Do I need to open a corporate account to trade?

Professional trading account or personal account? From the moment trading becomes your main activity, you are not going to cut it. Opening a company account becomes mandatory for any trader. That being said, here is some information to know so as not to make a mistake.

When should you think about a professional trading account?

A few months or years after having embarked on trading, the trader is inevitably faced with two scenarios:

  • Trading provides him with additional income: that is to say, always lower than that which his professional activity brings him.

  • Trading is now his main source of income

In the first case, the question of status does not really arise. Trading remains, fiscally, a secondary activity, the net earnings of which must however be declared in good and due form (with default annual taxation at 30%).

In the second case, things change because now case law leads the Administration to consider you as a professional trader. Without falling into the legal considerations of frequency, magnitude of income and technicalitylet’s say that the taxation of BNC (non-commercial profits) will be applied to you, with a tax burden estimated at 50%.

It is therefore necessary to create your company, with the following possible regimes:

  • Sole proprietorship – EI
  • Single-member limited liability company – EURL
  • The partnership – SAS, SARL

Beware of the disadvantages and risks of a company trading account

If the opening of a professional account becomes mandatory, it is nonetheless a source of inconvenience for the trader:

  • Fewer protections and guarantees
  • Higher rates
  • A heavier tax

The protections and guarantees on the account are less important

This is particularly apparent when trading CFDs/Forex.

With a retail account, you get negative balance protection. At no time can losses incurred on one or more trades exceed the account balance. What prevent you from owing money to your broker and falling into over-indebtedness.

By trading CFDs as a professional, the protection is no longer applicable…

Prices are higher

In particular on the costs of connection to the stock exchanges. While an individual will pay €1 to €2 per month to connect to Nasdaq, the professional will have to pay amounts of up to €10 per month.

He can, however, benefit from reduced trading fees, due to volumes that are theoretically higher than those of a private trader.

Taxation is higher

An individual will be taxed by default at 30%, via a single flat tax.

With a company to manage, the tax burden quickly reaches 50% between corporate tax, tax on your annual dividends, social charges and other royalties.

In summary: do you have to open a company account to trade?

Yes, you need to open a company account to trade when trading becomes your main activity :

  • With your own capital
  • With capital entrusted by third parties (clients of your portfolio management services)

Main activity is the only criterion. And not income from trading.

Whether you produce €500,000 or €50,000 in earnings, from the moment your trading earnings represent your majority income, it is automatic: you are a “professional” trader.

Let’s summarize the main information to remember:

Proprietary Trading

(Particular)

Trading for company account

(Professional)

Situation

You have another activity (student, manager, retiree)

Part-time trading, with an investor approach

You have no other professional activity

Full-time trading, with frequent and regular positions taken

Legal regime

Individual trader

Sole proprietorship (EI or EIRL)

Single-member company (SASU, SARLU)

Multi-person company (SAS, SARL)

Capital

Equity

Equity

Third-party capital (management for others) NB: governed by AMF rules

Taxation

Flat tax regime, 30%

Option at TMI

BNC scheme

IR regime

IS scheme

Taxation of dividends

Social charges

Administrative obligations

Annual declaration (form 2074)

Bookkeeping (balance sheet, income statement)

Annual corporate tax return

carry back (carry forward of the tax deficit over 10 years)

So, if you find yourself in this situation of having to open a professional trading account to comply with the legislation, we invite you to do a lot of research on the brokers who offer professional trading accounts. One of the most practical techniques for this is still to type the name of the broker + opinion on your search engine (eg: eToro opinion, Bourse Direct Opinion, Degiro Opinion, etc.) in order to have a panel of analyzes on brokers that interest you.

Leave a Comment