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
For a quick overview, see our Entities
For Traders page. For more detailed information, we
2014 Trader Tax Guide, Chapter 7 on Entities For Traders.
January 2014 major strategy update:
Based on new IRS guidance on self-employment expenses for trading
businesses, we've revised our entity and retirement plan
strategies. Two-spouse general partnerships may want the active
trader spouse to own a minority percentage in order to maximize
the retirement plan deduction in relation to the administration
fee needed. (Previously, it didn't matter if the active trader
spouse owned a large majority.) We also recommend S-Corps using
payroll and entity-level retirement plans and adding a C-Corp to
the mix for employee-benefit plans including retirement plans. In
both those cases, ownership percentages don't matter. Read our
Jan. 14, 2014 blog "New
IRS guidance on SE tax deductions affects partnership
Ready to sign up? Click here
for our payments and what's included in our service.
- Q1 is an excellent time to form a new entity.
The entity can elect Section 475 MTM within 75 days of inception
and 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.
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.
We have the
lowest priced and best entity services around.
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 agreements, corporate documents and resolutions).
Start with a 30-minute consultation with Robert A. Green, CPA.
After a consultation, upgrade to our entity formation
consultation service below.
Click here to see what's included.
Green NFH, LLC: Trader Entity Formation
Consultation Service – Advance Payment. (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 advance payment.
If we go beyond basic entity formation
consultation service through extra consultations,
the additional time will be charged at our
standard hourly rates.
*Requires separate purchase of outside legal time
Total cost is $395 Green NFH + $225 Rimon Law
Group = $620.
There are additional costs for the online
incorporator and state filing fees for LLCs and
Green NFH, LLC store
Start with Green NFH, LLC. You can add the legal
paperwork part afterward.
Rimon 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
Rimon Law Webstore
included in our GTT Trader Entity Formation Consultation Service
For online filings, we use Business
Filings Incorporated (BFI). They do excellent work!
Our GreenTraderTax entity formation consultation advance payment
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 advance payment fee includes:
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 accounting and trade accounting;
- how to handle startup costs (Section 195) and organization
costs (Section 248);
- 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
- how to handle payroll to the owner;
- how the entity interacts with your individual tax return
(contributions, distributions, expenses, elections, accounting,
home office and more).
formation of LLCs or corporations with the outside incorporator
BizFilings (see above). General partnerships do not have an online
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 and elections:
searches 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.
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
and corporations are formed with a state filing, whereas general
partnerships and sole proprietorships are not, since the latter
are not limited liability companies.
general 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 related resolutions.
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 our local legal counsel (for example,
with trust involvement).
S-corporation election paperwork including federal and state if
outside 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,
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 2014: A clean start
As you approach the April 15 tax deadline for 2013 tax returns and
2014 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 2014 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 2014.
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 2014. 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 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 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
Ready for help? Click here.