If you’re a day trader or actively trade, you already have a personal trading account that allows you to access the markets. Your account holds your trading assets, such as your funds, bonds, and stocks and keeps a record of your transactions while trading. However, registering a business trading account can have more benefits than a personal account, even if you’re a small-time trader.
A business trading account is an account held by a legal entity separate from the trader. It can allow you to trade on behalf of your business. So here is what you need to know about using a business trading account to assist you in making the most of your trading.
What is a Business Trading Account?
A business trading account is an online account that traders use to buy securities and monitor trades on trading platforms. But unlike a personal account that uses your private funds and are responsible for all actions taken on the account. A business trading account indemnifies you from your trading activities while allowing you to trade as usual, as a limited liability company does.
It also allows you to trade on behalf of another legal entity, such as your business if you’d like to invest for its sake. Institutional investors set up such accounts to make pooling funds and accounting more manageable, as well as separate their personal finances from their investments.
However, you don’t need to be an institutional investor or want to trade for your business to set up a business trading account. Instead, if you’re a day trader, you can register your trading activity as a legal entity and register an account. This has a few benefits over using a personal trading account that we will look at in the coming section.
As online trading platforms continue to make trading more accessible and convenient for many individuals, the need for structure and better ways to make investments has risen. Business trading accounts have enabled easy navigation of trading tax laws and simplified accounting.
Why Use a Business Trading Account?
1. Indemnity
Using a business trading account allows you to separate your personal life and funds from your trading activities. If, for instance, you make a mistake or the market goes belly up because of factors out of your control, you will not personally be held responsible if your are trading as a business in most cases. Your personal assets and finances will not be affected, and you can go on to rebuild your trading business without starting from ground zero.
2. Diversity
You can trade for your own sake or set up a pooled investment fund where other investors can chip in and benefit from your trading prowess as an investment advisor. This will give you more muscle to access certain investments and asset classes you would have otherwise not. In addition, it can help you set up a salary and pension process that reduces the uncertainty of working for oneself.
3. Professionalism
If you’re trading under a legal entity, you might find it easier to source funds from lending institutions such as banks. Furthermore, other legally incorporated investors may feel more comfortable dealing with a legal entity than a personal trader, opening up opportunities and possibilities.
To Sum It Up
The trading industry is highly volatile and can be risky when you rely on the same finances to run your life and trading activities. When trading from a personal account, you’re always worried about the next outcome, even more so if you include other people’s money.
However, this needs not to be. You can set up a business trading account and, at the least, not worry about your personal assets if anything unfortunate happens in most cases. It also comes with other advantages, and you will be more glad you did than not.
