Stock Trading and Other Things

How do I set up my day trading business as a corporation?

I am going to start day trading as a business. Can I set the business up as a corporation?

Public Comments

1. pick up the bankruptcy forms at the same time

2. Yes. File papers with the Corporation Commission in your state.

It wouldn't make much sense. There is no reason to incorporate. You are making profits with your trading. Then you pay tax on your gains.

3. You can practically do anything you want. If you like to make trading as a business, well, you can try to do that. There are quite few things you can choose though. You can set up a brokerage company (the start up capital will be remarkable), you can try to make a manage account company, you can sell signals or you can try to start forex education center or forex school if you are likes to educate people.

4. You can set up any legitimate business endeavor as a corporation, an LLC or a partnership (requires at least two people), or you can leave it as a sole proprietorship (the default if you do nothing).

There are many reasons to set up a business as a separate legal entity from you personally. Aside from better tax treatment in some instances, you will protect your personal assets from the liabilities of the business (in most cases). LLC's are the most popular form of doing business today, mostly because they are easy to create and operate. Also, the method of taxation may be selected by the owner, and they provide the best liability protection.

There won't be much potential for liability in a day trading business; if you have margin accounts or other loans most likely you will be personally guaranteeing those anyway. But there could be some tax benefits. A quick call to your accountant can lead you in the right direction.

One caveat - capital gains are currently taxed at a better tax rate than ordinary income - for individuals. The point at which your income changes from capital gains (investment activities) to ordinary income (from operating a business) could be determined by the creation of a business entity. It will be eventually determined simply by the amount of activity you have, but if you are just testing the waters for awhile, you might want to leave the business "as is" until you know the income will be regular and therefore becoming "ordinary" income in the eyes of the IRS (and therefore taxed at a higher rate).

Cost needs to be considered as well. LLCs typically cost less than $100 to create - you can get the forms from your State's Corporation website.