How Traders Use LLCs to (Legally) Save $69,000/yr on Taxes

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Күн бұрын

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@BasicFolders 6 ай бұрын

THIS IS AWESOME!! This is one of the subjects that's barely covered on KZbin... at least to the extent that it deserves. Thanks for this! ❤

@JohnMCPA 5 ай бұрын

Careful differentiating S Corp election for a C Corp vs S Election for an LLC. They are the same. However, a single member LLC that does not elect S must file on Schedule C of the 1040 personal return which would be subject to the 15% SE tax. Also Lots of people think incorporating in a particular state can be state tax favorable. Unfortunately, the income is supposed to taxed in the jurisdiction in which it was earned... A K-1 distribution from an S Corp is taxed at your normal earned income rate when it flows through. Generally, you have good ideas; we just need to be sure to continue to protect the public which you did nicely by recommending many times your listeners seek a qualified CPA. Good stuff! Love the 401k and Roth ideas! (Also look up setting up a living trust and using a "back door 401k"

@sumitomoO0O 5 ай бұрын

Do you have any tips for W2 earners whose primary income is w2 but they also make trading income close to the w2 income? My w2 income makes me ineligible for roth IRA account, so that option is off the table.

@TeamMadcrew 4 ай бұрын

@@sumitomoO0O open a traditional ira for trading.

@davyjones9595 6 ай бұрын

Very interesting thanks for the advice. The problem is finding a CPA that actually knows the code for traders

@Giggidygiggidy12 6 ай бұрын

The other issue I didn't hear him mention is a brokerage will make you regoster as a professional trader if you try and setup your acct as an LLC or corp. Even if you are a newbie which means your trading fees are going to quadruple every month. So you better be making some serious profits before you do that or your going to be spending a whole lot on expenses if you are unprofitable

@zeusinferno1223 6 ай бұрын

😮😮😮😮

@MR.Cameroon1993 4 ай бұрын

Thats why I havent incorporated myself

@JasonBeattyRE 3 ай бұрын

Additionally, CS is telling me I need a minimum balance of $250k for corporate account.

@PROTEUS_SEER-OF-EONS 2 ай бұрын

Vital info

@Tackling_Tommy 2 ай бұрын

Not true - it requires some extra work, but watch some CPA’s / Tax Advisors videos to learn how to register otherwise.

@bradclark2922 6 ай бұрын

There are much more deductions for an S Corp besides the things Ross mentioned, great video by the way. Your vehicles can be purchased (company vehicle) in the corp and completely deductible, including gas, insurance, tag, etc. Also, you can depreciate the vehicles for a further deduction. Corporate officers are also allowed a housing allowance, meal allowance, some entertainment allowance, etc. You don't have to be rich to pay little or no tax, you just have to do your research and be smart about it.

@phyllisfeliciano5883 5 ай бұрын

Thank you

@cody0006 5 ай бұрын

that was extremelly informative thank you for sharing

@shyamvai 5 ай бұрын

Wow

@tomlorenz4344 4 ай бұрын

If you work from home as a trader, a company vehicle will be highly scrutinized. Expenses must be reasonable for the particular business.

@bradclark2922 4 ай бұрын

@@tomlorenz4344 Not anymore. The Chevron doctrine was just overturned by the Supreme Court. It's no longer up to the agency for interpretation. If it's allowed by the tax code, then so be it.

@jordanodonnell7807 6 ай бұрын

Dont forget there is Rule 72(T), which allows you to take contributions before 59 1/2, but you must make them on a consistant basis that is approved by the IRS. So to get contributions for $3,000 a month with a seven figure account, would totally be do-able before 59 1/2.

@skillet3753 6 ай бұрын

Saving this video for 3 years later when im finally profitable😅

@samuelmayo6566 5 ай бұрын

Me too.

@The.Harsh.Truths 5 ай бұрын

Newsflash. You’ll never be profitable. 95% of retail traders lose money. But keep giving this guy views.

@tonyfu7695 5 ай бұрын

That’s an ape there!

@JovannyLazaro 5 ай бұрын

After 4 years now I need to learn how to pay less taxes legally

@keyjuan7 4 ай бұрын

@@The.Harsh.Truths why can't he be the 5%? Go doubt yourself in a corner.

