Posted In Taxes Accounting | Posted On 16, March 2020 | Posted By AB Value Team

Can your business Invest Money in the Stock Market?

Most business entities are just like individuals and can buy and sell stock.

When an Individual buys and sells stocks:

If you buy a stock as an individual person and sell it at a profit, depending on when you purchased and sold the stock, you will have to pay short term or long term Capital Gains. Shorter than 1 year is short term gains, longer than 1 year is long term gains.

When a Business buys and sells stocks:

LLC’s and S Corps can buy stocks just like an individual. Businesses, like individuals have a lot of the same buying powers.  Since there's no tax at the LLC and S corporation level, when you sell the stock, the gain/loss on the activity must be reported on your business taxes so when the taxes are filed and the stock sale is included there, any tax forms given to the owners or shareholders will include the gain/loss from the business, and the gain/loss tax effects will be seen on the individual tax returns. 

Most of the time, purchases and sales of stock by a business have the same tax implications as purchases and sales of stock by an individual. One exception: If you form a business and its primary business is stock trading, then, as noted in IRS Publication 550, the S corporation is exempt from the IRS's passive investment limitations for an individual who is not a full-time stock trader.

If you want to make sure your business is handling any gains/losses from these types of activities or need some guidance in getting things in order, feel free to reach out to us at info@accountingbiz.co

https://www.irs.gov/forms-pubs/about-publication-550