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This is not a trading account question, it is referring to how you, as a day/swing trader, do your banking.
Do you have a segregated account for your trading? I have general with a DBA and it's getting slightly complicated to operate within a personal bank account.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,386
Thanks Received: 10,207
I have a segregated /dba bank account and I have found it extremely useful for accounting purposes. I would recommend a segregated account for anybody approaching this from a business perspective.
The fact that it is a /dba account, while giving a nice cosmetic allure, is actually a negative. Several brokers will not accept or disburse funds to my dba account as it is titled differently than my trading account. Other brokers will. The differences in practices is surprising.
Hence it would be my advice to have a segregated account, but unless you really need the /dba on the account, to just open it as a segregated account in your personal name.
*All this assumes you are trading as an individual
Aside from @SMCJB's approach, you can do extreme segregation and form an LLC (or equivalent), which is what we do. Of course that introduces heavier paperwork burden and has some added costs, but it allows us to keep all our trading activities clearly separated from our personal finances and taxes. I avoid Schedule C like the plague (or Covid). Setting up a brokerage account with an LLC or corporation has different paperwork requirements with the three brokers we have used.
Separate bank account is best, I think, as @SMCJB suggests.
LLC (partnership, 1065 tax filing) worked for us for a couple reasons, no pun intended. Firstly, my wife and I are partners in our LLC and both traded futures, so it made sense (my wife had to stop trading a few months ago due to other work commitments). Secondly, we already had the LLC in place for our other ventures, so it was a no-brainer.
It is overkill for most, but it is an option. DBA (which I've used in other entrepreneurial pursuits), is probably suitable, as your accountant recommends.
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,386
Thanks Received: 10,207
Two problems with the LLC
1/ Most brokers require a personal guarantee which nullifies a lot of the protection that LLCs give up
2/ Trading in an entity makes you a professional in the eyes of the CME (and others?) and makes your data costs explode
1/ I was wondering about the protection afforded by an LLC in case a broker has a claim against you, and you've just answered my question. A "personal guarantee" eliminates the shield for your personal assets afforded by the LLC. Bummer, but makes sense if you're the broker and not the customer.
2/ I assume that trading as a dba makes you a professional also. Am I right about that?
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
Trading: Primarily Energy but also a little Equities, Fixed Income, Metals and Crypto.
Frequency: Many times daily
Duration: Never
Posts: 5,049 since Dec 2013
Thanks Given: 4,386
Thanks Received: 10,207
It depends. Doing business as a dba is just a legal way to do business under another name, it doesn't actually change anything legally. So if your 'Joe Smith' doing business as 'Joes Awesome Trading Algos' your still Joe Smith, your still an individual. your just allowed legally to use the name 'Joes Awesome Trading Algos'. Similarly if you are 'Trading Friends Fund III LLC' doing business as 'Trading Algos Limited', your still an LLC.
