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  Copyright© 2001 to 2012 Colin M. Cody, CPA and, LLC, All Rights Reserved.

WHY form an entity to trade through?: Why Form Your Own Entity?

Do it yourself: Entity Formation Services, for all 50 States

Do it yourself, using's assistance:
LLC and S-Corp or C-Corp Entity Formation Services, for all 50 States

Before you start, please read the legal disclaimer below

Telephone or
email us  to talk about your concerns.

But remember it is not all that easy.  Article on the Challenge of Entity Selection or click here.

The table below is believed roughly accurate to show approximate current Minimum State Fees that will be incurred by forming your entity.  There are additional costs for a "corporate kit & minute book" (usually under $100), Document Preparation & Filing fees paid to an attorney if you use one (usually under $1,000), or Document Preparation & Filing fees paid to a do-it-yourself web site such as the link above (usually under $200), and/or for to provide personal consultation and to walk you through the above web site and for additional subsequent forms and registrations: Form SS-4 for your IRS ID#, Form 2553 to immediately elect S-Corp status for your corporation, immediately preparing your Mark-to-Market election, and so on (for an additional amount, usually $400).

Once your entity is formed, you may open a bank account, credit card account and brokerage account and start trading!  There are other ongoing fees, from income taxes (yes, even for S-corps in some States), minimum tax, business privilege tax, franchise tax, accumulated capital tax, annual report of officers fee and other fees unique to each State.  In addition many States charge additional or increased fees for "foreign" or out-of-State entities doing business within their State.  Many of these States are marked with (*) in the table below.

Why use to do your leg work?  Trader Status entities need to be handled correctly right from the beginning, otherwise you have wasted your time and money. 
EXAMPLE: was recently contacted by a big entity formation web site that "forms hundreds of entities for traders" telling us that they promote the "secrecy" of their client's identity by setting up their trader entities with a manager and registered agent.  Apparently they were totally unaware of the landmark court cases which disallow trader status and the mark-to-market election when this is done improperly. 

Apparently they are not alone.  It seems that is has become SOP (Standard Operating Procedure) in the legal community and therefore with the LLC formation companies to form all LLC in a legally expedient fashion that offers the owners the best legal advantages and protections.  Unfortunately this flies in the face of trader status taxation!  Not being experts in the field of IRS trader status, they fail to understand the whole purpose of forming a trader status entity to begin with!  Unfortunately, from what we've seen, the hard facts are that when it comes to Trader Status, the overwhelming majority of advisors have no clue what trader status is truly all about. 

Nearly 50% of our new incoming clients who already have an entity structure in place have been advised to either eliminate it entirely, or replace it with a properly formed one.  This is because the costs to correct a defective entity including its "skeletons in the closet" make it far more cost efficient to simply form a new entity with an emphasis on proper Trader Status planning and not a boiler plate emphasis on privacy and so-called "asset protection."

There is no magic here, but it must be understood that a thorough understanding of the trader status rules is required to pass muster with your trader status tax filings.  Unfortunately, mass production incorporators make their living selling you entities and "advice."  Other tax preparers might make their living selling tax services and even "trader status advice" which advice changes year-to-year as they learn from their mistakes.  When selecting your own tax advisor, remember that is the site that was created by Colin M. Cody, CPA, who understands the law, how it was developed and its application in the real world and who participated in (authored) the actual writing of the IRS Code section that applies to traders.

Once it is determined that you could use a separate entity to your tax benefit, steps need to be taken to custom fit your entity to your tax situation.  This normally requires a discussion about and review of your prior form 1040 and your year-to-date trading activity.  For $400 traders get all their ducks in a row so they start off on the right foot.   

Forming an entity can be a straight forward affair.  But if you have complexities such as: if you, are seeking asset protection and legal isolation, then a qualified attorney, probably one from your home State of residence, is necessary.   We work with your attorney to make sure that trader status requirements are properly considered - when you are a full service client.

Do I need to know about securities laws to set up an LLC as a sort of hedge fund?

If you'll be the sole owner of your LLC and you don't plan to take investments from outsiders, your ownership interest in the LLC will not be considered a "security" and you don't have to concern yourself with these laws. For co-owned LLCs, however, the answer to this question is not so clear.

First, let's consider the definition of a "security." A security is an investment in a profit-making enterprise that is not run by the investor. Here's another way to think about it: If a person invests in a business with the expectation of making money from the efforts of others, that person's investment is generally considered a "security" under federal and state law. Conversely, when a person will rely on his or her own efforts to make a profit (that is, he or she will be an active owner of an LLC), that person's ownership interest in the company will not usually be treated as a security.

How does this apply to you? Generally, if all of the owners will actively manage the LLC -- the situation for most small start-up LLCs -- the LLC ownership interests will not be considered securities. But if one or more of your co-owners will not work for the company or play an active role in managing the company -- as may be true for LLCs that accept investments from friends and family or that are run by a special management group -- your LLC's ownership interests may be treated as securities by your state and by the federal Securities and Exchange Commission (SEC).