@tootory9506 6 ай бұрын

We asked, and you delivered Ross!! 🥳 Thank you so much for this more in depth explanation on tax and saving. This is a great episode. I'll watch it five times.. And hope you make more like this!

@MrJupton1 6 ай бұрын

Not sure, but something to considered.... A "full time trader" under I R S classification have to meet certain requirements. IE Number of trades etc... Worth checking out before declaring sub chapter S status and being able to deduct biz expenses. If you don't meet their requirements deductions and biz expenses are a mute point. Just saying Worth verifying

@TeamMadcrew 4 ай бұрын

i'm classified as a full time trader (trader tax status), sole proprietor . if you don't want to worry about qualifying, then corporation is the best option.

@VrbanacRV 3 ай бұрын

@@TeamMadcrewdoesn’t the corporation still have to satisfy the same Trader regulations to deduct any expenses?

@IamFluffY90 6 ай бұрын

Ross has been looking at my search history... I was literally looking up trading as an LLC vs S-Corp last night

@alphabeta8403 Ай бұрын

1:50 1099 vs LLC 5:00 Tax efficiency: S-Corp > LLC 10:00 Taking a reasonable salary 15:00 S-corp makes more sense? 17:50 Setting up a ROTH IRA

@Rainy_Day12234 6 ай бұрын

If you trade futures you’re taxed at 60% longterm capital gains rate and 40% short term rate…up to top marginal tax rate.

@apoc1211 5 ай бұрын

Help

@johnnydominos 6 ай бұрын

Ross, it's 59 1/2 and you must have the roth ira for 5 years. good info, thank you.

@tomlorenz4344 6 ай бұрын

Too much hand waving for me. That home office expense as described will almost surely trigger an audit, plus it’s a highly bloated number. IRS will give you a standard deduction of $5/sq ft with 300 sf max, for a total of $1500. If you itemize, you can deduct up to 15% of the home expenses. Unless home expenses are $80,000 that $12 grand will look fishy. The $50,000 salary will still need to have the 15.3% social security and Medicare taxes paid one way or another. Also here in Florida we don’t have a personal income tax, but there is a corporate income tax of 5.5%. The one thing that might made sense is the solo 401k. Even then the 15.3% SEP must be paid on the employee part of the contribution. Even then, taxes are only deferred not avoided. Money taken from a 401k is taxed as ordinary income, whereas in an ordinary trading account there’s the opportunity for much lower long term capital gains tax rates. Also states often charge an annual fee just to have an LLC or corporation. In Florida it’s $150. Then there may be other local fees and license costs as well.

@sumitomoO0O 5 ай бұрын

@tomlorenz4344 5 ай бұрын

@@sumitomoO0O make sure to hold investments long right to have them taxed at the long term capital gains rate. Buy growth stocks that don’t pay dividends and hold them until your retirement and are in a lower tax bracket

@JohnSmith-rv2mk 2 ай бұрын

I've been in business 21 years, I've never had an issue of deducting business expenses, including "home office" expenses. The vast majority of my home is taken by my business.

@tomlorenz4344 2 ай бұрын

@@JohnSmith-rv2mk they’re perfectly legit in many circumstances, what’s encouraged in the video is dubious

@shivaduvvuru 4 ай бұрын

Very good planning. I am a tax and financial planner/ CPA and I am in all support for this.

@RislinMLG 6 ай бұрын

One thing to be csreful of here is that the amount you can contribute to the solo 401k is based on your overall compensation. You can generally only contribute up to 25% of your salary. So actually in your example of a 50k W-2, you can only do an employer match of 12.5k. However, you can do employee deferrals on top of this.

@headlibrarian1996 6 ай бұрын

After tax contributions can be 100% of W2 box 1, or the annual limit, whichever is less.

@shyamvai 5 ай бұрын

Deferral?

@headlibrarian1996 5 ай бұрын

@@shyamvai "Employee deferrals" are what the tax code calls 401k contributions by paycheck deduction.

