Few additional questions: 1) C corps have to pay taxes quarterly- how would you navigate that if it's a trading business and profit expectations are unknown 2) You mentioned he made the $200k under his individual name. How do you then flip that to run the profit already made to fall under two businesses or was this just a hypothetical? 3) Could he not just expense the expenses under the LLC? Not sure the point of the C corp is clear to me especially given the requirement for quarterly taxes
If you would like a FREE 30-minute consultation, you can request one here - aba.link/91e1fa or you can send me an email at ccoons@andersonadvisors.com, and I will have someone contact you.
What is the total recurring annual costs to maintain this particular structure? Including state fees or filings, and your own administrative offerings like ensuring llc and corporation compliance? CTA compliance? With this info, traders could back into the required annual profit at which this business structure yields savings. Thanks!!
Great video, but one question, as a day trader could I use the profits to fund other investments like real estate, gold, etc and borrow money against those assets and use the interest and the investment money as a deductible item on my taxes in order to minimize the max the amount of taxes to be paid>?
Quite helpful. But very important to note IRS requirements. In order for your trading activities to be considered a "trade or business," and be able to take these deductions, you have to meet three requirements. You must seek to profit from daily market movements in the prices of securities and not from dividends, interest, or capital appreciation; your activity must be substantial; and you must carry on the activity with continuity and regularity. So if you have some part of your portfolio which is a dividend play, you should separate out those securities in a different account. Also consider the mark to market election under Section 475(f),. Otherwise, if you have a net loss from trading in any year, it is a capital loss limited to 3,000 per year. See IRS Tax Topic 429 and Revenue Procedure 99-17.
Question for Clint- Do you also need to register as a foreign entity in the state you reside in as a trader even if you have your C-corp and LLC setup in WY? Thank you
@@ClintCoonsI asked chase bank about this and setting up a business bank account and was told any entity doing business WY or elsewhere but(trading) within CA has to also register an entity in CA(which is $800-1200/yr) how do you get around that using WY if you do not reside over there?
@@ClintCoons I live in CA, but if I created a WY C-Corp (registering as a foreign entity in CA) and LLC as you indicated, wouldn't the CA Franchise Tax Board consider the LLC the equivalent of a investment partnership and demand the FTB fee?
@@ClintCoons Hi Clint...that is not what I was told by Georgia State tax board...I set up companies with you (LLC and C-corp) and my accountant told me I had to set both of them up in my state as foreign entities - wherever I'm trading physically. So I called the Georgia tax board and they said that I absolutely had to register both companies as a foreign entity in GA. Then, guess what? The names I have given Anderson Partners that they set up my companies under (in WY) were NOT available in Georgia. WHAT A HASSLE! So now I have to "add" something to the names...big hassle since I've already opened checking accounts and brokerage accounts under the old names that your people told me to do "right away!" No one at your company said "Make sure to see if the name you want to call you business in Wyoming is available in the state you live!" This is awful and has cost me time and money! I had to list both companies as foreign entity and pay another $225 each... Also (FYI) I just went in the Anderson Business Advisors Platinum Q and A room today, tax hour, and they said the same thing that the Georgia state board said you HAVE to file the companies as foreign entities. So your answer above is wrong. Maybe for asset protection but for taxes and trading that is the wrong answer you're giving... Please, everyone, call your state tax board and find out what you have to do. Do you own due diligence and don't believe everyone you hear.
Hi Clint, great video once again. You mentioned to pay 20% to the management company (c-corp) Can this % be increase to 50% ? If no, why not and whats the max you can increase?
@@ClintCoonsCould you yourself/me be in control of the management company, like you pay yourself the 20% mgmt fee throughout the entity setup? Could this mgmt co. you pay yourself a salary from the trading gains, so that you reduce taxable gains?
Great video, Clint. What would you recommend for someone who doesn’t have meaningful expenses/overhead? Is there another structure that enables asset protection and tax savings? I’m speaking with your team already but I cannot seem to find a good answer for this situation.
Since the trading accts are now under an LLC vs an individual is another effect of moving to this structure that you will have be treated as a commercial acct by your broker and probably incur higher fees on mkt data etc? Not saying this is a deal breaker, but sounds like additional cost. Anyway around that?
Depends on your account value. Typically if you are above 250k they waive the fee. If not, we set up a personal property trust to hold the account and have the PPT owned by the LLC.
So then the brokerage account is owned by the personal property trust, the PPT is owned the Blue Box LLC and the Blue Box LLC hires the Orange Box C-Corp to manage the account?
How about trading strictly with prop firms? Can those challenge fees be deducted? And what about trading in offshore brokerages that allow trading of CFD’s and higher leverage? They mostly ask for KYC and dont have an option to setup a brokerage account in a business name
Wish he would answer this, great question. I would think yes because its an expense. Just like footage of your square house used for work. Lunch "Meetings" gas all the basic stuff that comes with tax advantages LLC
Hi Clint, why not just structure the trading account holder LLC as S Corp and write of expenses under there? You also create earned income allowing for the same 401K contributions etc. Please clarify.
