Thanks for posting your excel. Honestly I have never been self employed or owned any entities so I'm basically a rookie when it comes to these topics. I ended up signing up with Anderson at least to get the process started and continue to do my research to make sure I have some options.
A couple of quick questions right off the bat:
1. What does the "Added back owner perks" signify?
2. Is your excel trying to do a comparison of sole proprietor vs partnership vs LLC/C-Corp?
3. Should we not be adding a salary/dividend line item for the LLC and/or C-Corp?
Would you mind posting this spreadsheet online? I will add another tab and start adding some of the items that I have on my mind. Mine will include everything from 401k to business expenses.
Although I'm going through the process of setting up the entity structure I will not be moving my individual trading account to the LLC until I fully understand all my options and have a good grasp of all the different items. I need to get the living trust done anyway so this process gives me the opportunity to learn. I will also be consulting with local tax planning agencies and sit down with them to understand how a typical tax year could work with this entity structure.
1. Added back owner perks are the cells in yellow. Essentially, these are business expenses, but these would have been normal expenses that I would have if were just trading in a regular brokerage account. Business meals, medical expenses, car payment, computer/office supplies would normally be paid with post-tax dollars. Here, they are used as business expenses to bring down your income. For example, if you had $100k in profit and $10k in business expenses, then now you are paying tax on $90k in income. Now if you were using your regular trading account with no business, then you pay taxes on your $100k income and then pay your car/computer/office/business meals/etc. So these get added back since they aren’t real expenses, but they allow tax deductions. Now actual business expenses are different, like the payment to Anderson and filing fees.
2. The first column that says short-term gains is essentially just if you were trading in a regular brokerage account and paid short-term capital gains. Now I’m comparing that to having an LLC partnership and c-corp and creating expenses for both of those businesses and seeing how much is saved in taxes
3. This is a good question and I want to see what is required. For the LLC, you’re paying the corporation for management of your trading, so that might be the only salary necessary. The rest flows through to the shareholders (owners) and then you pay taxes. You may have to show some dividend and/or W2 for the c-corp, but my goal is to keep that as low as possible that’s acceptable so the c-corp profits can grow until I want to take a dividend when I actually need that money
I think for anyone that doesn’t already have an existing business, a LLC and the c-corp makes sense to save money through business deductions. For people with very large accounts, the deductions might be very small in comparison to the overall gains, but most people should be able to get $20-60k in deductions pretty easily. Now those that want to have a 401k or sep IRA or other qualified retirement plan, they can set aside quite a bit. If you have a spouse, then you can be putting away $100k+ tax deferred. I actually canceled our office 401k plan this year after realizing that I want access to money earlier and have options to invest in things like tesla/crypto/real estate/businesses now and in the future. I’m 36 and wife is 33, so for us, it didn’t make sense to invest in the 401k esp with the options our office plan offered. I do plan to try to get more than the $250k in retained earnings in the c-corp, which essentially means you’re paying corporate taxes only and letting the rest of the money grow until it’s actually needed. I think Anderson advisors has ideas but they don’t want to tell you until you have an agreement in place. From talking to a few friends, they do put away more than the $250k like these large public companies do by taking out debt in the c-corp, having things in writing for investing in specific businesses or private companies, even if you never actually go through with it. I think the c-corp info is scarce online and it’s purposely like that. I feel like it’s the Tesla FUD that’s posted online and in media. The wealthy and people in the know don’t go around telling the truth or revealing all the secrets about how all this works
I’ll share the excel file, look out for a PM
