I do a fair amount of trading. I’m familiar with trader tax status and certain that I don’t want it. I probably also don’t want mark to market accounting.
I’d like to write off expenses for home office, data services, trading tools, etc. Here’s what I’d like to do… tell me if I’m nuts…
Option A:
Setup an LLC and take the S election.
Open a brokerage account in the name of the LLC, and trade in that account.
Deduct ordinary and necessary business expenses, including the items mentioned above.
Option B:
Setup two LLCS - a managment company, and a holding company which owns a brokerage account.
The holding company is likely a Wyoming LLC, taxed as a partnership, 80% owned by me and 20% by the management company.
The management company is also an LLC, but filing as a C-corp.
Deduct ordinary and necessary business expenses, including the items mentioned above, through the management company. Possibly setup an accountable plan (I hear Mark talk about this, but I’m less clear on it.)
If I choose this structure, am I required to take a salary in the C-corp like I would be in the S-corp with option A? Any other advantages/disadvantages? This structure does separate operations (management company) from assets (holding company owning brokerage account) per trifecta recommendations. I suppose the trifecta also would recommend the 80% of the holding company is owned by a revocable living trust rather than personally, and the management company should also be owned by the trust?
If it matters, I no longer have W-2 income and I buy my own health insurance and pay medical costs personally. I’d like to move these costs to pre-tax if possible, whether through the company or an HSA or both. Yes, of course I’m considering the option of trading in a self directed HSA as my wife and I already do in our Roth IRAs.
Thanks in advance for any suggestions!
-AJ