@archetype1987 6 ай бұрын

Thank you, Ross for touching the subject. I have been searching for a detailed explanation. This is amazing. No other video I have seen on the Internet covers it this way.

@bluefreeskyforeveryone 2 ай бұрын

Don't forget in s-corp you can hire your kids, and pay them saraly without tax up $14k. Deductible from tax.

@fitnesspoint2006 4 ай бұрын

unless you are buying new computers and monitors every year, many of these deductions are only good every few to 5 years

@StevenStawiarski-sb1bx 6 ай бұрын

Why not a Roth IRA? You can trade futures like the emini contract but you do it through a custodian, no taxes on earnings

@GoldenEagle7 6 ай бұрын

Thank you so much Ross!! This is what I looking for in details ..Really no one giving these info like you doing as always .God bless you !!

@lisnafulla 2 ай бұрын

Operating expenses aren't deductible against investment gains unless you claim Tax Trader Status - which then subjects you to self-employment taxes.

@SBayne762 4 ай бұрын

This is a great introduction to the various facets of taxation for people that undertake the difficult profession of trading. No matter what though, remember it is not a viable defense in an audit situation to say, "But Ross said so!" Please people, consult a licensed tax professional and understand that the IRS (through legislation and voluminous legal precedent) ultimately hold you responsible for your own tax return. Rock on!🤟

@METSHAYQ21 6 ай бұрын

Thanks Ross for the awesome video. Could you please do another video on how to trade with IRA account?

@blockchaindomain 6 ай бұрын

now... if only I could make 100k a year instead of loosing it... LOL....

@computacioncero 11 күн бұрын

WOw... GREAT INFO. Thank you for sharing these nuggets of GOLD!

@katomane6116 6 ай бұрын

Great explanation 2 mins in and I finally have my answer . Just pay regular taxes at the end of the year until I make too much money 😂 thanks

@worthlessman6860 2 ай бұрын

This was great Ross .......just what I was looking for! More stuff along these lines would be fabulous! Thank you!

@SalvePalermo 24 күн бұрын

Love your videos and your kind, teaching spirit Ross. May God continue to bless you and use your awesomeness to encourage, educate and to shelter every orphan and or needy person, among us, as if u were our beloved uncle.

@TraderChick 4 ай бұрын

No KZbinr talks about this and it’s so important. Is a schedule K hard to do? Keep these tax videos up please 🙏 thank you Ross! Congratulations on your success :)

@FenrirTechniq 17 күн бұрын

Thank you very much, yhis is engaging yet detailed.

@BrettM2014 6 ай бұрын

Are you able to depreciate the equipment over several years or just the year the equipment is purchased?

@YaSoFine 6 ай бұрын

QUESTION: Ross, Great Video but how to overcome the higher amount of data fees charged by brokerages once you establish a entity trading account (corp). The data fees (level 2 etc) is small or free for individual trading account but for a entity trading account brokerages charge nearly $1000 a month for the same data. HELP!

@shyamvai 5 ай бұрын

Wouldn’t that be an expense that you can write off too?

@andres777video Ай бұрын

Remember traditional 401k is not Tax Free as indicated in the video, it's TAX DEFERRED, meaning you pay taxes later when you take a distribution, at the rate of that time.

@dakel7 6 ай бұрын

Do we need to file for Day Trader Tax status in the S corp? Or is just setting up the S corp all I need to do. Also did you do the S corp in Delaware?

@grimystv Ай бұрын

Thank you ima get onto that. I started a teaching class and i Want to make it into a llc but i only would pull out no more than $600 but it wouldnt be frequently been trading for 6 months and only had about 6 payouts

@eugenep3273 Ай бұрын

Well, interesting concept, but your Solo 401k is still taxed when you take money out, then you have to pay SEP on the employee part (Regardless). So essentially you are only saving on home office. Willing to save for-real ---> move to PR and enjoy Act-60, else keep paying as everyone else.

@vBabywipes 6 ай бұрын

hey ross! how much do you need to make annually for it to be worth creating a llc/scorp or how long would you need to be consistently profitable? im on the verge of profitability and want to make sound financial decisions

@jourjor 17 күн бұрын

Charles Schwab requires min $250k for LLC or Inc.

