dont forget about state taxes too! My state (california) has different rules about startup expenses than federal. I deducted my startup costs correctly on federal but messed up on state and got a nasty letter from the franchise tax board. Make sure you check your state tax rules too!

Great question! You're definitely on the right track thinking about this carefully. Based on what you've described, you would NOT file a Schedule C for 2024 since your business wasn't operational yet (no income, no active business operations). The IRS considers startup costs to be deductible in the tax year when your business "begins" - which sounds like 2025 in your case when you actually started generating income and conducting business activities. So your $4,700 in startup expenses from 2024 would be claimed on your 2025 Schedule C. You can deduct up to $5,000 in startup costs immediately in your first year of business operations (2025), and since your costs are under that limit, you should be able to deduct the full $4,700 on your 2025 return. Just make sure to keep detailed records of all those expenses with receipts and documentation showing they were legitimate business startup costs incurred before you began operations. One thing to double-check though - if any of those expenses were equipment purchases (computers, tools, etc.), those might qualify for Section 179 depreciation instead of being treated as startup costs, which could be more beneficial tax-wise.

Great thread! I went through this exact decision process last year with my Florida LLC. One thing I'd add is that while everyone's focusing on the election mechanics (which are all correct), don't overlook the operational side of maintaining TTS qualification. The IRS looks at four main factors: substantial trading activity (you've got this with 200+ trades), regularity and continuity of trading, holding periods (should be short-term focused), and profit motive from price swings rather than dividends/appreciation. I kept detailed logs of my daily trading hours, market analysis time, and trading strategy notes. This documentation became invaluable when my CPA prepared my return and helped justify the TTS claim. The single member LLC structure worked perfectly - no need to convert to S-Corp just for these elections. Also consider opening a separate business checking account for all trading-related expenses if you haven't already. Makes the expense tracking much cleaner and reinforces the business nature of your trading activity.

This is exactly the kind of comprehensive discussion I needed to see! I'm in a similar situation with my trading LLC and was getting overwhelmed by all the conflicting advice out there. One additional consideration that might be worth mentioning - if you're planning to scale up your trading operation significantly, you might want to think about the self-employment tax implications. With a single member LLC and TTS status, your trading income will be subject to SE tax, which can add up quickly on larger profits. This is where the S-Corp election could potentially save you money down the road - you can pay yourself a reasonable salary (subject to payroll taxes) and take the rest as distributions (not subject to SE tax). But that's more of a consideration for when you're consistently profitable at higher income levels. For now, sounds like your single member LLC with TTS and Section 475 elections will serve you perfectly well. The flexibility and simplicity are huge advantages when you're still building your trading business.

One thing nobody's mentioned - sometimes banks DO get tax breaks from local governments as incentives to build headquarters or operations centers in certain areas. My city gave Bank of America a 50% property tax reduction for 10 years to build their operations center here instead of the neighboring city. Created about 2,000 jobs but definitely a sweetheart deal on the taxes.

Yes, it's completely legal for cities and counties to offer tax incentives to businesses - it's called economic development policy. These Tax Increment Financing (TIF) districts and abatement programs are authorized by state law in most places. The idea is that the jobs and economic activity generated by a major employer like a bank operations center will eventually produce more tax revenue than the city loses from the incentive. That said, I understand the frustration about fairness. Small businesses and homeowners don't have the same negotiating power to demand these deals. Some cities are starting to require "clawback" provisions where companies have to pay back the tax breaks if they don't meet job creation or wage commitments. It's definitely a controversial topic in local government - balancing economic development with tax equity.

Fun fact - only about 30 states actually have vehicle fees based on value that qualify as deductible taxes. If you're in one of the other 20 states, your registration fees are just fees, not taxes, and aren't deductible at all even if you itemize. I learned this the hard way!

That's a really helpful point about only 30 states having value-based vehicle taxes! I'm curious - is there an easy way to find out if your state is one of those 30? I don't want to go through the hassle of trying to figure out which portions of my registration might be deductible only to find out my state doesn't even have deductible vehicle taxes. Also, for those states that do have them, does the IRS publish any guidance on what the fees are typically called on registration documents? It seems like every state uses different terminology which makes this really confusing for taxpayers.

Just went through this exact process with my consulting LLC that elected S-Corp status. A few key points that might help: 1) You're absolutely right to be frustrated about the $850 fee for zero-activity returns, but unfortunately it's required. However, you can significantly reduce costs by doing some of the prep work yourself. Since you had no business activity, your Form 1120-S will basically be all zeros except for basic entity information. 2) For the EIN notification, I sent a simple letter to the IRS Business & Specialty Tax Line at the Cincinnati processing center. Include your business name, EIN, date of dissolution, and a brief statement that the entity has been dissolved. Keep a copy for your records. 3) Don't forget about your state requirements - many states require a final franchise tax return even with zero activity, and some have specific dissolution tax forms. The penalties for missing these can be worse than just filing them. 4) One money-saving tip: if both LLCs are in the same state and have similar structures, see if your accountant will give you a discount for preparing both final returns together. Mine knocked off about 20% for the second entity since most of the work was duplicated. The whole process is definitely a pain for inactive businesses, but better to close them properly than deal with ongoing compliance issues down the road.

I'm going through a similar situation right now with my small consulting LLC that I'm dissolving. Reading through all these responses has been incredibly helpful - especially learning that you don't actually "cancel" an EIN but just notify the IRS of the dissolution. One thing I wanted to add that might help others: if you're looking to save money on the final tax returns, consider asking your accountant if they offer a flat fee for "zero activity" final returns. I found one who charges $275 for S-Corp final returns when there's literally no business activity to report - just filling in the basic entity info and checking the "final return" box. Also, for anyone else dealing with this, make sure you check if your state has any annual report filings that need to be completed before dissolution. I almost missed my state's final annual report, which would have kept the entity technically "active" even after filing articles of dissolution. The certified mail suggestion for the EIN notification letter is spot on too - that return receipt is your proof that the IRS received your notification. Worth every penny for the peace of mind.