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What options are there for incorporating a holding vehicle for equity positions rather than owning them in my own personal name?

  • Welcome new user. Right, this is totally different in each nation-state, Joseph. – Fattie Jul 7 at 22:10
  • Right. My mistake – Joseph P. Jul 7 at 22:34
  • I've added the USA tag. – Joseph P. Jul 7 at 22:34
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An issuer company, for the purpose of investing, would be subject to investment company regulation. The advantage to this type of company is to raise funding from outside investors.

A non-issuer company, for the purpose of investing, would be subject to broker/dealer registration. The advantage to this type of company is to bring particular talented traders into one organization by rewarding the traders with percentage partnerships.

Now there is a 21% corporate tax rate but distributions from a corporate tax structure involve double taxation of distributions. Most trading companies use a higher-rate pass-though-taxation but avoid double taxation of distributions.

But an individual investor probably doesn't need a corporate structure because futures traders have an advantaged capital-gain tax rate while one-year equity holders also have an advantaged capital-gain tax rate.

Now an issuer company with an investment portfolio, but with a purpose other than investing, can avoid being classified as an investment company by having a portfolio that is 60% Treasury securities. Then if there is trading of the issuer shares, a 21% corporate tax rate might be chosen along with a policy of no distributions. Similarly, a non-issuer company could avoid being classified as a broker/dealer by having a purpose other than investing and by having a portfolio that is 60% Treasury securities.

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  • The IRS has a trader-status tax accounting for individual traders making hundreds of trades per day. I would put a company like that on an individual's Schedule C and use the Schedule C as a rationale for not being subject to broker/dealer registration. A proprietor company can go on a Schedule C and a single-member LLC can go on a Schedule C. – S Spring Jul 8 at 1:50

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