@billydanzz 6 ай бұрын

IRS Section 1256

@josephsaeteurn9158 2 ай бұрын

Hands down the best vehicle is Roth IRA.. make sure you make the max contribution per year, even if you dont plan to trade yet.. built your ca[ital up cause once you lost the year, you cant go back to contribute..and if you really need money, you can withdraw your contribution out no penalty..

@ukobassey2517 6 ай бұрын

Genuinely appreciate your help with this 🙏

@TrevorAAS 5 ай бұрын

Title: LLC. Video: S-corp 😂

@Alex-Music639 5 ай бұрын

s-corps don't protect you from personal liability or bankrupty...... because, WHO owns the company? It's you personally as the shareholder, so your shares are worth something (assets-liabilities of the s-corp)

@cincosentidostex-mexrestau4684 3 ай бұрын

Great info. What kind of company can you start? You can’t just start an investment company, are you not regulated if you start an investment company?

@sunelsnn 4 ай бұрын

The employer match is limited to 25% of the reasonable compensation. so you'd need to pay yourself 180k or so in W2, to get 45k employer contribution and 23k on employee contribution. it's not like you can just divert all of the business cash to 401k.

@RTRT-jr8jv 6 ай бұрын

Great info, thank you! Is the level of asset protection the same for S-Corp and LLC or is one better than the other?

@DaytradeWarrior 6 ай бұрын

With an escort, the income flows through to your personal tax return. With a s corp, the corporation would pay income tax on its profits if it has net profits and then you would also pay your taxes as an employee so you could have double taxation.

@VisionClearly 6 ай бұрын

Should that say, "with an LLC" instead of "escort"?

@Fact_Check77 6 ай бұрын

I am not sure this makes sense, the solo 401K would only work if you aren't already contributing the max $23000 per year through your normal day job. Would be great to work this up assuming someone has a day job that they are earning the majority of the living income on.

@snuff43 6 ай бұрын

Great video. Does qualifying for Trading Tax Status change the type of entity?

@dejayvanhorn8685 6 ай бұрын

Thank you so much Ross for sharing your knowledge and wisdom. Much appreciated

@CyberMikeTrades 6 ай бұрын

Needed this, thank you brother. This is phenomenal information 🔥

@headlibrarian1996 6 ай бұрын

The paperwork for LLC brokerage accounts is really annoying though. Far more intrusive than for personal accounts. Can’t really do it online, actual paper is required, with wet signatures. They want photos of your driver’s license even though they don’t for your personal accounts. Business checking accounts are the same way. You will pay substantial fees for market data too. Worth it in the end, but be prepared for it.

@Ryanj8031 4 ай бұрын

Took weeks to get approved for my futures account for my LLC. They asked for everything but my first born lol

@5guwapo Ай бұрын

@@Ryanj8031Hi Ryan, what brokerage do you have your Futures account? I have NinjaTrader and thinking of converting my personal account to a business account. Did you use a CPA or tax lawyer to set up your business?

@Firemedic2105 6 ай бұрын

Personally I did a pass through LLC and realized that they make me pay professional market fees and that killed my profits!!! Once I consistently make good money it's good, but I went back to trading outside the LLC and filed mark to market this April.

@certifiedfinest5065 6 ай бұрын

Does mark to market allow for the same deductions an LLC would?

@Firemedic2105 6 ай бұрын

@@certifiedfinest5065 sorry I just saw this. Yes it does. The key is filing before the April 15th deadline... which I didn't know to do when I first started trading.

@etern21sunshine 3 ай бұрын

Errr..just thinking of the regulatory shenanigans about s-corp makes my head hurt. State annual renewal, payroll service, fed and state quarterly filings..

@j-vx3pu 4 ай бұрын

Hi Ross, thank you so much for your content. This is my first year of investing and I would have never thought about ways to pay less income tax. My investments are currently under my name, do you know if I can set up an s-corp and transfer my investments into it?

@DaytradeWarrior 4 ай бұрын

We'd recommend reaching out to a CPA or accountant for help with this.

@MrJW-jf3ue 3 ай бұрын

Thanks, this was a very good video. This information is Gold.