If your ownership interests are considered securities, you must get an exemption from the state and federal securities laws before the initial owners of your LLC invest their money. If you don't qualify for an exemption to the securities laws, you must register the sale of your LLC's ownership interests with the SEC and your state.

Fortunately, smaller LLCs, even those that plan to sell memberships to passive investors, usually qualify for securities law exemptions. For example, SEC rules exempt the private sale of securities if all owners reside in one state and all sales are made within the state; this is called the "intrastate offering" exemption. Another federal exemption covers "private offerings." A private offering is an unadvertised sale that is limited to a small number of people (35 or fewer) or to those who, because of their net worth or income earning capacity, can reasonably be expected to be able to take care of themselves in the investment process. Most states have enacted their own versions of these popular federal exemptions.

For more information about SEC exemptions, visit the SEC website at  A quick way to research your state's exemption rules is to go to the home page of your state's securities agency, which typically posts the state's exemptions rules and procedures. To find your state securities agency, go to your Secretary of State's website. The Wyoming Secretary of State's office provides a list of state websites at

Please see the links below for more details:

Minimum costs involved to get started:

Each entity pays an incorporator fee of approximately $115 and an articles of organization or a minute book fee of approximately $85.  As an example: the total expected cost for creating an S-Corp in Colorado might be as follows:

  • $400 consulting fee
  •   115 Incorporator fee
  •     85 Minute Book
  •     50 Secretary of the State fee* (varies by State)
  • $650 initial total

    optional extras:
  • $  50 Secretary of the State paperwork expedite fee* (varies by State)
  • $100 Expedite fee including FedEx of paperwork and signatures

The following table is only a rough guide to initial costs.  State set-up fees vary widely for expedited service, confirmation paperwork costs, correspondence charges including those States that require your personal signature vs. those who accept a hired incorporator's signature and for newspaper announcement publishing fees.  Most States also hit you up for annual fees after formation, NV and CA often look for these fees before the ink is dry on your initial paperwork, while most others are due as much as a year later.

Discussion on Choosing a State to form in.

More discussion on State Fees and publication costs here.

Up-to-date Entity Mail Processing Times in CA:

Location Initial Standard
 Corp Fee
Initial Expedited
 Corp Fee
Minimum Annual Corp Fees Initial Standard
Initial Expedited
 LLC Fee
Minimum Annual LLC Fees
Alabama $150.00 $100.00 $100 $  75.00 $  10.00
Alaska $250.00 $150.00 $100* $250.00 $150.00
Arizona $245.00 $  35.00 $50 + $45 $200.00 $  35.00
Arkansas $  50.00 $    0.00 $50 + $45 $  50.00 $    0.00
California $100.00 $  65.00 $800 + $20/$250 $  70.00 $  70.00 $800
Colorado $  50.00 $  50.00 $25* $  50.00 $  50.00
Connecticut $275.00 $  25.00 $250 + $75* + ($50 for 2003 only) $  60.00 $  25.00 $10 + $250 + ($50 for 2003 only)
Delaware $100.00 $100.00 $30 + $20* $  70.00 $100.00 $100
D.C. $185.00 $     0.00 $100 + $200 $150.00 $     0.00 $100
Florida $  80.00 $     0.00 $150 $155.00 $     0.00 $50
Georgia $125.00 $100.00 $15 $  75.00 $100.00 $25
Hawaii $100.00 $  50.00 $25 + $100/mo $100.00" $  50.00 $25
Idaho $100.00 $  20.00 $10 $100.00" $  20.00 no fee
Illinois $133.00 $  50.00 $25 $400.00 $  50.00 $200
Indiana $  90.00 $    0.00 $30 $  90.00 $    0.00 $30
Iowa $  50.00 $    0.00 $45 $  50.00 $    0.00"
Kansas $  75.00 $  20.00 $150.00 $  20.00
Kentucky $  65.00 $    0.00 $  65.00 $    0.00
Louisiana $  95.00 $  20.00 $  80.00 $  20.00
Maine $125.00 $100.00 $60 $250.00 $100.00 $60
Maryland $120.00 $  50.00 $100.00 $  50.00
Taxachusetts $275.00 $    0.00 $456 + $85 $500.00 $    0.00 $500
Michigan $  60.00 $  62.50 $  62.50 $  62.50
Minnesota $135.00 $  20.00 $135.00 $  20.00
Mississippi $  50.00 $    0.00 $25 + $25 $  50.00 $    0.00
Missouri $  58.00 $    0.00 $45 $105.00 $    0.00
Montana $  70.00 $  20.00 $  70.00 $  20.00
Nebraska $200.00 $  50.00 $13 $125.00 $  50.00
Nevada $195.00 $100.00 $85 + $25 $195.00 $100.00 $85 + $25
New Hampshire $  85.00 $     0.00 $100 $  85.00 $    0.00 $100
New Jersey $125.00 $   30.00 $150 + $40 $125.00 $  30.00 $50
New Mexico $100.00 $     0.00 $  50.00 $    0.00
New York $135.00 $  55.00 $325 + $9/$250 $200.00 +
$  55.00 $325
North Carolina $125.00 $200.00 $125.00 $200.00
North Dakota $  90.00 $    0.00 $135.00 $    0.00
Ohio $125.00 $100.00 $125.00 $100.00
Oklahoma $  50.00 $    0.00 $100.00 $     0.00
Oregon $  50.00 $    0.00 $10 + $30* $  40.00 $     0.00 $20*
Pennsylvania $260.00 $  52.00 $100.00 $   52.00
Rhode Island $150.00 $    0.00 $250 + $50 $150.00 $     0.00 $250 + $50
South Carolina $135.00 $    0.00 $15 $110.00 $    0.00 $10
South Dakota $  90.00 $  10.00 $25 $  90.00 $  10.00 $50
Tennessee $105.00 $    0.00 $10/$100 + $20 $305.00 $    0.00 $100
Texas $300.00 $  25.00 no minimum $200.00 $  25.00 no minimum
Utah $  50.00 $  75.00 $100 + $10 $  50.00 $  75.00 $10
Vermont $  75.00 $    0.00 $250 + $25* $  75.00 $    0.00 $250 + $15*
Virginia $  75.00 $    0.00 no minimum $100.00 $    0.00 $50
Washington $175.00 $  20.00 $59 $175.00 $  20.00 $59
West Virginia $110.00 $    0.00 $50 + $30 $125.00 $    0.00 no minimum
Wisconsin $100.00 $  55.00 $25 + $25 $130.00 $  55.00 $50
Wyoming $100.00 $    0.00 $50 $100.00 $    0.00 $50

