Have you ever wondered if you can place your trading account in a limited liability company, and what the tax consequences might be? More importantly, what can happen when you place your trading account into an LLC? Well, in this video, I'm going to be talking about that, plus going to be sharing with you a strategy on how to get around a potential mistake you could make when you put your trading account into an LLC. All right. Let's get started. Okay, so here's the deal. I've been doing this, as you know, for over 25 years. I've been working with traders during that time and one of the things that always comes up is, hey, how do I turn my trading into a business entity? Because I understand that trading in my own name does create potential liability for me. And if I were to set up a limited liability company and move that trading account into that LLC, well, I'm doing so. So if I get sued personally, they can't. I mean, a creditor could not get after my brokerage account. Now this makes complete sense. It's where I hold my brokerage account is in a limited liability company. However, if you're a trader and there are certain things you're looking for from your trade related activities, and you have to be careful about how you go about setting up this type of structure because it could add complexity costs. Worse yet, it could create a situation where you have to pay taxes on your existing positions, and we don't want that to happen. That is why, when it comes to setting this up, what I'd like to do is first off, set up your limited liability company. So the question then becomes where do you set up this LLC? Well, here's the deal. When you're looking at trading, what are your concerns right. Your concern from a liability standpoint is that you might be sued individually. Let's say that you're involved in a contract dispute with someone that was going to repay your driveway. And you don't believe you did the job, right, so you don't pay them. Next thing you know, they're suing you, or you have to default on a lease or mortgage, or you're involved in a car accident. I mean, we could just keep going with this. But the fact of the matter is, is that if you get sued personally and a judgment is entered against you, then that creditor is going to want to take that judgment and use it to garnish any accounts that are in your name. So if I had a trading account in my own name, they could go after being the creditor to go after that account, file a garnishment, and they could take all my positions from me. Now we don't want that to happen. And that is why people look at using this limited liability company to hold their brokerage account, because they're looking for those charging order protections, meaning that with a limited liability company, if it's set up in the right state that a creditor cannot take your LLC interest. And if you have a trading account held inside of here because they can't take your LLC, well, then they don't have access to your trading account. So this is why people are drawn to set up the structure. This is why I created the structure for my own account. However, to get that trading or that charge you order protections, you want to make sure that you set up your LLC in a state that offers you strong charging order protections. Now, if you're a fan of my channel, you know the state that I'm referring to here. I like to set up my trading LLC in Wyoming. So I would set up a Wyoming limited liability company. And it does not matter if you live in Florida, New York, Texas, Ohio, pick the state. It does not matter because this LLC is designed strictly to hold your brokerage account. It's not engaging in any type of active business activity in the state which you live. So it really doesn't matter. We're free to choose wherever we'd like to set this company up. I'm selecting Wyoming because it offers this charging order protections. Now, from a liability standpoint, with the trading account itself, that's never going to be a problem because your stocks are not going to generate the harm for you. You're generating the harms for the stocks by potentially as I described, getting involved in some accident or, you know, the defaults and things like that where you could be sued personally. So anyway, so you get this LLC set up once it's created, then we have to go through the process of moving our account into the LLC. Now, one of the mistakes that I find that people make when they're considering the structure is that they'll set up their limited liability company right here, and they have their brokerage account in their own name. Now, if you're a trader, you know that you have a lot of open positions. Many time you bought stock, maybe you invested in Nvidia, you bought it when it was trading back at $400, and now it's trading at $1,000. And you want to take your stock and you want to move it into the LLC. But you believe, unfortunately, that in order to do that, you have to sell out of all your positions. So if you do that, you sell out of all your positions. And if I bought it for 400 and it's now trading at 1000, that's a $600 gain. I will recognize per share. Now that doesn't make sense. And so for a lot of people, when it comes to protecting their brokerage account because they think they need to close out of all their positions, they decline to do that, and they end up holding everything in their own name. And they never set up the LLC and move their personal brokerage account into a protected state. So I always like to tell people this you should never have a personal brokerage account, you should have a protected brokerage account. And all that means is that it's in an entity that provides protection for you. So what does this mean? How do we get this account moved over? Well, the problem comes up as a when somebody let's say they had a, an account set up here with Charles Schwab and they want to move over to Raymond James or something like that. Well, in order to move from Schwab to Raymond James, yes, you're going to have to close out of all your positions, you're not going to most likely be able to roll those over or it's going to get complicated. So what I would suggest that you do then is do not open up your account with your LLC, with Raymond James, open up your LLC account with Charles Schwab. Now, in order to do this, what you'll need to do is reach out to Charles Schwab and obtain a limited liability account application. So they have these on their website. You can definitely call them. You can download the form, then you're just going to complete it. And when you're completing this form it's pretty straightforward. It's going to ask for the name of the LLC, who the managers are, who the members are, their ownership percentages, who's authorized to trade the account, your social Security number, the iron number for the LLC, its tax status, which, by the way, when I set up an LLC for someone and all they're looking for is just asset protection and they're not trying to create a trading business. And if that's what you're