HN Explorer

Ask HN: Is it legal to start a business that requires 0 customers?

8 points by whoisjohnkid ↗ HN
I’m currently developing a trading system that is only utilizing my personal funds. I’m considering starting a business who’s sole purpose is to utilize those funds to keep making money.

I’m not interested in starting a hedge fund at this point of time.

12 comments

[ 2.2 ms ] story [ 45.1 ms ] thread
techjuice
Yes, you can create a business that requires no customers. Many people do this to enable them the ability to conduct B2B transactions as it is much easier to do so (e.g. buying several homes, automobiles, buildings, cities, yachts, other businesses, land, property, for financing, legal groups, owner of a single website or network of sites, software, etc.).
whoisjohnkid
Awesome!

Yeah I’m thinking there will be more tax benefits if I traded via the business than personally.

Erlangolem
You might want to consider talking to a lawyer, if only for just an hour, to hammer out the specific details.
techjuice
Talking to a lawyer is a great idea, along with talking with an accountant too. You have way more tax advantages being a business versus individuals. If you need help it will be easier to hire someone if you already have an operational business up and running to help management of your business operations and administrative duties. Though if your business plan starts to pan out it might be hard to not have customers even if it is a small amount.
WhiteOwlLion
Tracking expenses may or may not be worth the time. You need to exceed what your standard deductions are as an individual just to "break even". Now, was all that tracking of expenses worth the time to save a few dollars, along with paying business license fees & taxes? If yes, then keep working it.
Nomentatus
Not usually. Wholly owned proprietorships are treated just as the individual would be for tax (not liability) purposes I believe. NOT a lawyer.
cimmanom
Also not a lawyer, but: in the US you can create an LLC that is treated as a pass-through entity for tax purposes, but not other corporate structures (B-corp, C-corp, S-corp, LLP).
iamdave
It sounds like you're describing a mutual fund, instead of a hedge fund?

If your system is profitable though-or more importantly: consistent, you may realize more personal revenue by selling that system to traders; failing that-if you have any programming skills create an EA (Executive Advisor) for the MetaTrader platform that uses your trading system and sell that.

But good luck to you regardless, trading systems fascinate me.

(I'm personally curious to learn about your system though, as a hobbyist forex trader. My twitter handle is in the profile, if you'd like to DM me there. My personal system combines MACD, RSI and Bollinger Bands)

whoisjohnkid
Ahh I see thanks!

The strategy I’m utilizing is an order flow based momentum strategy .. no need for all the common indicators most retail traders use.

I initially started with a dual divergence strategy that utilized divergence on macd and rsi, but this order flow strategy is way more accurate. 90%+ out of 100 trades.

I’m not really interested in selling the system, maybe at some point down the road I’ll start some kind of fund; ofcourse then I’d need more than a couple strategies.

DoreenMichele
I am not clear what you are up to, but you might want to read up on what Warren Buffet did in his youth. He kept investors in his fund below some cut off point that would have required him to register it or something. I think the cut off was around 100 people.
whoisjohnkid
Interesting. Didn’t know about this. Thanks!
SirLJ
It is absolutely legal, I have been doing it for years, talk to your accountant and lawyer on how to minimize your income taxes... do not sell your idea, it will be arbitraged away if too many people/ money are trading the same way...