State fee information. Click on your state on the map below for detailed information about its fee structure for forming an LLC or corporation. Be sure to research the latest changes in your state's laws and fees with the appropriate secretary of state's office.

Please note that this web page, as well as this entire web site and any legal documentation and entity formation assistance service offered is not the undertaking of a law firm.  We do do not practice law and we do not act as your attorney. Rather, this information is presented "as is" and "for discussion only" to help you represent yourself or guide your attorney in your own tax, personal and legal matters. If you seek representation, are involved in litigation or have complex legal issues that cannot be resolved on your own, or are looking for asset protection vehicles, we strongly recommend that you hire an attorney at law. Entity formation is a legal service and should be done through an attorney.  This web site's primary purpose it to suggest ideas for consideration to accomplish IRS federal USA only tax goals.

Federal Taxpayer Identification Number (TIN)
also known as a Federal Employer Identification Number (EIN) needed for many trader entities may be obtained online at,,id=102767,00.html
The "provisional EIN" number obtained via this internet link is also called an I-EIN or a "two-oh number" since all I-EINs are issued in the format 20-#######.

While do-it-yourselfers are allowed to get their own TIN for their trading entity, we request that our clients and soon-to-be clients let us do the application for your TIN to avoid any problems or the raising of "red flags" on your account.  You may legally authorize us to do this by signing a print-out of this linked page,,id=102765,00.html  and faxing it to us.

 A Traders Responsibilities

Colin M. Cody, CPA, CMA LLC
6004 Main Street
Trumbull, Connecticut 06611-2400

(203) 268-7000


                  Member PCPS                                        
                  The AICPA Alliance for CPA Firms
                  Private Companies Practice Section

                  American Institute of CPAs
                  Connecticut Society of CPAs
                  California Board of Accountancy
                  Institute of Management Accountants

online verifications:

(opinion only, editorial license taken, responsible contrary opinions are welcome)

People promoting Nevada Incorporations are notorious for misleading honest taxpayers with promises of elimination of taxes by simply paying for some "tax advice" and incorporating in the State of Nevada.

A quality outfit is Nevada Corporate Planners
at and  who tell you right up front that NV corporations are NOT for everyone, and do NOT necessarily eliminate any taxes.

There is a look-alike web name (putting a single hyphen in the URL) allegedly run by SleepyShopper Dot Com Network, Inc. at   This web site does not get our nod of approval.

Their web page apparently lifts copyrighted material right off of
  http;// a web site allegedly maintained by a rogue Secretary of the State of Nevada.  The misinformation on these web pages are so egregious that they should be considered almost criminal in nature when you realize the thousands of dollars taxpayers have paid to incorporate in NV expecting to eliminate their taxes, only to eventually discover that the web pages are full of misleading innuendo and outright lies!

Old link to do it yourself: Entity Formation Services, for all 50 States


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Last updated: January 20, 2014

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