Using an LLC to trade

Hi friends.

I’ve mentioned before that I trade using an LLC, to be able to take exemptions without having to apply for daytrader status.

It’s been fairly straightforward for me, so I’m happy to answer questions if you have them. I used and paid a small fee to start the LLC. I then opened an LLC investment account through TD, and trade through there.

Broadly speaking, trading this way lends itself to less IRS scrutiny than the daytrader exemption. I don’t have to prove that I’m a daytrader, and can take exemptions for things like home office and other things as related to trading.

At tax time, your LLC income is simply reported as your own income (think self employment).

However, please check your state requirements before doing anything. Florida is notoriously business friendly, and not every state will have the same requirements I found Zenbusiness very easy to work with, and they filed both the federal and state forms for me.

Happy to answer questions :blush:


Thank you. I will look into this. So you don’t have to have a certain amount of money to trade as an LLC? Does the bank account have to be under an LLC as well or I can use my personal account? Thank you in advance.

Nope, no minimum. I move money from my personal bank account into the investment side.

The only hassle I run into is that TD will consider you a professional and charge you if you want real time quotes. To get around this, I’ve linked the LLC account to my personal account and it works just fine.

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Do all/most brokers offer LLC accounts?

Most do but they all differ. WeBull requires $100k if I recall correctly. TD has no minimum.

Looking into this and found Schwab requires $250k account value for LLC. I’m not ready for that but have been very happy with Schwab.

I’m a little nervous about TD (GME syndrome devouring my brain cells?). Can you elaborate at all about the linking of personal and LLC account?

I’m not sure what you mean by GME syndrome or why you’d be nervous about TD? There’s not much to elaborate on re: linking unless I’m missing what you’re asking.

Oh GME syndrome: in the sstonk forum is a lot of complaining about TD, but there is a lot of complaining about most brokers. It’s mostly noise in general with some useful information here and there. If you succumb to the syndrome you believe everything or most things without adequate verifiable knowledge.

I was just curious about linking with LLC and personal, but really I can ask TD about that directly rather than bothering you. After all they are not paying you to be customer service representative!

It’s super easy!

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Thank you, so generous with your time!

I do want to point out there are significant downsides to consider if you trade as an LLC.
An LLC is an institutional trader, which means you get to pay professional rates for your market data (if your brokerage charges for it), which are substantially higher.

Your options orders are also classified as a professional customer, NOT a priority customer. What this basically means are less favorable exchange fees/rebates (if applicable to you), and a priority customer’s orders will be filled before yours even if you placed your order first.

You also have the additional burden of filing tax returns for the LLC and paying any applicable annual fees and complying with other requirements to keep the LLC active and in good standing.

That said, trading under an LLC has many benefits, but I would say you need to be making at least ~10K / year in profit for the tax benefits of being able to deduct expenses to be worth the additional costs and hassle.

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