what are the tax pros cons of forming llc for my investment/trading?

[Alanbud]

I have gotten to the point where my investment income has surpassed my w2 income and I am considering moving to full time trading. I am considering forming an llc for this however I am unsure of the tax implications. I have seen conflicting info on this based on trading/investing within an llc and not sure if there would be any benefits or restrictions of doing this. 

[Vanessa A]

An LLC is a flow-through entity, this means any income received by the LLC flows directly through to the LLC owner/members.  The income is then taxed at the individual income tax level.  There is no income taxation at the LLC level. 

Basically, forming an LLC does not provide you with any real tax advantages. Generally, people form LLC's for liability protection.  It does, however, require you to file additional tax returns if you are a multi-member LLC. If you are a single-member LLC you are treated as a disregarded entity meaning your federal filing will be no different than it currently is.  

Depending on your state you may or may not have additional filing requirements as a single-member LLC. 

As far as restrictions on trading/investing laws within an LLC, you should contact a local business attorney that specializes in investments. 

[Anonymous_]

You should absolutely consult with a tax and/or financial adviser prior to making a decision or taking action.

You also might want to review the information at the IRS web site (link below) with respect to trader status and the mark-to-market election.

https://www.irs.gov/taxtopics/tc429