Traders Entities - Trader Entities for Traders

Visit our new Green NFH online store to shop for our professional services. Quick link for Entity Formation section. We have some excellent packages.

Additional Information:

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:

Check out our entity accounting services too.

If you have any questions about entities, please email us at or call us.

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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. 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 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 much more.

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 Tax Guide.

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.



Highlighted Recent Recordings:

*Entities & Employee-Benefit Plans
*Current Developments in Tax Law that Affect Traders
*Accounting for Traders
*The Section 1256 club is hard to get into: Futures on foreign exchanges often donít qualify
*Puerto Ricoís tax haven status
*Entities: A key update on trading entities and management companies
* 2013 Tax Filings For Traders & 2014 Tax Planning
*Forex Tax Treatment & Planning
*Trader Tax Law Update: Current Developments
*2014 Tax Planning & Will an Entity Help Lower Your Tax Bill?
*Audits of Performance Records

Trader Tax Center

Tax Newsletter & Calculators

Highlights (see the full archive):

Aug 19: Foreign partners in a U.S. trading partnership can be tax free Read More

Aug 13: IRS warns Section 475 traders Read More

June 20: Tax treatment for Nadex binary options Read More

June 19: IRS softens its stance for some taxpayers with undeclared offshore accounts Read More

June 12: IRA rollover rule changes Read More

June 6: Bitcoin is not reported on 2013 FBARs Read More

June 5: Tax deadlines in June: U.S. residents abroad and FBAR Read More

June 2: Tax treatment for foreign futures Read More

May 21: Bitcoin tax update: Can business traders apply Section 475 elections to bitcoin trades? Read More

May 13: Puerto Ricoís tax haven status is tailor made for investors, traders and investment managers Read More

May 6: Entities: A key update on trading entities and management companies Read More

Mar 25: IRS guidance on bitcoin transactions will chill its use Read More

Feb 27: Another trader tax court loss (Assaderaghi) Read More

Feb 1: Net investment tax details Read More

Dec 4: IRS final regulations for Net Investment Tax help traders. Read More

Dec 3: Bitcoin is a hot commodity, but is it taxed like commodities, assets, or currencies? Read More

Nov 15: Another non-business trader gets busted in tax court trying to cheat the IRS. Read More

Nov 6: Hedge fund investors depend on ďassuranceĒ from quality independent CPA firms. Read More

Oct 29: ObamaCare taxes are starting to affect traders. Read More

Aug 30: The Tax Court Was Right To Deny Endicott Trader Tax Status Read More

Aug 18: Common trader tax mistakes Read More

July 24: Learn the DOs and DONíTs of using IRAs and other retirement plans in trading activities and alternative investments Read More

GreenTrader blog archive, Forbes blog, Benzinga blog.


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