1) Best and Cheap Voip service is www.viatalk.com. Costs close to 22 dollars a month for unlimited us calling and 1200 minute international calling
2) For faxing best is smartfax.com around 7 dollars a month. I havent found anything better than this offer.
Friday, October 16, 2009
Available Domains
1) For managing company www.IndusInvestments.net
2) For Hedge Fund www.IndusHedgeFund.com
2) For Hedge Fund www.IndusHedgeFund.com
Incorporation Services
Below are low cost best services for starting companies.
1) IncFile.com
2) SmallBiz.com
1) IncFile.com
2) SmallBiz.com
Bank and Brokerage accounts
Below is best outcome of extensive research on accounts
Banks:
1) Chase Bank business checking
2) HSBC Direct checking account
Brokerage:
1) Interactive Brokers for small business
Banks:
1) Chase Bank business checking
2) HSBC Direct checking account
Brokerage:
1) Interactive Brokers for small business
Thursday, October 15, 2009
Taxation for hedge fund
How long term capital gains and short term capital gains are passed to members from LLC/LLP??? Very important question from tax saving point of view.
LLCs or LLPs are not taxed as separate entities. profits are passed on to members. So basically in our ideal hedge fund structure. Following will be flow of profits.
Hedge Fund LLP -> Managing LLC -> Owners/managers of structures
At the end of year LLC (or LLP) files form 1065 where they report their profits or losses. Normal operational income is filed separately from dividend or long term capital gains income on this form. Long capital gains/Dividends filed on separate schedule D form. Also LLC sends form K-1 to each member prorated based on their share of ownership. This K-1 form has normal income and capital gain income separately mentioned. Accordingly member files his personal return using this form. For normal income tax rate upto 35% and for long cap gain tax rate is upto 15%.
LLC's day-to-day expenses can be deducted from short trade gains or other operating profits (consultancy etc.)...Income from this will be considered as normal operating income based. This will get added to member's income from other sources and will decide his tax bracket (0% to 35%). Other profits from dividends or long gains will be treated based on long term tax rate and wont affect members tax bracket.
Taking advantage of long term tax benefit is very very crucial point. All long term investor use 'tax benefit' as their strongest weapon against hedge funds. All Warrent Buffet/Graham theories are majorly based on this factor. Frequent fast trades may not be as profitable as long term gains because of tax differences, trading cost and resource requirements.
Well in my opinion, both can be profitable if used on different instruments with different strategies and at different times outcomes are different. Dont want to discuss strategies here.
LLCs or LLPs are not taxed as separate entities. profits are passed on to members. So basically in our ideal hedge fund structure. Following will be flow of profits.
Hedge Fund LLP -> Managing LLC -> Owners/managers of structures
At the end of year LLC (or LLP) files form 1065 where they report their profits or losses. Normal operational income is filed separately from dividend or long term capital gains income on this form. Long capital gains/Dividends filed on separate schedule D form. Also LLC sends form K-1 to each member prorated based on their share of ownership. This K-1 form has normal income and capital gain income separately mentioned. Accordingly member files his personal return using this form. For normal income tax rate upto 35% and for long cap gain tax rate is upto 15%.
LLC's day-to-day expenses can be deducted from short trade gains or other operating profits (consultancy etc.)...Income from this will be considered as normal operating income based. This will get added to member's income from other sources and will decide his tax bracket (0% to 35%). Other profits from dividends or long gains will be treated based on long term tax rate and wont affect members tax bracket.
Taking advantage of long term tax benefit is very very crucial point. All long term investor use 'tax benefit' as their strongest weapon against hedge funds. All Warrent Buffet/Graham theories are majorly based on this factor. Frequent fast trades may not be as profitable as long term gains because of tax differences, trading cost and resource requirements.
Well in my opinion, both can be profitable if used on different instruments with different strategies and at different times outcomes are different. Dont want to discuss strategies here.
