[Ynos]

Hi,
I day trade mostly stocks and recently one of my closest friends asked me to trade his money along with my own (he has 5k to give me).

I would either be trading longer term with his money or add it to mine (if legal to do so) because of the pattern day trading rule.

Has anyone here done this? What legal entities if any need to be formed? Someone recommended a partnership but I don't know. Would a joint account work?

I am not an investment advisor or anything like that if it matters for this.

I would rather just do the legal part on my own rather than go to a lawyer.

Any help would be great.

Thanks

[Tiobingo]

Ynos, I think it is wise of you to ask these questions. I'm not an attorney either but I would offer you the following things to think about.

1. Tax implications
2. A 'passive investment' LLC might be the way to go for you. Much depends on where you live.
3. Better to be penny wise than pound foolish. Tradersaccounting.com might be a good place to begin looking. I don't endorse them but I did attend one of their webinars and they know there stuff. You might be able to get a free consultation.
4. Have you thought of futures or forex? They both offer compelling opportunities for day trading and are treated much differently than stocks.

Good luck. I'm sure you'll find the answers you need to make the best decision.

[brownsfan019]

One way around the whole legal setup would be start a system on Collective2 and have him open a brokerage account that can accept signals from C2. So you send the trade to C2, C2 sends it to his broker. Creates an additional step or two for you, but that is a quick way to get it going w/o a lawyer in between.

Of course the $5k in stocks is going to create a pdt problem. I'm so used to trading futures now that I don't think about the pdt anymore. Can you send your signals on an index - like the S&P, Dow, or Nasdaq? If so, then the ES, YM or NQ contract could work.

[Tiobingo]

I'm curious now about this C2 arrangement Brownsfan. Can you direct me to where I can get more info about this? I was unaware of this arrangement. I have used an interactive brokers master account to manage sub accounts in different names. With that you can apportion what percentage of each trade you would like to come out of each account and vice versa with p and l's. But it sounds like this is something different altogether.

[Tams]

Originally Posted by Ynos »

Hi,
I day trade mostly stocks and recently one of my closest friends asked me to trade his money along with my own (he has 5k to give me).

I would either be trading longer term with his money or add it to mine (if legal to do so) because of the pattern day trading rule.

Has anyone here done this? What legal entities if any need to be formed? Someone recommended a partnership but I don't know. Would a joint account work?

I am not an investment advisor or anything like that if it matters for this.

I would rather just do the legal part on my own rather than go to a lawyer.

Any help would be great.

Thanks

that's the fastest way to lose a friend, your own trading account, and his money...

[Tiobingo]

Hmmm... Words of wisdom from Tam. Lol.. He does make an excellent point. I don't even talk to one of my cousins anymore after winding down what proved to become a terrible partnership in a business we were involved with. I didn't think about that but come to think of it, it's a very important consideration.

[Tams]

... you will lose your own trading account too,
because you are basically changing your own set up,
and divide your focus in something that's not your normal trading operation.

[brownsfan019]

Originally Posted by Tiobingo »

I'm curious now about this C2 arrangement Brownsfan. Can you direct me to where I can get more info about this? I was unaware of this arrangement. I have used an interactive brokers master account to manage sub accounts in different names. With that you can apportion what percentage of each trade you would like to come out of each account and vice versa with p and l's. But it sounds like this is something different altogether.

More info here.