Friend and I are pooling money together to open trading account. We are trying to weigh the benefits of opening an individual trading account with an online firm or forming a Corp/LLC and trading as a partnership? Can anyone offer insight?
Personal Account Trading:
All your gains will be taxed at short-term capital gains rates. This would be the same as your ordinary income tax, except you're not paying into social security or medicare.
Your ability to write off expenses and losses will be limited. For example, if at the end of the year you loose more than what you made, you are limited in the amount you can write-off on your taxes.
Corporate Account Trading:
You would now be self-employed. Your stocks are now treated as "inventory." All transactions are taxable at corporate income rates. Any profits you take from the corporation will be taxed at ordinary income rates + you will need to pay double social security & medicare (corporation pays half and you pay half).
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