concerned about, you're definitely going to want to stay in to catch one of my other videos on creating a trading business, where I discuss how to set that up. So if you want to create a trading business, there's a different strategy involved with that. This is a strategy just for asset protection. So when you open up that account with or you open up that LLC, if it's there for asset protection, then typically this is going to be set up as a disregarded entity. So you'll be setting that up. But there's only one owner. So if you're just a single individual and you set up your LLC, then you treat as a disregarded. Maybe if you're married and your spouse is there, maybe it's going to then be a partnership for federal tax purposes. So those are the only two elections I would make in this type of structure. Do not make an asset selection. Do not make a selection for this LLC. Okay. So your LLC, you're going to fill out your account application. And then an account will be open for you under your limited liability company's name. Now you'll take your existing position. So you call up your broker. You tell them, hey, I've got this other account opened up with you. I want to roll my existing positions into my new account. So what your broker will do then is they'll transfer all these positions into your account number associated with your LLC. And then the question is, do you close out your personal account? Okay. So here's where things get interesting. And this is what I mentioned at the very beginning, that you have to be on the lookout for. So if you're an individual who likes to trade and you need those real time feed data, you want to know what that stock is trading at. At the second, you're going to make your trade well with many institutions. When you're setting up your brokerage account, if you put it into a business entity, they will not provide you real time feeds, in that business entity, because they're saying you're a professional trader and they want to charge you a higher exchange rate fee in order to gain access to the real time feeds. Now, there are some institutions, brokerages like Charles Schwab, that if you have an account balance of over $250,000, they'll waive this fee. But if they don't waive the fee or you don't have that account balance of over 250 K and you need that real time fee data coming in, you really have two options here. So this is what I'm referring to about your personal account. So your first option is this keep your personal account open. But only maybe you keep $1,000 in there. So you have access to the real time fee data. So you can look at your personal account on one screen. Know what that stock is trading at, and go in and place the order over there in the business account name at that particular, price that you see that you're aiming to either buy or sell at. That's one way to do it. The second option you have is that if you want real time feeds for that LLC account and you cannot get them without paying that higher exchange fee, then this is what you need to do. So what you should create now is what we call a personal property trust. So we create a personal property trust. It's similar to a living trust. And again I have other videos on personal property trusts. So you set up a personal property trust and you do the exact same thing I just mentioned with opening up your account with the LLC, but instead of opening it up in the LLC name, you're going to open it up in the Personal Property Trust name. So when I create a Personal property trust, I will be the beneficiary right here, and I'll be the trustee of my trust. So now I take my personal brokerage account and again you get your account open under your trust name. Then you roll all the positions into the personal property trust. So when you're opening up the account, you're you're informing them that you've set up a trust for estate planning purposes. And you go through and you fill out the application for a trust account application, then you're going to be able to keep your real time feeds, because you'll log in now under the trust name, you're no longer logging in under a limited liability. We've been using this technique for many, many years to obtain real time feeds for our business entity client. So we're well versed in this. I know exactly how this works. So now once this personal property trust is established and you've done this step, then what we'll do, we still have our Wyoming LLC in play because you just can't stop there. If all you did was stop at the personal property trust and you're involved in a lawsuit, well, if you were sued, they could take your trust from you because a personal property trust does not offer asset protection. And the whole purpose here is to set this structure up so you have protection for your brokerage account. That's why we got to make a minor change. That is, once we've got this account and everything open in the trust, we're then going to take your beneficial interest and we assign it transfer. It's a paper document. I, Clint Coons, hereby assign 100% of my interest in my personal property trust to my Wyoming limited liability company. Then I'm both the member and manager of. So now your personal property trust is held in your Wyoming LLC. So even though you're trading here, all the income passes through to you because these are all pass through entities. The trust does not file a tax return. It all comes right down to you and shows up on your 1040. But from an asset protection standpoint, if you were involved in a lawsuit and somebody enters a judgment against you, then we have that LLC in Wyoming as a block or entity. So if anything were to go wrong here, it's going to protect everything that it owns. And it happens to own a personal property trust, which happens to own your brokerage account. Now, how many accounts, people ask can you place inside of one limited liability company? Maybe you like to trade with different brokers. You can have as many as you would like inside of that one LLC. There is no limit on the number of brokerage accounts you can open inside of your LLC. And so if, that's what you want to do, go ahead and do it. It works great for that. So I hope you got something out of this. If you're considering setting up a limited liability company to protect your brokerage account, the answer is you can do it. You just have to realize that, hey, I don't want to close out of my positions and there may be an issue there if I desire real time feeds, but hey, I've just solved that problem for you and explain to you how you go about maintaining real time feeds even though you have a business account. Guys, if you liked this video, be sure to smash the like button. And if you'd like to set up a strategy session with someone here at Anderson, look in the show notes below I have a link. Click on that link free 30 minute strategy session with one of the professionals here at Anderson. We'll talk to you about your brokerage account and show you the path forward and how to gain protection for take care.