Stock Trader: Partnership or Corporation

[KennyBanya]

So, I am going in to the stock trading business. The firm I will be trading with requires $25 k to start an account and use their capital to trade.

Some buddies are going to back me with $50k and I will trade 2 identical accounts side by side. I will keep all the potential profits from one account, the partnership will keep the profits from the 2nd account.

My question in this is whether we should form a partnership or some type of corporation (LLC, Scorp, etc.)? I will put up 5k and own 10% of the partnership, if that matters.

We are concerned we may face more tax with a corporation. We want to keep the agreement as simple as possible, with bringing in lawyers and/or accountants.

Thanks,

KennyBanya

[DesertCat]

Probably an S corp (which is what I use), maybe an LLC is going to be important for tax purposes. You'll be able to use them for writeoffs as well. I don't declare as a trader so I'm not sure what will be different for you, but I use the S Corp to provide me with earned income and company contributions to fund a large 401k, which you can't do from raw capital gains.

You absolutely must consult qualified accountant/lawyer and put your agreement in writing, both for tax purposes and your own protection. Getting into an arrangement like this without putting it into writing is almost guaranteeing failure. I.e. your partners will later recollect a different agreement.

[Sniper]

Whenever you are managing someone else's money, you want that agreement in writing... don't forget to document things like how the costs for filings will be handled, as well as how disbursements or cash infusions will be handled.

As DC said...

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You absolutely must consult qualified accountant/lawyer and put your agreement in writing, both for tax purposes and your own protection. Getting into an arrangement like this without putting it into writing is almost guaranteeing failure. I.e. your partners will later recollect a different agreement.

[/ QUOTE ]