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But my friend is doing this, so I want to also!

Level 15
Level 15

Client called me telling me he wants to start a new business (ok, great!).

Hes currently a finance manager at an auto dealership making close to 300k a year. He'd be keeping his job and do this on the side (alright, not a problem!)

He says he wants to start an LLC and be a daytrader so that he can write off the new computer he's planning to buy, and then he and his girlfriend could start other smaller businesses and put them under the "LLC umbrella". (uhmmm...)

Goes on to tell me "Because his 2 friends formed an LLC and are doing this and they're making $700 a day on trades, so he wants to do it too since he's already trading in his own personal portfolio." (..sigh...)

He insists he needs to be an LLC, but doesnt want to be a corporation...this doesn't sound like something that can be accomplished as an SMLLC, right?

I prepare individuals and a few SMLLCs with Sch C's, so I told him this was out of my league and he needs to consult with an EA or CPA that can help him identify what type of entity would be best for him in this situation......but just for my knowledge, what the hell is he talking about?

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Level 10

With friends like that, I hope you don't have many enemies. 

There are dozens of websites with good explanations of "day traders and taxes".  Just do a Google search.  And there are few state rules on what you can do with Lemmings Leaping Cliffs ("everyone else is jumping off the bridge, why won't Mom let me?") -- check for local conditions on LLC's.

However, I suspect one major reason for doing it as an LLC is that transactions can be reported to an EIN, which might be less likely to link to a 1040.  OK, that's just a guess.  I don't have any friends who would explain it to me. 

Here is one basis source.