Registering LLC with BD

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Sep 23, 2009 5:44 pm

I recently went independent and am in the process of creating an LLC. However, my new broker dealer tells me that all the paperwork will be in my name and not the LLC. The agreement is between the registered rep and the broker dealer. How can I protect myself and have limited liability in such an instance.



Any comments would be much appreciated.

Thanks

Sep 24, 2009 5:41 pm
SD:

I recently went independent and am in the process of creating an LLC. However, my new broker dealer tells me that all the paperwork will be in my name and not the LLC. The agreement is between the registered rep and the broker dealer. How can I protect myself and have limited liability in such an instance.



Any comments would be much appreciated.

Thanks





Go RIA.

Sep 25, 2009 8:32 am

Thanks for your responses. I have a follow up question regarding personal liability. The answers from my b/d and attorney often seem contradictory.



The attorney would like the agreement with the b/d to be with my LLC. b/d needs to have the agreement with the rr (me). My signature would need the disclaimer that b/d and LLC are unaffiliated.



Attorney suggests commissions/compensation must be paid to the LLC, otherwise it will "pierce the veil of the LLC". b/d wants commissions to be paid to individual account linked to my social.



I do not want to reinvent the wheel and realize there are things that cannot be changed. I am wondering, however, what kind of protecting will my LLC afford me in light of the above stated issues.



Appreciate your comments.



Thanks

Sep 25, 2009 9:03 am

SD, the problem is that you have an attorney who doesn't understand the securities business.  What the attorney wants you to do can't be done.

Sep 25, 2009 9:04 am

Yep. We're an S-Corp.

Sep 25, 2009 9:09 am

Iceco1d, the choice should never be between S-corp and LLC.  These are very different decisions.  An LLC can be an S-corp or a sole prop/partnership. One decision has to do with taxation and the other has to do with liability.   I'm guessing that an LLC doesn't make much sense in our business for a registered rep.

Sep 25, 2009 9:22 am

I am curious on the tax benefits for a RIA on a LLC vs the sub s. This is an area where I have put my head in the sand. Are you guys seeing a big tax benefit? or do you still pass through all the revenue as income?

 

Sep 25, 2009 11:20 am

wow -thanks ice!

I need to go find a better accountant fast!

Sep 25, 2009 9:58 pm

ice- do you know (I assume the answer is yes), as a RIA, would I need to re-register my firm if I go from an LLC to a S corp. Seems a pain to do, but it may be worth the money.
Thanks



Oct 15, 2009 6:18 pm

Hi everyone,

 
Although I'm not a legal compliance expert either I would imagine that you would have to amend your Form ADV if you were changing from an LLC to an S-Corporation in addition to the normal Secretary of States changes.
 
Great topic -- I've know Registered Reps who assign the income received from the B/D over to their S-Corp, for example but not sure if it helps with the liability standpoint.
 
On the RIA side, its a whole other animal.
Nov 17, 2009 8:57 pm

I've done some research on this lately, and the IRS allows LLC's to be taxed like an S-Corp. All you need to do is fill out an IRS form 8832.



See these links:



http://www.irs.gov/pub/irs-pdf/f8832.pdf



and



http://www.irs.gov/businesses/small/article/0,,id=158625,00.html



BTW, I'm not a CPA, an IAR, nor do I own an LLC (yet), but I've been researching this issue and the IRS link seems to explain it pretty well.