Saturday, October 10, 2009
Hedge fund haven states
Some useful links
1) http://www.hedgefundlawblog.com/new-jersey-hedge-fund-law-%E2%80%93-investment-advisor-registration-exemption.html
2) http://www.stateregulations.us/
Choosing New Jersey based on following two rationals
1) Easier tax filings if residency and business state are same
2) No state requirements for new jersey towards registering as investment advisors. Many other states requires it.
1) http://www.hedgefundlawblog.com/new-jersey-hedge-fund-law-%E2%80%93-investment-advisor-registration-exemption.html
2) http://www.stateregulations.us/
Choosing New Jersey based on following two rationals
1) Easier tax filings if residency and business state are same
2) No state requirements for new jersey towards registering as investment advisors. Many other states requires it.
Hedge Fund Structure
Limited Partnerships mostly used for creating hedge fund legal entity (wiki hedge fund). And any one of LLC, C or LLP can be chosen for company managing hedge fund. Best combination is LP for hedge fund and LLC for managing company. This way all the profits can be passed directly to members avoiding double taxation. Special case, LLC is chosen for offshore funds and LP for domestic funds. Below are details on how best structure can be formed for for domestic funds.
1) Open a single or multi member LLC. This will be legal entity for managing company. This company will provide advising or services to hedge fund LP and will charge for its services. Some states require it to register as advisors with state and beyond 250 million its required to be registered with SEC.
2)Open bank account for this managing LLC.
3)Create Hedge Fund LP (limited partnership) legal entity. All the outside investors will be limited partner of this fund and managing company will be general partner.
4) Opening bank account for this hedge fund LP is optional. Its better to have separate bank account for both entities.
5) Open two brokerage accounts on hedge funds name. One for long term investments and other for short term or speculation. Very useful to keep both separate from tax as well as clarity of purpose perspectives. Benjamin Graham recommends this approach. Other option can be using LIFO approach for accounting. But I dont think LIFO approach provides all benefits of maintaining two separate bank accounts.
During operation, limited members will send money to hedge fund account. Managing company will invest this money into brokerage account. It can also withdraw its managing service charges from hedge fund account. Managing company will have its separate account for day to day or other expenses. This approach would be very easy to calculate NAV valuations for hedge fund and profitability for managing company.
Below are links which give differences between LLC and LLP.
1)From Diffen.com
2)Some university website
Rational behind choosing LLC over LLP for managing company.
1) LLC has more like corporate structure..can be very easily extended to unlimited number of shareholders.
2) Partnerships requires clear definition of limited and general partners. General partners are executive who bear responsibility for losses and debts of firm whereas in llc stakeholders are shielded from liabilities.
3) Single Taxation. No major difference from tax benefit point of view...some minor varifications from state to state.
4) In LLC, excecutive need not to be stakeholders
5) LLC can be opened using 1 to any number of holders whereas partnerships need tleast two.
6) Usually partnerships are chosen for professional business like lawyers, accountants or auditors...LLC ideal for any small business.
In Summary - LLC is ideal for incubant hedge fund and for further expansion too.
1) Open a single or multi member LLC. This will be legal entity for managing company. This company will provide advising or services to hedge fund LP and will charge for its services. Some states require it to register as advisors with state and beyond 250 million its required to be registered with SEC.
2)Open bank account for this managing LLC.
3)Create Hedge Fund LP (limited partnership) legal entity. All the outside investors will be limited partner of this fund and managing company will be general partner.
4) Opening bank account for this hedge fund LP is optional. Its better to have separate bank account for both entities.
5) Open two brokerage accounts on hedge funds name. One for long term investments and other for short term or speculation. Very useful to keep both separate from tax as well as clarity of purpose perspectives. Benjamin Graham recommends this approach. Other option can be using LIFO approach for accounting. But I dont think LIFO approach provides all benefits of maintaining two separate bank accounts.