Great content Clint! I have searched for years for a video like this. Side note question, are there any advantages when it comes to federal student aid to placing a 529 in a trust? For example, reducing the expected family contribution and keeping the assets out of the name of the kids for student aid?
That's a great question. For a more personalized answer, I suggest scheduling a free 45-minute consultation with my team. We’ll provide advice tailored to your specific situation. Visit: aba.link/91e1fa
Thanks for the video. A couple of questions please. Why can't you write off expenses in just an LLC? Do you have to have business meetings for both entities? Can you charge the corp rent if its address is the same as the LLC? Thank you.
@clintcoons, awesome video as always. Is there any implication if I live in California? Should I register my LLC here or Wyoming should be ok for California residents?
Does the C Corp have to be an active trader to take advantage of this? (so if my agreement pays my c corp 20% plus a guaranteed payment, does it have to be an active trader)?
Should I register the C-Corp as a "foreign corporation" in my local state if I'm doing business out of WY? if not are these out-of-state deductions (internet, phone, rent) okay filling taxes in WY?
Hey Clint, I get the reasoning behind the management company being in WY for the anonymity protection, but shouldn’t the company that holds the brokerage account and does the actual trading be located in your home state, since that’s the state that you’re technically doing your business in?
what does this mean for state income tax? ie residing in CA but the trading corp is in WY? seems there would be a massive benefit (13% SI in CA vs 3-4% SI in WY)@@ClintCoons
Another question, if the llc does trading but also hold stock shares that produces dividend but those shares are not sold, do the dividends money can be used to pay the 20% fee to the manage company as well?
Hey Clint, thanks again for the video. However, I don’t understand one thing…In this particular example, if your client made $200K trading crypto, wouldn’t that income be classified as capital gains, and not ordinary business income? How are you able to deduct business expenses from proceeds stemming from capital gains?
The LLC is the account doing trading, correct? And why does the management company get 20% ownership- should that be adjusted to more with more income? Is the C-corp still recommended if I’m just starting out and not trading a lot?
You present great ideas. Thanks Clint. Can I leverage an already existing LLC with a specific NAICS code as a management company and partner with the Trading LLC?
@@ClintCoonsSo, given your reply above, should both LLCs be setup as NAICS Code 541611 Management Services? If not, what are the appropriate NAICS codes to use for the orange and blue boxes respectively? The orange box being the trading business LLC taxed as a C-Corp. The blue box being the LLC partnership which holds the brokerage accounts. My concern here is that certain NAICS codes may require special licenses. For example, if the orange box is setup as a "Portfolio Management" entity (NAICS code 523920 which sits under "Finance and Insurance"), then you need to be a certified portfolio manager. This seems like a non-starter. Btw, your videos are fantastic. Thank you so much. I’m definitely going to checkout one of your seminars.
I would recommend setting up a free consultation to talk about some strategies and how they apply to your unique situation. Sign up here: aba.link/91e1fa
Does the entity have to be a file as c-corp or Can it be filed as a S-corp? Can i just create an LLC file as an s-corp or just an LLC and work for it or manage it?
Thank you for the video but how to avoid professional brokerage and data fees (amount to $1500 or more) when trading under an entity or s-corp. but these fees are very low or zero when trading as an individual. how to overcome this?
Thank you for the reply. If I do that as you say, will I be able to deduct expenses such equipment, education, subscriptions etc like one could as an s-corp?
It seems the Augusta rule is really the key driver of tax savings here if I'm doing my calculations correctly. If you aren't a homeowner, do you still think going through this structure makes sense? (additional layers, LLC fees, etc) If you live in CA for example, you also still need to pay a 8.84% state income tax on top of the 21% federal income tax right? That takes away some of the tax savings that otherwise would have been achievable as well... Maybe I'm missing some other tax savings considerations as well but I'm not a tax expert.
Hi Clint, I am a futures trader. I use prop firm funded account, so I am 1099ed as a contractor at the end of the year. I also am a real estate agent as a side gig. Question is can I use this type of set up as well With the LLC and the C-Corp Inc.? Thanks in advance.
If I set this these businesses up in WY and live and do my trading in UT, would I need to register the C Corp as a foreign business entity in UT and have it pay income tax in UT? Why or why not?
Not unless you begin conducting business in Utah such as selling products to residents in Utah. Any income you earn will be subject to Utah tax if you are a resident of Utah.
@@ClintCoons And reimbursing myself under an accountable plan to set up an "administrative office" in my UT home would not be enough to cross that "conducting business" threshold, correct?
Great video. Glad I found this channel. Quick question: would it be possible to have orange box LLC (c-corp with me as sole share holder/officer) be the sole owner of the blue box LLC (s-corp, me as an officer and employee)…….blue box LLC then can pass through income (minus expenses incurred) to orange box LLC which will be taxed as a c-corp (minus any expenses incurred). The reason I ask is I’d like the orange box LLC (c-corp) to eventually own multiple LLC (s-corp) in the future as I build multiple revenue sources. The multiple LLC s-corp being in different industries. Thanks in advance!
