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Thanks for your comment Kacie Dantin, have a nice day.
- Chance Abbey, Staff Member
so the first one is i have a question about using an llc to invest in the stock market would it create any tax benefit such a good question the straightforward answer is no okay creating an llc to invest in the stock market doesn't in itself create any sort of tax benefit let's talk about why that is and let's talk about the exception so the main reason you guys to create an llc versus just doing business or investing under your social security number is to separate that venture whatever it is from you personally legally okay as always hashtag not a lawyer okay just an accountant but creating an llc to perform your business or to invest in in other ventures right it creates a corporate veil that separates your interest in the business from you personally so the biggest benefit or the reason people do this is because it prevents someone from going after your personal assets if they sue you or go after your business all right are you with me so creating an llc for anything okay whether it's to for your for your business for your etsy for your side hustle for your investing for your crypto investing for your real estate company any of those things creating the llc is strictly a legal umbrella okay it just kind of is separating you pulling that investment away from you personally from a legal point of view an llc can be set up anytime you start a business or as a vehicle for investing like i said um you can do it from the get-go you can do it you know later down the road when we talk about from an investing point of view guys we have people we have clients all the time setting up llc's so that they can invest in real estate so they can invest in partnerships so they can invest in corporations and so they can invest they don't really set it up to invest in a stock market but you absolutely can an llc can invest in the stock market no rules against that but like i said the llc in itself creating that does not give you any sort of tax benefit in llc is taxed exactly the same as if you're performing those same activities under your social okay whether again it's starting up or running a business uh running a real estate um rental property you know um or investing in another business investing in the stock market it's all taxed the same unless you file an s-corp election or create an llc with someone else and thus becomes a partnership or you create a c-corporation okay but again we're talking as an llc setting that up is just a legal i keep calling an umbrella but it's just a legal separation of your business activity against your personal activity that all set if you guys are talking about or asking about day trading minute trading if you've heard that right where people are actually just sitting on like their job is sitting there constantly trading okay we have clients who do this okay and that's a different story so this has nothing to do with setting up an llc but this has a difference to do with what your activity actually is if you're just like i wanna invest ten thousand dollars in the stock market then creating an llc is not gonna create any tax benefit but if you are what is called a if a professional trader okay let's talk real quick i don't know how many of you are in this group that would even be considered this but i just want to let you guys kind of know that this exists and it's out there because you know i don't want to go back and be like well i have friends who say that their llc gets a tax benefit it's not the llc that's getting the tax benefit it's the business activity that they're doing all right so we're called professional traders okay so with a professional trader you get to take your gains and losses from the stock market or uh you know your stock market investments your crypto investments if you're a crypto investor and you get to take them as losses on your schedule c okay gotta take your gains too all right but it all goes as a schedule c as a business all right so when you're just investing you're passively investing right you are limited on your losses okay passive investment activities have limitations at the irs sets a schedule c business doesn't okay you can take schedule c business losses against any other income you have to essentially know there's no threshold on that so that's where the tax benefit of being a day trader versus a casual investor would come in into play because when you're in a passive investor if you have losses you're limited to making 3 000 every year as a professional trader those capital gains and losses are are not buried but they're included in your income in your ordinary business schedule c income so those losses can be considered ordinary losses all right but there are very stringent guidelines to be considered a professional trader i'm just gonna go over them high level because again i don't know how many of you in here this actually pertains to but i had the question someone to answer it so you guys are talking a professional trader someone who has at least 720 trades per year with 200 typically a thousand actual significant cells okay traders spend a good part of almost every day watching and trading the markets during trading hours okay we're talking five hours a day four hours a week minimum to be considered professional trader this activity really does need to be your primary way to provide for your livelihood okay um if you have a regular job and then you're doing this it's gonna look sketched to the irs all right and the taxpayer you your profession as a professional trader you still got to maintain a business-like operation good books good records you know continuing education seminars all this and so on all right so again not very many people are going to be considered this professional trader and get to take the tax benefit of being a professional trader but i wanted to tell you show you or explain to you guys that it does exist because i was asked this question like does an llc provide benefit for investing in the stock market no tax benefit legal benefit
Thanks Janie your participation is very much appreciated
- Chance Abbey
About the author
I've studied primatology at Adrian College in Adrian and I am an expert in positive psychology. I usually feel predatory. My previous job was tax lawyer I held this position for 27 years, I love talking about breakdancing and garmon. Huge fan of Sean Bean I practice tumbling and collect autographs.
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