@up4006 9 күн бұрын

You Sir are the best! 🙏

@MacosPuen 3 ай бұрын

Very well taught, great information, thanks

@honestreviewer949 23 күн бұрын

The whole topic is Pretty complicated, your video certainly explains a few things for me. I really hate book-keeping however. What's a good simple software for doing the book-keeping. As an experienced Trader. I want to move to Trading as an LLC, but still wondering if I should proceed.

@sonypierre4799 2 ай бұрын

Valuable information. Thank you Ross.

@Nelson_357 5 күн бұрын

Great video! Question: Can traders deduct failed trading evaluations under an S corp or as an individual if they are not profitable that year? Thanks in advance 👍

@DaytradeWarrior 5 күн бұрын

Most people will, but it depends on how you file your taxes. Always consult a CPA.

@Nelson_357 5 күн бұрын

@ Thanks for the reply 👍

@mrkhalilhasan 23 күн бұрын

Great Information! Thank You!

@robertgordon4757 6 ай бұрын

Re: Solo 401(k). Might want to double check the rules about having an employer match in your solo 401K.

@leeashernolan 4 ай бұрын

Ross should have mentioned moving to Puerto Rico where you don't pay tax on capital gains

@Z.H.Trading 6 ай бұрын

Thanks again great video! So, are you thinking when you reach 59 1/2 you trade fully out of the ROTH IRA and just money for cost of living, etc.? Then just collapse your S-Corp? Good stuff man thank you

@DaytradeWarrior 6 ай бұрын

At that time I might help grow my children’s accounts or do something like that.

@Z.H.Trading 6 ай бұрын

@@DaytradeWarrior Great idea man. I'm a couple years away and making "okay" progress. 80% green days even small, so will start following the guidance for the ROTH and start building that out for retirement "help" in a few years. Bad choices from the start so really no retirement - I feel I have a light at the end of the tunnel. Thanks again

@WakeUpPeople1776 21 күн бұрын

How about Tax exempt irrevocable trust? I was hoping for more info on setting up KYC at the exchange.

@bryonseilerXauBry0716 6 ай бұрын

Okay. You earned another subscriber😊

@webaally2984 Ай бұрын

Trading Futures you’re taxed with the 60/40 rule here in California

@deleongirl72 6 ай бұрын

THANK YOU 🙏🏼 for covering this topic in trading. Will save it for when I get there 😊 sharing it with others.

@wma79351 6 ай бұрын

That's why we need flat tax!!!

@Huedo.c 6 ай бұрын

Yes! Thank you for sharing your knowledge ross

@galactic25 6 ай бұрын

Also, what I see is that you can take the home office and other related expenses if you are a 475f marked to market trader. Why do you say you need a business entity like s-corp/llc for this reason?

@peterhaywood4111 6 ай бұрын

If i hadn't subscribed previously (actually I had) I'd certainly subscribe after this episode. Many thanks!

@JorgeCruz33165 5 ай бұрын

Wrong advice, I think. Generally, operating expenses of the LLC can be deducted from the business income, but not directly from capital gains.

@billbuckner22 2 ай бұрын

Great information - thank you

@nitroice7108 6 ай бұрын

An S-corporation with passive income is subject to passive income tax rules - you failed to mention this. A corporation forfeits its S-corp status on passive income exceeds 25% for 3 consecutive years.

@carriepinter7847 Ай бұрын

So your Roth IRA with the megabucks is not protected by the S Corp? Would it be better to align it under the business or are there any disadvantages in that?

@RezPlank 3 ай бұрын

Deducting anything involving a home office was decreasing the value of our home.

@DaytradeWarrior 3 ай бұрын

Thanks for the comment!

@biggcurv87 6 ай бұрын

Thank you so much for the info you shared 🎉👊👊

@Warren_Ao Ай бұрын

Thank you very much

@iosiftimofticiuc9043 6 ай бұрын

What about Traders from outside the US. We pay taxes in US and then again in our country? And if we pay taxes in US, what do we pay exactly?