Question: starting at the minute 12:21 the member rented the house to the C-Corp and 20k went to the member from the Corp, Is that considered an income to the member? is any tax liability for the member for this extra income for renting his house? at what tax rate? thanks!
Is this model the same as having a Holding plus a trading company if its so, the C corp has some ownership of the Holding.. in other videos the holding/partnership owns the C-Corp not in reverse, or do we have to put another company above those for the holding? thanks!
Hello. Maybe you can point me in the right direction a little bit. I live in Iceland, I trade on the US stock exchange. The next step is to get pro status from the broker. Continue to establish a company and transfer capital to the name of the company. Capital about $250k. Is it realistic to go to the bank and ask for a loan to develop a real estate business using company capital for the initial investment, which is working capital on the stock exchange. Not to mention the small details, of which there are many. But the principle itself is possible like this?
Let's say the management corp generates profit (not so many expenses). Instead of the management corp taking a 20% interest in the account holding entity, paying corporate tax, paying tax of qualified dividends, is there a way to make a structure that flows income as carried interest?
See section 280(a) and the rules regarding rental of your personal residence. The funds received are tax free if you meet the requirements of renting it for less than 14 days.
If the officer of the c-corp lives outside of WY and is the only member of the corporation, does the c-corp has to register for unemployment in WY? According to irs rules, officers needs to assign reasonable salary. So wondering if unemployment fee nneeds to be paid on that salary olif officer live out of state
We're you saying the entity holding the trading account's LLC was an LLC taxed as a C Corp or as a C Corp holding an LLC holding the trading account's LLC? Or did I miss something altogether? Thx
The Corporation cannot directly reimburse individuals for expenses they incur; instead, it must cover these costs as part of its employees' expenses. Your video didn’t address this aspect, which is important. The company needs to process payroll and ensure it pays reasonable wages to employee, and then write off the expenses mentioned in your video.
You will expense this money out to yourself in the form of fringe benefits. We have many strategies around removing money from your management company, so it is not taxable, but it is a deduction to the management entity. If you would like a FREE 30-minute consultation, you can request one here - aba.link/clintss or you can send me an email at ccoons@andersonadvisors.com, and I will have someone contact you.
Instead, why don’t you just make one entity (C corp) and put the trading business in the C corp? That way all the profits are taxed at the C corp level. Then when you want to pay yourself, just pay yourself via a salary.
@@ClintCoons Thank you. My plan is to accumulate as much money as possible in the C Corp for growth. I prefer the lower corporate tax rate. If I need to take any money out, I will just pay myself a salary and deduct that salary from the C corp. The taxes on my salary would be the same as the taxes on the LLC distributions. However the money I leave in the C corp will have a much lower tax rate than that of an LLC taxed as a disregarded entity.
Hey Clint, good video. If someone is not an active trader (no day trader) but investor making profits of around $50K, can they still use this entity structure? Please can there be one step structure ? Basically I would like to use C-Corp taxation to deduct expenses
Should that C Corp be a Holding company or a Management company? Does it matter? Can the C Corp own the investing llc by itself? What if I also have a professional llc as a financial planner, can the C Corp own that llc, and just pay me salary for services and management?
Hi. watched multiple videos on this and all recommend the c corp. Who would be the owners of the c corp and LLC? Can it still be the single trader? Or does it have to be some sort of family member.
Thanks for valuable video like always. I have quick question though, what will be the difference between getting TTS vs setting up C-corp? To my knowledge, if you get TTS then you can still write off any operational expense related to trading isn't it? Thank you in advance.
Hi Clint, great video. You forgot about assigning a salary to the officer of the c-corp. According to what I read about tax rules, an officer of a c-corp must have a reasonable salary. What's your suggestion about this?
@@ClintCoons Is there an unreasonable guaranteed payment to the management entity? If, for example, you want to pay enough salary (as that c-corp’s employee) to max out your 401k and pay benefits (health insurance, HSA, HRA, profit sharing 401k contributions) you’re easily talking about $100k-120k in gross corporate income depending on what you’ve budgeted for expenses. Its share of partnership income would likely be larger than 20% but not so large you would accidentally exceed your budget in a good trading year. Your partnership would have to guarantee the remainder so it reaches your budget.
Hey Clint, Titanium member here.... was doing that already and wasn't too sure on the legality. Can you comment if unqualified dividends can be structured the same way.
How many of your businesses can claim the home office deduction? Also, if you claim home office, can you still rent out your house under the Augusta rule? Thank you.
And then all the fees and headache for 2 businesses, filing taxes, oh wait, pay him for that. No thanks, I'd rather just pay the 30% tax. Doesn't make sense until you make over 200K a year trading. Even then it may not be worth the headache.
