Hello Folks ....i was wondering if forming an LLC for forex trading helps to get taxes lower.....i dont know if it goes that way or not...But is there any benefit for trading under an LLC other than tax brackets if any...
would appreciate some discussion that
thanx

An LLC can help; but in just a few ways.

It's best to use a pass-through entity like an LLC taxed as a partnership. That means all income and losses passes through to your individual tax return; where you pay taxes. No taxes are paid on the entity level, except some minimum (stealth) taxes due in most states.

So the character of the income and loss does not change. If it's IRC 988 ordinary gain or loss on the partnership return (LLC), it's the same on your individual return.

Single owned LLC's are "disregarded entities" and since you don't have a partner all the income and loss is reported directly on your individual tax return. There is no partner so you can't file a partnership tax return.

You need trader tax status to qualify for business treatment, even in an entity.

Entities are helpful tax wise is creating the opportunity for AGI deduction like retirement plans and health insurance premiums.

Learn more on our Entities Page here http://www.greencompany.com/Traders/...Entities.shtml.

We consult traders on the best entities for them and then we form the entities.

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Thanx for the reply....Greatly appreciate it...This Forum is the best place in the world i would say to discuss all the matters for forex

Your welcome, thanks.

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Hello, please allow me to join this thread.

To form LLC with a partner, how do we decide to split profit/loss? Can we do whatever we want? Is it possible not to pass through any profit/loss to one member?

Thanks,

LLC member owners usually agree on how much to each contribute in capital to the LLC and that percentage of equity usually also counts for profit and loss sharing.

But you are also allowed to have "special allocations" that have substantial economic effect. For example, investment advisers may get a "profit allocation" or "carried interest" in investors gains.

LLCs can also have multiple classes of ownership, with one class funding the capital and other classes doing most of the trading (sweat equity).

Not allocating any profits to one member is odd and most likely not allowable.

But there is leeway on these issues and you should consult a CPA or attorney about it.

Thanks.

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hi, green trader

i read some of the articles on your site and i have a few questions about how trading spot forex works in other countries.

I am a US citizen but i am planning on moving to a country that has no capital gains tax. From your article, I believe that if i set up an "entity" (which I assume means I can set up an LLC) that it can then pay me, the trader, an administrative fee of up to 80,000$ which to me would be tax free.

So if i trade and make less then 80K$ under these conditions I wouldnt be paying any tax on the spot forex gains?

Does the LLC also pay no tax?

I just wanted to make sure I was understanding the article. Thanks for all the information.

Yes, it is possible for traders to form an entity in the US to create foreign earned income when they are abroad; to take advantage of the IRC 911 exclusions.

I suggest a consultation to discuss this further as there are special requirements.

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Hi

I am Indonesian citizen living in Indonesia. Is there any tax liability or withholding with US government for any gain I earned from forex using a broker like FXCM?

Thank you.

US citizens pay taxes to US Gov if they make profit on US territory.

Foreign citizens who deal and make profit on US territory using US Brokers or non-US Brokers, but still on US territory will pay taxes to their country when they are citizens.

If you want to avoid taxes (even if you are a US citizen), you get a shelf offshore company (in a tax-exempt jurisdiction) with all papers and a international bank account, you prepare to pay 400-500 Euro / year to maintain that company and you will pay taxes to nobody.

That's all with taxes per income.

Interesting information,

So what is avaliable to a solo forex "night owl" trader that trades every night / morning, (scalps, so many trades within a night extreemly short term) 4-5 hours a night, and has no partner, in his quest to achieve ad maintain "Trader status"?

Sole props would not be a good fit it sounds.. Correct me if I am wrong, but from reading the above, an LLC would not fit either if you do not have a partner. (is this correct?)

Also I have a day job that is not tied into my trading which I get a w2. Would this be a problem for the business if I started a solo LLC?

Would the LLC be subject to self employment tax because of not having a partner?

Not everybody is Married, (I am not) or has access to a partner to go in with ya (friends are SCARED of FOREX), so what does one do?

I kinda see running an LLC as a added benefit because I could expand it in the future. What would be a good fit in this scenario?

-- c0w.

Sole proprietors use a Schedule C on their individual tax return to report their expenses. It looks like a losing business and can attract more IRS attention (a red flag).

If you are a fulltime trader, then that sole prop is okay.

But if you have a full time job and want to claim trader tax status (business treatment), you are better off with a separately filed business tax return; like a LLC partnership, general partnership, or S-Corp return.

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Sole proprietors use a Schedule C on their individual tax return to report their expenses. It looks like a losing business and can attract more IRS attention (a red flag).

If you are a fulltime trader, then that sole prop is okay.

But if you have a full time job and want to claim trader tax status (business treatment), you are better off with a separately filed business tax return; like a LLC partnership, general partnership, or S-Corp return.

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FXCM does not endorse and cannot vouch for any of the third-party content on this site