How to Start a Trading Company: Entity, Tax, Licences

"Trading company" means different things: a company that trades its founders' own capital, an evaluation prop firm, a fund, a brokerage, or a business that trades physical goods. This guide is about the financial-markets kind and focuses on the company itself: what activity it will carry on, which entity and jurisdiction fit, how it is taxed, and when it needs a licence. Our four routes guide compares the business models; this one covers the paperwork.

What will the company actually do?

The activity decides everything else, so write it down in one sentence before you choose an entity. Regulators, banks and payment processors will ask the same question.

Which entity should a trading company use?

Most founders choose a limited liability company or a private limited company, because it separates business losses from personal assets and is cheap to run. The jurisdiction should follow where the founders live and work, since tax usually follows management, not the registration address. Ask a tax adviser before choosing an offshore company for a business run from your home country.

• A US LLC is taxed as a pass-through by default; an election can change that. Ask a CPA which suits trading income.
• A UK company pays corporation tax at 19% on profits up to 50,000 pounds and 25% above 250,000 pounds, with marginal relief between, per GOV.UK.
• For prop firms specifically, compare [prop firm company formation cost](/guides/prop-firm-company-formation-cost), [Cyprus](/jurisdictions/cyprus), [the BVI](/jurisdictions/bvi) and [Dubai](/jurisdictions/dubai).

How is a trading company taxed?

In the US, the IRS treats you as a trader in securities only if you "seek to profit from daily market movements", the activity is "substantial", and you trade "with continuity and regularity" (Topic 429). Traders can elect mark-to-market accounting under section 475(f), but the election is due by the original due date of the prior year's return, and late elections are generally not allowed; new taxpayers record it in their books within two months and 15 days of the start of the year. The IRS page is written for individuals, so ask a CPA how it applies to your entity.

In the UK, HMRC's manual starts from the view that securities are "at first glance purchased and sold by way of investment and not by way of trade", but dealing can be a trade if "carried out pursuant to a deliberate and organised scheme of profit-making". Whether your company trades or invests changes how profits and losses are taxed, so get advice before you start.

What are the steps to open a trading company?

The order matters: activity, advice, entity, bank, then broker or platform.

• Write the one-sentence activity and confirm with a lawyer whether it needs a licence where you operate and where you market.
• Ask a tax adviser which entity and jurisdiction fit your residence, then form it.
• Open a business bank account; expect questions about trading activity and source of funds.
• Open brokerage or clearing accounts in the company's name, or choose a platform if you are building a prop firm ([platform guide](/guides/what-platform-should-a-prop-firm-use)).
• Write risk limits and, if partners or traders share profits, a written agreement.
• Build a website that states the entity, what the company does and does not do, and the risks.

What changes if you take outside money?

Almost everything. Trading friends' or investors' money can make the company an investment adviser or a fund; in futures it can make it a commodity pool, registered with the NFA. Paying outside traders a share of profits from your own capital raises employment and licensing questions in some countries. And accepting client deposits to trade makes you a broker. Our guides to starting a hedge fund, starting a brokerage firm and becoming an introducing broker cover each route. If you want traders without taking their money, the evaluation model on the start-a-prop-firm hub is the usual answer.

Does a trading company need a website?

A company that only trades its own capital may not. One that sells anything, an evaluation, a course or a service, does, and banks and processors will read it during onboarding. PipValley builds websites for prop firms and the trading businesses next to them, from $1,490 for a Launch build, live in 5 working days.

Questions

Sources

1. SEC: Guide to Broker-Dealer Registration
2. Delaware Division of Corporations: Corporate fee schedule (Aug 2026)
3. Delaware Division of Corporations: LLC/LP/GP franchise tax instructions
4. Wyoming Secretary of State: Business Division filing fee schedule
5. GOV.UK: Register your company
6. GOV.UK: Corporation Tax rates and reliefs
7. IRS: Topic no. 429, Traders in securities (reviewed 24 Sep 2026)
8. HMRC Business Income Manual BIM56870: Financial traders, case law and companies
9. NFA: Commodity pool operator registration