or user fees for LLCs and S-corps. Most states
don't have annual charges, taxes or fees for general partnerships. The
idea is that you can use the state court systems for LLCs and S-corps
but not general partnerships (GP). You save on these costs with a GP.
Traders don't need liability protection or the court system since they
don't have customers. Therefore, a GP is a good low-cost solution for
many traders. We'll advise you of all these costs during your consultation.
We also list these costs for some states in Green's 2013 Trader Tax
Benefits can far outweigh costs: If an entity can save
you thousands of dollars, then it's worth the costs. You can then upgrade
to our full entity formation service.
If not, save on the costs of having an entity, including the original
formation costs and annual reports, taxes and/or fees each year, which
also vary by state. For many traders, having an entity is a wise move,
but which type of entity, in which state and how to structure and use
it is very important. After the initial consultation, traders can upgrade
to our entity formation service so it doesn't cost extra. Plus, we usually
complete our entity formations within three days time, so you can be up
and running in your business ASAP. Click here when
you're ready for your consultation to discuss entities, trader tax and
more, or to get started with our full entity formation service.
Ready for help? Click here.
We have the lowest priced
and best entity services around.
20%-off promotion from April 25 - May 10, 2013
Robert A. Green CPA handles the tax advice, helps with the entity
formation process and handles several key start-up issues. Our outside
attorneys at Rimon Law Group handle legal services, including legal agreements
(general partnership or LLC operating agreement, corporate documents and
Start with a 30-minute consultation with Robert A. Green, CPA.
After a consultation, upgrade to our entity formation service
Click here to see what's included.
LLC: Trader Entity Formation Service Upgrade Retainer
& Minimum Price. (Upgrade after a 30
Comes with download of our engagement letter. For simple LLCs,
general partnerships and S-Corps, the fee should not be more
than this minimum fee/retainer. If we go beyond basic formation
services through extra consultations, the additional time
will be charged at our standard hourly rates.
*Requires separate purchase of outside legal time below.
Total cost is $316 Green NFH + $225 Rimon Law Group = $541.
There are additional costs for the online incorporator and
state filing fees for LLCs and corporations.
Green NFH, LLC store
Start with Green NFH, LLC. You can add the legal paperwork part
Law Group - outside law firm for legal document
preparation and EIN.
• $225 for standard entity formation documents, including
EIN and S Corporation election.
• $325 for complicated jobs like carried interest or
proprietary trading firm models.
*See further details on the Rimon Law store (click Add to
Cart on the right).
**Requires a separate purchase of the entity formation service
from the Green NFH, LLC store above ($395).
Rimon Law Webstore
included in our GTT Trader Entity Formation Service
For online filings, we use Business
Filings Incorporated (BFI). They do excellent work!
GreenTraderTax entity formation retainer includes much of what you need.
Robert A. Green, CPA helps you decide if you need an entity and if so
which one is best for you. Our competitors sell cookie cutter entities
to all who call on them, whether you need an entity or not. We design
the right entity around your special tax needs (considering family, other
work and state issues) and execute it fast. Our outside attorneys prepare
and review all the paperwork.
Our service is just what you need. Yes, you can form your own entity at
your state Web site or ask your local attorney to handle it all (probably
at higher cost than our very competitive fee). But the most important
issue is not simply forming an entity — it's forming an entity that's
properly structured to take advantage of all the complex and nuanced trader
tax strategies. We consult with you on these trader tax strategies, design
the best entity and tax plan and then help you execute it with our customized
entity formation service and annual tax preparation service (to collect
those tax benefits). Overall, we save you a lot of money!
Our retainer fee includes:
We lay out
our scope of engagement, terms and conditions in an engagement letter,
which also empowers us to communicate client information to the outside
attorney engaged separately by the client (see above).
with Robert A. Green CPA to discuss:
- which entity structure is best for your facts and circumstances,
to maximize trader tax benefits;
- how to use that structure correctly while maintaining minimal costs
in the entity;
- qualification for trader tax status in the entity;
- tax treatment elections for securities (Section 475), futures (Section
1256) and forex (Section 988) in the entity;
- how best to handle general ledger accounting and trade accounting;
- how to handle startup costs (Section 195) and organization costs
- how to handle pre-business education costs;
- which type of retirement plan is best for you, how to handle retirement
plan rollovers or Roth conversions, and how to utilize retirement plans
in the most tax efficient manner, using your entity to generate the
earned income needed for retirement plan contributions;
- how to handle compensation to the owner (administration fees or payroll);
- how to avoid Nasdaq professional data feed fees on an entity trading
- how the entity interacts with your individual tax return (contributions,
distributions, expenses, elections, accounting, home office and more).
of LLCs or corporations with the outside incorporator BizFilings (see
above). General partnerships do not have an online formation.
of a master memo to the client, outside attorney and our CPAs to be assigned
for tax preparation.
Our outside attorneys help with the entity name, give guidance
on state and local filings and prepare the entity legal paperwork, resolutions
some state and local databases that are easily available online, to see
if the name chosen is already on file. If it is, the attorney will suggest
a new name.
Tax ID Numbers:
The attorney files the online application with the IRS and state for your
tax identification numbers (EIN). These are needed for filing income tax
returns later on (you can't e-file without it).
LLCs and corporations
are formed with a state filing, whereas general partnerships and sole
proprietorships are not, since the latter are not limited liability companies.
partnerships are not obligated to file with a state, most states require
them to file fictitious business name certificates with their local county
clerk. It generally costs under $25. For filing the fictitious name or
DBA, we can utilize BizFilings or the outside attorney.
of resolutions to open trading account, mark-to-market elections and other
of entity paperwork including (simple and standardized) LLC Operating
Agreement, partnership agreements or corporate bylaws for S- and C-corporations.
These are basic and customized for traders. Our outside attorneys can
customize them further and coordinate planning with your local legal counsel
(for example, with trust involvement).
election paperwork including federal and state if required.
attorney uploads the entire work product to the ShareFile at Green NFH,
LLC and we advise the client to download it.
Disclaimer: Our outside attorneys or BizFilings
advise clients throughout the U.S. and some issues vary by state, county,
city and town jurisdiction. Consider getting local attorney advice
for compliance when appropriate. There are other issues to consider like
local property taxes, too.
Check out our entity
accounting services too.
If you have any questions about entities, please email
us at firstname.lastname@example.org
or call us.