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[stirampage]

Please bear with me as I'm sure this question has been asked before...

I'm looking at opening up an LLC, the only issue now is WHERE to open it. IT's really between my home state (Colorado) and Nevada. For the most part, I understand the benefits of incorporating in Nevada, what I do not understand is what trading profits are claimed as, in terms of taxes. Is it all capital gains? Is any of that profit considered income to any of the sharefolders of the LLC?

The only income we have is coming from trading - we also are waiting on our LLC to manage accounts (through POA) and they will place our incentive fee into our accounts. Can this money be claimed as income? (that would be nice!)

Thanks, as always

[John Churchill]

Try this link to Traders Accounting
http://www.tradersaccounting.com/pro...deoseminar.asp

A very informative e-report is available free. Also, one of their people, Jim Forrester, CPA, has produced an information sheet for Forex traders, for whom the IRS gives specially advantageous treatment under IRC 1256.

This website as a whole has a mass of helpful information.

John

[cornellj]

Originally Posted by stirampage

Please bear with me as I'm sure this question has been asked before...

I'm looking at opening up an LLC, the only issue now is WHERE to open it. IT's really between my home state (Colorado) and Nevada. For the most part, I understand the benefits of incorporating in Nevada, what I do not understand is what trading profits are claimed as, in terms of taxes. Is it all capital gains? Is any of that profit considered income to any of the sharefolders of the LLC?

The only income we have is coming from trading - we also are waiting on our LLC to manage accounts (through POA) and they will place our incentive fee into our accounts. Can this money be claimed as income? (that would be nice!)

Thanks, as always

I am not from the US but tax laws are generally the same evreywhere. The trader, you, in other words who derives his livelihood from trading will become income tax liable on all profits. If you trade a client's money, the client will pay capital gains tax on his growth due to the the fact that the income is "passive", almost like profits made on a policy, share or property. In other words if the LLC trades, it's profits will be income tax liable(no state taxes in Nevada, but Federal taxes yes). Your shareholders will become tax liable too depending on whether you share income with them or pay dividends to them.

The dividends option looks to be the best route to follow for tax purposes. In my country the dividends paid to the shareholder is taxfree in the hands of the shareholder(the company pays tax on the dividends paid out at a rate of 12,5%) Lastly the incentives you earn will also be considered income and will be liable for income tax.

The IRS will assess your taxes on asking the question if your income is earned while "active trading" or as a "passive income".

I suggest you talk to a tax expert in your area to set up your company correctly from the start. Plan in advance and set it up with your future plans in mind, especially to accomodate the future shareholders and clients you want to bring in.