During operation, limited members will send money to hedge fund account. Managing company will invest this money into brokerage account. It can also withdraw its managing service charges from hedge fund account. Managing company will have its separate account for day to day or other expenses. This approach would be very easy to calculate NAV valuations for hedge fund and profitability for managing company.
Below are links which give differences between LLC and LLP.
1)From Diffen.com
2)Some university website
Rational behind choosing LLC over LLP for managing company.
1) LLC has more like corporate structure..can be very easily extended to unlimited number of shareholders.
2) Partnerships requires clear definition of limited and general partners. General partners are executive who bear responsibility for losses and debts of firm whereas in llc stakeholders are shielded from liabilities.
3) Single Taxation. No major difference from tax benefit point of view...some minor varifications from state to state.
4) In LLC, excecutive need not to be stakeholders
5) LLC can be opened using 1 to any number of holders whereas partnerships need tleast two.
6) Usually partnerships are chosen for professional business like lawyers, accountants or auditors...LLC ideal for any small business.
In Summary - LLC is ideal for incubant hedge fund and for further expansion too.
Roadmap - Indus Investments
Planning to start investment startup. Basic goal of to profit from long term and short term investment strategies. Long preferable undervalued stock (Grahminian principles) and shorting overvalues or overhyped stocks.
1) More details on trading strategies can be discussed in separate blog.
2) Requires details and rational behind choosing Technical trading tools, brokerage and bank acounts
3) Name chosen Indus Investments (with +/- advisers llc or llp or limited etc.). Needed purport document on reason behind this name.
Currently www.indusinvestments.com can be registered as domain.
4) After extensive searching over what form of legal entity and structure is suitable for getting maximum benefits vs cost, onlye incubator hedge funds suits all needs. Other possible entities are stock holding company, investment trust, private equity company etc. Some helpful links below
1) http://www.scribd.com/doc/13076922/Starting-a-Hedge-Fund-in-2009
2) Google on Incubator Hedge Fund
3) http://www.mastpartners.com
4) Google LLP Vs LLC hedge fund
5) http://www.moneymanagerservices.com/white%20adv.pdf
Still need clarification on LLP VS LLC. So far now I am in favor of registering LLC in new Jersey and going ahead with completion of other formalities for incubator hedge fund.
Next Immediate Steps
1) Document and make choice between llc or llp. Incorporate it as soon as possible.
2) Open business bank account choices between (HSBC/BuseyBank/Chase/BankOfAmerica/Wells forgo)
3) Transfer phone and fax to business name
4) Prepare journal of all the costs already made (Laptop and furniture purchase along with reciepts).
1) More details on trading strategies can be discussed in separate blog.
2) Requires details and rational behind choosing Technical trading tools, brokerage and bank acounts
3) Name chosen Indus Investments (with +/- advisers llc or llp or limited etc.). Needed purport document on reason behind this name.
Currently www.indusinvestments.com can be registered as domain.
4) After extensive searching over what form of legal entity and structure is suitable for getting maximum benefits vs cost, onlye incubator hedge funds suits all needs. Other possible entities are stock holding company, investment trust, private equity company etc. Some helpful links below
1) http://www.scribd.com/doc/13076922/Starting-a-Hedge-Fund-in-2009
2) Google on Incubator Hedge Fund
3) http://www.mastpartners.com
4) Google LLP Vs LLC hedge fund
5) http://www.moneymanagerservices.com/white%20adv.pdf
Still need clarification on LLP VS LLC. So far now I am in favor of registering LLC in new Jersey and going ahead with completion of other formalities for incubator hedge fund.
Next Immediate Steps
1) Document and make choice between llc or llp. Incorporate it as soon as possible.
2) Open business bank account choices between (HSBC/BuseyBank/Chase/BankOfAmerica/Wells forgo)
3) Transfer phone and fax to business name
4) Prepare journal of all the costs already made (Laptop and furniture purchase along with reciepts).
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