Anyone is who serious about their trading please do NOT listen to this comment.... This is a comment of a person who is not making money trading. No legit trader would speak against trading in a LLC/ any business entity because your money is really at risk if just trading under personal name. You do not need to be making more than 200k to do this, do this even if you are making 20k trading because you want to get this habit from early. Once you learn how to structure your business not only will you save thousands but also it's not a headache. Yes it will seem crazy getting it setup but once it's setup and you sit down to understand it then it becomes another skill that you learn. The reason I know OP doesn't make money trading is because he is gripping about paying a tax professional a couple thousand even though the professional will end up saving someone 10s of thousands. Either spend the time to learn the structuring yourself and run it by a professional just to make sure you not messing up or pay the professional because in the end, you are protecting the money, learning and saving thousands. Idk who this Clint guy is and not in my interest if anyone uses him for taxes but it just irks me when I see crap comments like these discouraging people of setting up a business for their trading because it is a 10s of thousands dollars decision to make.
@@rpicazoabletrue to a point, one can also get an umbrella policy for added protection. It’s fairly cheap. This strategy for trading might be geared more really towards saving in taxes if u don’t need all the profits from trading yet.
Then you need to pay 20k/year to Clint's company to be your lawyer and structure all of this and keep the companies legally running, and for Clinton's CPA department to make your taxes, then you are back to the 110k/year you had as an individual and without all this headache hehe.
Very insightful comment. Would you like to explain what part of the strategy is a "Scam". I am open to other points of view that can be articulated and backed by the IRC or cases.
If you want to dive deeper into this topic, schedule a free consultation with my team today. Visit: aba.link/91e1fa
Great information. Love your channel.
Few additional questions:
1) C corps have to pay taxes quarterly- how would you navigate that if it's a trading business and profit expectations are unknown
2) You mentioned he made the $200k under his individual name. How do you then flip that to run the profit already made to fall under two businesses or was this just a hypothetical?
3) Could he not just expense the expenses under the LLC? Not sure the point of the C corp is clear to me especially given the requirement for quarterly taxes
If you would like a FREE 30-minute consultation, you can request one here
- aba.link/91e1fa or you can send me an email at ccoons@andersonadvisors.com, and I will have someone contact you.
What is the total recurring annual costs to maintain this particular structure? Including state fees or filings, and your own administrative offerings like ensuring llc and corporation compliance? CTA compliance? With this info, traders could back into the required annual profit at which this business structure yields savings. Thanks!!
About $1,500
@@ClintCoonsI was expecting much more! I think I need to do this, even with a smaller account just so it’s setup properly for the future!
Exactly the video I was looking for!!!
Great video, but one question, as a day trader could I use the profits to fund other investments like real estate, gold, etc and borrow money against those assets and use the interest and the investment money as a deductible item on my taxes in order to minimize the max the amount of taxes to be paid>?
Yes you can. Interest deduction is limited to your investment income.
Quite helpful. But very important to note IRS requirements. In order for your trading activities to be considered a "trade or business," and be able to take these deductions, you have to meet three requirements. You must seek to profit from daily market movements in the prices of securities and not from dividends, interest, or capital appreciation; your activity must be substantial; and you must carry on the activity with continuity and regularity. So if you have some part of your portfolio which is a dividend play, you should separate out those securities in a different account. Also consider the mark to market election under Section 475(f),. Otherwise, if you have a net loss from trading in any year, it is a capital loss limited to 3,000 per year. See IRS Tax Topic 429 and Revenue Procedure 99-17.
Question for Clint- Do you also need to register as a foreign entity in the state you reside in as a trader even if you have your C-corp and LLC setup in WY? Thank you
You do not.
@@ClintCoons You are the BEST. Love all your videos. Thank you.
@@ClintCoonsI asked chase bank about this and setting up a business bank account and was told any entity doing business WY or elsewhere but(trading) within CA has to also register an entity in CA(which is $800-1200/yr) how do you get around that using WY if you do not reside over there?
@@ClintCoons I live in CA, but if I created a WY C-Corp (registering as a foreign entity in CA) and LLC as you indicated, wouldn't the CA Franchise Tax Board consider the LLC the equivalent of a investment partnership and demand the FTB fee?
@@ClintCoons Hi Clint...that is not what I was told by Georgia State tax board...I set up companies with you (LLC and C-corp) and my accountant told me I had to set both of them up in my state as foreign entities - wherever I'm trading physically.
So I called the Georgia tax board and they said that I absolutely had to register both companies as a foreign entity in GA.
Then, guess what? The names I have given Anderson Partners that they set up my companies under (in WY) were NOT available in Georgia. WHAT A HASSLE!
So now I have to "add" something to the names...big hassle since I've already opened checking accounts and brokerage accounts under the old names that your people told me to do "right away!"
No one at your company said "Make sure to see if the name you want to call you business in Wyoming is available in the state you live!" This is awful and has cost me time and money!
I had to list both companies as foreign entity and pay another $225 each...
