Using Banks and Bank Accounts/Offshore company for trading FX
I am a US citizen who trades FX with a US broker. US regulations only allow 50:1 leverage, whereas the US broker's UK operation allows up to 400:1 leverage. The UK broker will open accounts for Belize LLC's. Am I correct in understanding that forming a Belize LLC that holds an account with the US broker's UK operation, will enable the trading profits to "pass through" the Belize LLC to me for reporting on my individual US tax return? Or, must I also form a US LLC to get this pass through effect? Two additional questions: can the Belize LLC open a US bank account? Is there a different structure that can minimize/avoid (not evade) US taxes on my FX profits? Thanks.
The Belize LLC is an ideal way to establish your account at the UK forex trading operation (if they will actually allow it) while maintaining a "disregarded" or "pass through" tax status. There will be no need to establish a US LLC, the Belize LLC will operate in the same manner. As a general rule it is almost impossible to open a US bank account with a Belize company of any sort, but I suppose that will depend upon how much money you are depositing. The more money the more likely the bank will take the necessary due diligence efforts and risk.
As you pointed out this structure will not have any effect on your tax status since it will be "disregarded".
Another option would be to use the Belize IBC (if the broker will open an account with this). This structure acts as a separate entity, not a pass through tax structure, and has a zero tax status.
Yet another option that I like is to establish a company in a "low" tax country rather than a "no" tax country. This can sometimes make it easier to establish bank accounts and brokerage accounts. Some nice "low" tax jurisdictions which in reality will be "no" taxes for forex trading will be Latvia or Georgia since neither country taxes capital gains.
The later option is ideal in avoiding taxes until you actually repatriate the profits. There will be not taxes on the accrued income, but when you pay out the profits to yourself as dividends there will be US taxes to pay then.
I have an office in Belize and Eastern Europe where we can take care of these matters if you choose to pursue one of them. Please feel free to contact me directly if would like to pursue these matters further.