@adtsal942 26 күн бұрын

If one already makes over $200k in a regular job with full 401k contributions then would creating an SCorp and adding another 401k - 1. Is it allowed?, 2. Is it worth it? Because early on, he said $100k profit is made by December but by February market was down. So question is are you paying salary, contributing to a 401k by taking money out of the trading account or from other sources?

@RealPhilTrades 5 ай бұрын

Ross, thanks for the awesome video. I'm always wondering how much trading I should do before I start, or if a minimum number is required. Obviously, if I make $1000 a year and write off $10,000 in expenses, something is off. I'm slowly becoming more and more profitable and I'm not sure when to make this leap. Thanks in advance to anyone who comments.

@jasonluong3862 5 ай бұрын

The whole point of an LLC is to protect your personal assets when things go south. The LLC literally stands for Limited Liability. It’s a tool used by the rich to stay rich. However, anyone can establish an LLC as long as you can prove why you need it. Michael Cohen uses LLC for everything thing he does for Trump so LLC has a bad reputation, but it does have its usefulness in terms of protecting oneself from being bankrupted because of a bad business outcome that may not be one’s fault.

@TraderChick 4 ай бұрын

Can you talk about how to pay quarterly taxes with unknown fluctuating future income as a day trader? Thank you 🙏

@Cooldadkev 5 ай бұрын

Thanks Ross love the video well explained!! Thank you 🙏

@skimcb 14 күн бұрын

180 pounds equals 2,880 ounces. At $2,700 per ounce, that would be $7,776,000! They’re definitely not worth their weight in gold.

@d.keithshores4500 6 ай бұрын

When trading out of the Roth, that Roth account is under your S Corp correct not your personal Roth

@DaytradeWarrior 6 ай бұрын

A Roth is in your personal name

@AmareAmable 6 ай бұрын

Should worry about making money trading first. If you setup your account as a rollover ira and contribute 6k a year a winning trader hypothetically can grow that in no time and all tax is deferred. Many youtubers make more money via KZbin and subscriptions than trading. I might fact check your llc foot example too.

@graphic9876 26 күн бұрын

Hi Ross - just confirming is it S-Corp LLC which needs to have reasonable salaries paid to owners or is it C-Corp LLC which could do this? I read somewhere its just one of the two and not both which could do this.

@atse1910 5 ай бұрын

Ross leaves out the fact you have to get a virtual address/virtual office for your LLC when trading in these types of broker accounts. The cost outwegihs any benefits if your trading income is less than $100,000. It sounds too good to be true.

@citylife3229 6 ай бұрын

All the comments are saying nobody is making money, only losing money

@MablePauls 14 күн бұрын

No one should worry about s corps or llc until your buisness turns profit or you need a legal entity for payment processor it's just a way of lowering personal liability and you can file the paperwork at through your state and state website save money.

@TianaManeO 14 күн бұрын

Starting an LLC or S Corp after reaching profitability or needing liability protection is sensible, but early formation has benefits too. An LLC offers liability coverage and simpler management, while an S Corp can lower self-employment taxes for higher income. Consulting a professional ensures you choose the best fit as your business grows.

@PajinakStanovska 14 күн бұрын

Thank you for sharing, I must say, Julianne appears to be quite knowledgeable. After coming across her web page, I went through her resume and it was quite impressive.

@frankiema478 6 ай бұрын

Capital gains is not business income. It is impossible to use for 401k distribution

@frankiema478 6 ай бұрын

This from Google Gemini: No, capital gains from an S corporation cannot be directly used to fund contributions to a 401k for the S corporation owner. There are two main reasons for this: * Contributions must come from earned income: Contributions to a 401k can only be made from an employee's salary or wages, which is considered earned income. Capital gains, which are profits from the sale of capital assets, are not considered earned income for retirement plan purposes. * S corporation distributions are not considered wages: Distributions from an S corporation to its owner are considered a return on investment, not wages. This means they cannot be used to fund contributions to a 401k.

@DaytradeWarrior 6 ай бұрын

My understanding is that you can do 401(k) contributions if the primary purpose of the business is Trading and investing. As always, it’s a good idea to consult CPA and even get a second opinion because different CPAs can have different opinions.

@frankiema478 6 ай бұрын

@@DaytradeWarrior 👍