Also (FYI) I just went in the Anderson Business Advisors Platinum Q and A room today, tax hour, and they said the same thing that the Georgia state board said you HAVE to file the companies as foreign entities.
So your answer above is wrong. Maybe for asset protection but for taxes and trading that is the wrong answer you're giving...
Please, everyone, call your state tax board and find out what you have to do. Do you own due diligence and don't believe everyone you hear.
Great video, especially for the novice like me, looking for ideas and answers.
Thank you for making it easy to understand. Appreciate you.
Hi Clint, great video once again. You mentioned to pay 20% to the management company (c-corp) Can this % be increase to 50% ? If no, why not and whats the max you can increase?
That would not be reasonable. Would you pay a 3rd party 50% to manage your account?
@@ClintCoonsCould you yourself/me be in control of the management company, like you pay yourself the 20% mgmt fee throughout the entity setup? Could this mgmt co. you pay yourself a salary from the trading gains, so that you reduce taxable gains?
@@galactic25 then you get taxed twice, first through income tax of C Corp then that salary that you received through is taxed again
Great video, Clint. What would you recommend for someone who doesn’t have meaningful expenses/overhead? Is there another structure that enables asset protection and tax savings? I’m speaking with your team already but I cannot seem to find a good answer for this situation.
Since the trading accts are now under an LLC vs an individual is another effect of moving to this structure that you will have be treated as a commercial acct by your broker and probably incur higher fees on mkt data etc? Not saying this is a deal breaker, but sounds like additional cost. Anyway around that?
Depends on your account value. Typically if you are above 250k they waive the fee. If not, we set up a personal property trust to hold the account and have the PPT owned by the LLC.
So then the brokerage account is owned by the personal property trust, the PPT is owned the Blue Box LLC and the Blue Box LLC hires the Orange Box C-Corp to manage the account?
@@_Thoughtful_Aquarius_this seems oddly complicated
How about trading strictly with prop firms? Can those challenge fees be deducted? And what about trading in offshore brokerages that allow trading of CFD’s and higher leverage? They mostly ask for KYC and dont have an option to setup a brokerage account in a business name
Wish he would answer this, great question. I would think yes because its an expense. Just like footage of your square house used for work. Lunch "Meetings" gas all the basic stuff that comes with tax advantages LLC
please answer this !!!!
Hi Clint, why not just structure the trading account holder LLC as S Corp and write of expenses under there? You also create earned income allowing for the same 401K contributions etc. Please clarify.
It will need to qualify as a trader
Great content Clint! I have searched for years for a video like this. Side note question, are there any advantages when it comes to federal student aid to placing a 529 in a trust? For example, reducing the expected family contribution and keeping the assets out of the name of the kids for student aid?
Not that I know of
need to deal with FICA taxes (SE Taxes additional 15.3%?), or exempt from this tax? why?
Can we set up two LLCs or it needs to be one LLC and one C corp?
That's a great question. For a more personalized answer, I suggest scheduling a free 45-minute consultation with my team. We’ll provide advice tailored to your specific situation. Visit: aba.link/91e1fa
Clint, does a C corp offer the same 401k yearly contribution as S-corp? Which i believe is 64k? And, why choose a C-corp over S?
Yes it does. As to the other question I have a video dropping this week that answers it.
Thanks for the video. A couple of questions please. Why can't you write off expenses in just an LLC? Do you have to have business meetings for both entities? Can you charge the corp rent if its address is the same as the LLC? Thank you.
Yes you can do everything you mentioned in an LLC. The key to certain deductions is making the proper tax election for the LLC.
Is it a problem for my home office to be in a state other than Wyoming?
Not at all
Do the IRS approve this as I own both blue and orange ones?
Yes you can own both entities.
@clintcoons, awesome video as always. Is there any implication if I live in California? Should I register my LLC here or Wyoming should be ok for California residents?
Definitely set it up in WY and not CA.
@@ClintCoons Isn't CA now charging $800 fees for any "foreign" LLC that does business in CA?
Does the C Corp have to be an active trader to take advantage of this? (so if my agreement pays my c corp 20% plus a guaranteed payment, does it have to be an active trader)?
No, it is an active manager.
Should I register the C-Corp as a "foreign corporation" in my local state if I'm doing business out of WY? if not are these out-of-state deductions (internet, phone, rent) okay filling taxes in WY?
Clint, are there any tax benefits/legal structures that would be available when trading a retirement account?
Hey Clint, I get the reasoning behind the management company being in WY for the anonymity protection, but shouldn’t the company that holds the brokerage account and does the actual trading be located in your home state, since that’s the state that you’re technically doing your business in?
No need because it does not meet the definition of doing business in a particular state.
what does this mean for state income tax? ie residing in CA but the trading corp is in WY? seems there would be a massive benefit (13% SI in CA vs 3-4% SI in WY)@@ClintCoons
Another question, if the llc does trading but also hold stock shares that produces dividend but those shares are not sold, do the dividends money can be used to pay the 20% fee to the manage company as well?
