I am thinking of setting up a single member LLC that only does trading (stocks) and doesn’t have any other activities, it is taxed as passthrough. I can’t seem to find a clear cut answer to some of my questions.

Trying to figure out if it is worth trading stocks through an LLC vs without one. I know the brokers charge you for professional real time quotes if you are an LLC but is there any advantage that outweighs that cost? Primarily:

  1. Do I have to pay self employment tax for the capital gains?

  2. Can I contribute to a SEP plan?

  3. Does the LLC qualify for the 20% QBI deduction?

  4. Can I write off business expenses (e.g. traveling to a conference on investing, buying books on the topic or attending classes)

I appreciate your input.

Thank you

  • Dakota_PlainsBEnglish
    1·
    11 months ago

    If you are thinking about doing this as a business and charging others for your services, you will need to first acquire the appropriate securities license(s) - perhaps something like Series 7 & 66 as well as register with the proper authorities - one or more states and maybe FINRA or SEC. Your would be service income (ordinary income) to you and capital gains tax rates do not apply to your services. As a legit business providing services to others, you should be able to claim ordinary & necessary business expenses on your Schedule C. Don’t forget to include E&O insurance as one of your expenses.

    You can’t go into a business and trade for just yourself (so no license required) and pay yourself a wage as a single member LLC (if you file a Schedule C). If you want to receive a W-2 paycheck, you’ll need to choose to be taxed as an S-corp or C-corp. You should be able set up a SEP under any type of entity. You don’t pay self-employment tax on income from capital gains as it is not “earned” income.

    You have a lot going on in this post. Start with the proper license(s) and registration(s). Good luck!