Need help with stocks, taxes, and my LLC - Tax Forum - Tax Help Forum, Payroll Tax Forum, Business Tax Forum, Tax Questions, Free Tax Advice

kfink85 · 11-16-2009, 12:38 AM

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Hi everyone. My name is Keith and I am in the process of setting up a LLC in Maryland for trading stocks and a website I run for stock analysis. I have some beginner questions on how I should run shop but first I will give you some more background.

I use TDAmeritrade as my broker currently and I have a personal account set up. However, once the LLC is up and running I plan on switching to a specialty account account hooked to my LLC (so that I can deduct more than $3000 in losses). I have approximately $12,000 in my account right now but I will be receiving a $25,000 gift from my mother in the near future. This should allow me to set up a margin account and get cleared as a day trader. I have not set up a business bank account yet for my LLC, nor do I know what the best way to go about doing this is. I have a personal checking account right now where all of my bills are deducted from. I withdraw funds as needed from my TDAmeritrade account to the personal checking to pay my bills.

My questions are as follows:

1. How do I go about getting a Tax ID for my LLC?

2. Do I need to pay quarterly taxes on my earnings? Since I haven't thus far (started trading in June), am I looking at a penalty coming up?

3. Is it possible to pay bills directly from my LLC business bank account that I would be setting up? Is that legal? If not, what would be the most cost-efficient way of doing so? Basically, should I transfer my TDAmeritrade funds to my personal checking or business checking?

4. How do I give the $25,000 gift back to my mother untaxed since I will be placing it in my LLC?

5. What's the best way to get a business bank account for my LLC? Same as a personal bank account I'm assuming? Just walk in the bank and link it to the LLC?

6. Am I going to be paying capital gains tax and self employment tax?

As you can see, I'm quite novice with this business and tax aspect but any help will be much appreciated. Thank you in advance.

Skyhawk · 11-17-2009, 06:33 PM

Setting up an LLC for the purpose of trading securities is a bad idea. If you claim to be an "active trade or business" then the trading income is all ordinary income and NOT capital gains/losses. If you are not an "active trade or business" then the Personal Holding Company rules will apply, that is the penalties and higher corporate tax rates. There is also the possibility of significant state or local franchise, or net worth, taxes on the "entity" (LLC). See a tax professional, such as a CPA or an Enrolled Agent (EA), and discuss your business plan and the tax implications (Federal, state, local).

kfink85 · 11-17-2009, 07:29 PM

Hi Skyhawk. Thanks very much for the response. I heard that you can only write off $3,000 on losses as a personal gain but under LLC, you are unlimited? Is that true?

Skyhawk · 11-18-2009, 04:26 PM

Personal capital gains or losses are treated the same whether they are passed through an entity or not. The same limitations apply. Placing personal investment assets in an entity does not make them "business assets" subject to the rules applicable to business gains and losses, for example the section 1231 treatment of gains and losses.