Yes
Hey Clint, thanks again for the video. However, I don’t understand one thing…In this particular example, if your client made $200K trading crypto, wouldn’t that income be classified as capital gains, and not ordinary business income? How are you able to deduct business expenses from proceeds stemming from capital gains?
The income paid to the corporation is not capital gains it is ordinary income.
The LLC is the account doing trading, correct? And why does the management company get 20% ownership- should that be adjusted to more with more income?
Is the C-corp still recommended if I’m just starting out and not trading a lot?
The LLC owns the trading account but the activity is being conducted by the corporation.
You present great ideas. Thanks Clint. Can I leverage an already existing LLC with a specific NAICS code as a management company and partner with the Trading LLC?
You could
@@ClintCoonsSo, given your reply above, should both LLCs be setup as NAICS Code 541611 Management Services?
If not, what are the appropriate NAICS codes to use for the orange and blue boxes respectively? The orange box being the trading business LLC taxed as a C-Corp. The blue box being the LLC partnership which holds the brokerage accounts.
My concern here is that certain NAICS codes may require special licenses. For example, if the orange box is setup as a "Portfolio Management" entity (NAICS code 523920 which sits under "Finance and Insurance"), then you need to be a certified portfolio manager. This seems like a non-starter.
Btw, your videos are fantastic. Thank you so much. I’m definitely going to checkout one of your seminars.
@@tommytracey Management if fine. The codes are meaningless and are just used for statistical purposes.
Can I take a ‘business planning’ trip under the llc and a second ‘business planning’ trip as the management company?
No it would be under the management entity
Good Educational Content 🫡
What a fantastic advice
Question is it best both entities be established in the state of Wyoming? Or can the corporation be in the state you live in?
Either way works.
What about just one LLC account and not include the C-Corp. is there any advantage just using one LLC compare to personal account?
Yes, that is what we set up for individuals who are not looking to make a business case out of their trading.
In the given example, did the partnership make the mark-to-market (MTM) election to treat the capital gains as ordinary income? Thanks in advance.
Yes. Be sure to consult with your tax advisor.
my cpa says s-corp is better than c-corp. Could we do a s-corp in lieu of c-corp. What is the difference.
I would recommend setting up a free consultation to talk about some strategies and how they apply to your unique situation. Sign up here: aba.link/91e1fa
Does the entity have to be a file as c-corp or Can it be filed as a S-corp? Can i just create an LLC file as an s-corp or just an LLC and work for it or manage it?
The management entity should be a C-Corp to reap all of the deductions. A pass-through will limit you.
Thank you for the video but how to avoid professional brokerage and data fees (amount to $1500 or more) when trading under an entity or s-corp.
but these fees are very low or zero when trading as an individual. how to overcome this?
Hold the account in a personal property trust under your LP.
Thank you for the reply. If I do that as you say, will I be able to deduct expenses such equipment, education, subscriptions etc like one could as an s-corp?
It seems the Augusta rule is really the key driver of tax savings here if I'm doing my calculations correctly. If you aren't a homeowner, do you still think going through this structure makes sense? (additional layers, LLC fees, etc)
If you live in CA for example, you also still need to pay a 8.84% state income tax on top of the 21% federal income tax right? That takes away some of the tax savings that otherwise would have been achievable as well...
Maybe I'm missing some other tax savings considerations as well but I'm not a tax expert.
Correct but you have other deductions that will typically eat up all of the income.
Excellent video, you are a genius
Hi Clint, I am a futures trader. I use prop firm funded account, so I am 1099ed as a contractor at the end of the year. I also am a real estate agent as a side gig. Question is can I use this type of set up as well With the LLC and the C-Corp Inc.? Thanks in advance.
Yes you can.
Hi. are you able to help day traders in Australia to set up a business structure, or your services are only for US residents?
US only
If I set this these businesses up in WY and live and do my trading in UT, would I need to register the C Corp as a foreign business entity in UT and have it pay income tax in UT? Why or why not?
Not unless you begin conducting business in Utah such as selling products to residents in Utah. Any income you earn will be subject to Utah tax if you are a resident of Utah.
@@ClintCoons And reimbursing myself under an accountable plan to set up an "administrative office" in my UT home would not be enough to cross that "conducting business" threshold, correct?
Great video. Glad I found this channel. Quick question: would it be possible to have orange box LLC (c-corp with me as sole share holder/officer) be the sole owner of the blue box LLC (s-corp, me as an officer and employee)…….blue box LLC then can pass through income (minus expenses incurred) to orange box LLC which will be taxed as a c-corp (minus any expenses incurred).
The reason I ask is I’d like the orange box LLC (c-corp) to eventually own multiple LLC (s-corp) in the future as I build multiple revenue sources. The multiple LLC s-corp being in different industries.
Thanks in advance!
If you would like a FREE 30-minute consultation, you can request one here
- aba.link/30minSession
Any particular reason for the management company to be a C corp instead of an S corp?
