Traders Entities - Trader Entities for Traders
Visit our new Green
NFH online store to shop for our professional services. Quick link
Formation section. We have some excellent packages.
For a quick overview, see our Entities
For Traders page. For more detailed information, we recommend Green's
2014 Trader Tax Guide, Chapter 7 on Entities For Traders.
- Q3 is an excellent time to form a new entity. The
entity can elect Section 475 MTM within 75 days of inception. It can
be used to unlock 2014 deductions for retirement and health insurance.
Entities look much better to the IRS for trader tax status and business
expense deductions. Entities often help avoid some of the Obama-era
tax hikes on the upper income, too.
More content on entities for traders:
- Watch our recent webinars
- Watch our videos
produced by MoneyShow.com:
- Trader Entities - Quick
Link for more information in our content.
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.
Year-end 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 salary
before year-end, to claim a full year of 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 payroll tax costs. 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 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 salaries, opening an individual 401(k) plan on the
entity level, reimbursing expenses and more.
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 475 MTM.
Strategy for Q1: A clean start
As you approach the April 15 tax deadline for filing prior year tax
returns and current year 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 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 the tax year.
For example, if you have a large trading loss year-to-date 2014,
elect Section 475 MTM by April 15, 2014 (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 forward.
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 the year. 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.
here to learn more about incubator funds.
in entity formations for traders in all parts of the country.
Start with a consultation to find out if an entity is right for
Look before you leap. Don't rush into an entity if you
don't need one.
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
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 the details.
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
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