A trader explains how to structure your trading business to keep more money and reduce audit risk. Set up a proper business entity, treat trading as a business rather than investing, and work with a specialized accountant like Jerry Allison of Traders Accounting.
Okay, so, you know, when you make money as a trader, you know, when you hit those profits, you want to be able to keep them, right? You don't want to be giving right back to the markets. You also don't necessarily want to be paying more in taxes than you really, you know, should. And so it's really important, you know, you've heard the notion, you know, treat your trading as a business. Well, that covers a lot of ground. And one aspect of that, I spoke with Jerry Allison of Traders Accounting on my podcast here a few episodes back. And one thing that came up and it was really, really, really important is, you know, as far as how you set up your trading, you know, do you do. Would it be wise for you to set up a business entity and trade it through that business entity rather than as yourself? And are there specific tax ramifications and considerations to go with how you set up, you know, your trading business? Because it is business. You know, it's something, it's. It's an activity you're engaging in to make money. So it's a business. And anyway, what you want to do is make sure that you do attend to this. You want to talk to your account, or if your accountant isn't an expert in working with traders, give them a call. Over at Traders Accounting, Jerry Allison, good guy. Again, he was on the podcast. Check out my podcast, the Consistent Profits podcast. And the thing is, you do want to make sure that you attend to this, make sure that your trading business is set up with the proper entity or for tax purposes so that the, any, you know, any income that you make from your trading is, you know, you're structured so that your tax exposure is minimized, but also your liability and, you know, the likelihood of you getting audited is also minimized. There are different considerations on how you structure your trading business, what entity you choose, and how you set up your accounting and everything that can very much dictate how likely it is for you to get audited. And the thing is, just, in general, you need to pay your taxes. Of course, that's just being a good citizen. But with going along with that, you don't necessarily want to be paying more than is really appropriate for you. I mean, you don't want to be just handing the government extra money, taking it out of your pocket, out of the mouths of your family, and handing it to the government if it's not really what you should be paying. And so this is a really important matter to attend to. You want to, again, when you make your profits, you Want to be able to keep them both, not handing them back to the market through mistakes, but also keeping those profits when it comes time to pay your taxes. And so it's really important to attend to this. Again, you want to talk to an accountant, though, don't talk to a lawyer. If you do decide that you want to set up your trading as a business, you've been doing it under your own name as a sole proprietor up until now. Before you go getting too busy and you do want to talk to an accountant, not an attorney. You want to talk to an accountant, and here's why. Let's say you do decide that you want to set up an LLC or an S corp or a C Corp. First of all, the accountant is going to understand the tax laws and they are required to stay current on the tax laws and they're going to be familiar with the tax laws in your area and in your state. And so that's crucial. The other thing is a good accountant, a CPA certified public accountant, can also help you set up your accounts. And you know how to manage it, your bank accounts, get your tax number with the, you know, with the government, do any filings that are necessary in your state to establish the entity and all that kind of stuff. A CPA can help you with everything. A lawyer can only help you with the filing with the state. And they're probably going to charge you more than they should anyway. And then you're still going to have to talk to an accountant to handle the accounting side of things. The accountant can handle everything. And again, with traders, accounting, they've been around for a long time. I've been working with them for a lot of years. They're good outfit, very high integrity. They take good care of their customers and they specialize in working with traders all across the country. So they're a very good resource. This is an area where they are an expert and they focus. And again, they can help you both not only shield yourself from an audit, but also minimize your tax exposure and really, you know, make sure that you're doing it properly so that you make, you know, you make and keep as much as possible and you're still handling everything, you know, properly. You don't have the liability, you know, of, you know, likely to be audited and that kind of stuff or, you know, making mistakes and trying to set it up yourself or working with the wrong person or working with an accountant that doesn't understand, you know, what it's like or, you know, what it's, what it means to be a trader. So I strongly suggest, yes, look up Traders Accounting again, Jerry Allison. Or you can just give them a call at Traders Accounting. I'll have the number down in the description down below. Or you can just go to tradersaccounting.com really good outfit. And you know, don't, don't overlook this though, because you know, especially if you are doing well with your trading, you know, if you're making 2550, $100,000 a year with your trading, there can be a serious tax liability that goes with that. And handling properly versus improperly can be the swing of several thousand dollars, possibly tens of thousands of dollars. You want to make sure that this isn't, you know, isn't something that you're getting, going to get, you know, hit with simply out of negligence or ignorance. Go ahead and attend to it. Get the good help that you need, attend to it and that way you can sleep at night, you know, rest easy knowing that yes, everything's taken care of and you're handling things properly and treating your trading as the business that it is. So I hope this has been helpful. If it has, you know, give me a subscribe down below and a like and share this with your friends. If you have friends who trade, you know, you want them to do well and they'll like you better if, you know, you send them a good video that's helpful, you know, help help them and do better with their trading and you know, take some of the stress off of trading as well. So again, I hope this has been helpful. If you'd like more resources on trading and the variety of aspects that go with being a successful trader and trading it as a business. Swingbyinsideouttrading. Com right up here and we'll see you in the next video again. Hopefully it's been helpful. Talk to you soon. Cheers.