Yes to keep the income off you personally and to provide specific tax deductions that are not available to S-Corps.
Great video that explains this structure.
Would the cost of starting LLC and C Corp qualify as tax deductible as start up cost (and there after) with your services?
If you would like a FREE 30-minute consultation, you can request one here
- aba.link/30minSession
Question: starting at the minute 12:21 the member rented the house to the C-Corp and 20k went to the member from the Corp, Is that considered an income to the member? is any tax liability for the member for this extra income for renting his house? at what tax rate? thanks!
No it is not income to the member because it is covered under IRC 280a
Is it okay to rent a location to do business outside (FL, NV, TX, etc.) of the state where the LLC was registered (WY)?
Is this model the same as having a Holding plus a trading company if its so, the C corp has some ownership of the Holding.. in other videos the holding/partnership owns the C-Corp not in reverse, or do we have to put another company above those for the holding? thanks!
Correct. The Corp holds an interest in the holding company.
Is mark to market election redundant in an LLC ? Since you can write off all the losses and expenses as an llc. Thank you.
If you want personal trader status then you need to make the election.
@@ClintCoons Thank you!
What about Futures trading?
No issue with future's trading in this structure
Why can't the deductions come out of the partnership?
You are not allowed to take these deductions on your 1040 unless you meet trader status.
Can this strategy apply to forex/binary options trading?
Yes
Ok perfect thank you!
Hello. Maybe you can point me in the right direction a little bit.
I live in Iceland, I trade on the US stock exchange. The next step is to get pro status from the broker. Continue to establish a company and transfer capital to the name of the company. Capital about $250k. Is it realistic to go to the bank and ask for a loan to develop a real estate business using company capital for the initial investment, which is working capital on the stock exchange. Not to mention the small details, of which there are many. But the principle itself is possible like this?
Let's say the management corp generates profit (not so many expenses). Instead of the management corp taking a 20% interest in the account holding entity, paying corporate tax, paying tax of qualified dividends, is there a way to make a structure that flows income as carried interest?
I am not aware of one.
If you chatge $20k to your C corp for meetings, won’t that just shift that expense to the income side on your personal taxes?
See section 280(a) and the rules regarding rental of your personal residence. The funds received are tax free if you meet the requirements of renting it for less than 14 days.
If the officer of the c-corp lives outside of WY and is the only member of the corporation, does the c-corp has to register for unemployment in WY? According to irs rules, officers needs to assign reasonable salary. So wondering if unemployment fee nneeds to be paid on that salary olif officer live out of state
Yes you may need to register in the state where you are paying a salary.
Can you use a disregarded LLC that is being managed by a c-corp to be the trading LLC?
Not to utilize the strategy I described. The LLC must be a partnership.
14k on 200k, 7% is not nothing, but feels like it’d need to be bigger to make it worth the trouble. And risk to audit?
Wondering if it still works, if the c corp is in another state?
It does
How to create my own account for trading and investment without a middle man, on the smartphone
I have an issue I have the same setup but I want to move my corporation out of Louisiana into Wyoming. Can you guys do that for me?
We can. Schedule a free consultation with my team. aba.link/91e1fa
I'm a member with you guys and they told me they can't do that sir, that's why I'm talking to you directly
We're you saying the entity holding the trading account's LLC was an LLC taxed as a C Corp or as a C Corp holding an LLC holding the trading account's LLC? Or did I miss something altogether? Thx
The entity holding the trading account is taxed as a partnership
The Corporation cannot directly reimburse individuals for expenses they incur; instead, it must cover these costs as part of its employees' expenses. Your video didn’t address this aspect, which is important. The company needs to process payroll and ensure it pays reasonable wages to employee, and then write off the expenses mentioned in your video.
but why a LP and not an LLC?
It has to do with how the GP recognizes the income as a guaranteed payment.
I don't get it. Can you do an hour long video on the same thing? Please
Noted.
There's still a lot of money left in the orange box... what happens to that? Distribution, corporate bank, etc. ???
You will expense this money out to yourself in the form of fringe benefits. We have many strategies around removing money from your management company, so it is not taxable, but it is a deduction to the management entity. If you would like a FREE 30-minute consultation, you can request one here - aba.link/clintss or you can send me an email at ccoons@andersonadvisors.com, and I will have someone contact you.
Instead, why don’t you just make one entity (C corp) and put the trading business in the C corp? That way all the profits are taxed at the C corp level. Then when you want to pay yourself, just pay yourself via a salary.
When you look to pull equity out of the C-Corp the dividends are taxable whereas with the LLC they are not.
@@ClintCoons Thank you. My plan is to accumulate as much money as possible in the C Corp for growth. I prefer the lower corporate tax rate. If I need to take any money out, I will just pay myself a salary and deduct that salary from the C corp. The taxes on my salary would be the same as the taxes on the LLC distributions. However the money I leave in the C corp will have a much lower tax rate than that of an LLC taxed as a disregarded entity.
Hey Clint, good video. If someone is not an active trader (no day trader) but investor making profits of around $50K, can they still use this entity structure? Please can there be one step structure ? Basically I would like to use C-Corp taxation to deduct expenses
What are you talking about in terms of expenses?
Another question, since the c-corp is a 20% member, i guess a K-1 form must be flied at the end of the year for the c-corp. Any feedback on this?
Yes that is correct.
Should that C Corp be a Holding company or a Management company? Does it matter? Can the C Corp own the investing llc by itself? What if I also have a professional llc as a financial planner, can the C Corp own that llc, and just pay me salary for services and management?
It is a management entity. The holding company is never taxed as a corporation.
nearly thought this was jamie dimon😂
😂😂
Hi. watched multiple videos on this and all recommend the c corp. Who would be the owners of the c corp and LLC? Can it still be the single trader? Or does it have to be some sort of family member.
Absolutely. The owner would be you.
like it
Clint, how do you/I change capital gains into ordinary income? I have a brokerage account in my s corp, the broker sends 1099B's. Thanks in advance.
It requires a C-Corp managing the brokerage to make it work.
@@ClintCoons 👍
Thanks for valuable video like always. I have quick question though, what will be the difference between getting TTS vs setting up C-corp? To my knowledge, if you get TTS then you can still write off any operational expense related to trading isn't it? Thank you in advance.
That is correct.
Hi Clint, great video. You forgot about assigning a salary to the officer of the c-corp. According to what I read about tax rules, an officer of a c-corp must have a reasonable salary. What's your suggestion about this?
I think you are mixing s corp with c corp
@@FireyCam for both s-corp and c-corp , the IRS recommend a reasonable salary. You can Google it and check it out
Yes you must take a reasonable salary but that is a relative term based on your overall business income.
@@ClintCoons Is there an unreasonable guaranteed payment to the management entity? If, for example, you want to pay enough salary (as that c-corp’s employee) to max out your 401k and pay benefits (health insurance, HSA, HRA, profit sharing 401k contributions) you’re easily talking about $100k-120k in gross corporate income depending on what you’ve budgeted for expenses. Its share of partnership income would likely be larger than 20% but not so large you would accidentally exceed your budget in a good trading year. Your partnership would have to guarantee the remainder so it reaches your budget.
Hey Clint, Titanium member here.... was doing that already and wasn't too sure on the legality. Can you comment if unqualified dividends can be structured the same way.
Probably not if that is all you are doing with your account.
I also do this. My accountant isn’t as knowledgeable about this. Can I use you guys for tax prep and filing?
If you would like a FREE 30-minute consultation, you can request one here
- aba.link/30minSession
omg!
Another much needed video. Thanks Clint, keep them coming! Love this informative video!!!❤
How many of your businesses can claim the home office deduction?
Also, if you claim home office, can you still rent out your house under the Augusta rule? Thank you.
Use an accountable plan - its better than the home office.
Is this the same as an incubator hedge fund structure?
Not even close
@@thatApoliticalCoder They're closer than you probably realize.
And then all the fees and headache for 2 businesses, filing taxes, oh wait, pay him for that. No thanks, I'd rather just pay the 30% tax. Doesn't make sense until you make over 200K a year trading. Even then it may not be worth the headache.
Anyone is who serious about their trading please do NOT listen to this comment.... This is a comment of a person who is not making money trading. No legit trader would speak against trading in a LLC/ any business entity because your money is really at risk if just trading under personal name.
You do not need to be making more than 200k to do this, do this even if you are making 20k trading because you want to get this habit from early. Once you learn how to structure your business not only will you save thousands but also it's not a headache. Yes it will seem crazy getting it setup but once it's setup and you sit down to understand it then it becomes another skill that you learn.
The reason I know OP doesn't make money trading is because he is gripping about paying a tax professional a couple thousand even though the professional will end up saving someone 10s of thousands. Either spend the time to learn the structuring yourself and run it by a professional just to make sure you not messing up or pay the professional because in the end, you are protecting the money, learning and saving thousands.
Idk who this Clint guy is and not in my interest if anyone uses him for taxes but it just irks me when I see crap comments like these discouraging people of setting up a business for their trading because it is a 10s of thousands dollars decision to make.
I agree unless you really wanted protection of your assets
@@rpicazoabletrue to a point, one can also get an umbrella policy for added protection. It’s fairly cheap. This strategy for trading might be geared more really towards saving in taxes if u don’t need all the profits from trading yet.
Then you need to pay 20k/year to Clint's company to be your lawyer and structure all of this and keep the companies legally running, and for Clinton's CPA department to make your taxes, then you are back to the 110k/year you had as an individual and without all this headache hehe.
It a scam
Very insightful comment. Would you like to explain what part of the strategy is a "Scam". I am open to other points of view that can be articulated and backed by the IRC or cases.
Does the c corp only pay corp tax on the 20% of gains they received or does it also get taxed as stcg on top of corp tax?