Separating private investments from "professional trading" using a company?

Taxes
1

I’m sure this must have been discussed before but I couldn’t find a good post about it.

Is it possible to separate my “private investments” from trades that would be considered “professional trading” by setting up a company and keeping the “trading activity” in the company’s name? Would it work with something relatively simple like a sole proprietorship, or would you need an Ltd? (which seems like total overkill and I wouldn’t bother)

Context: Although the vast majority (95%+) of my wealth is in boring buy and hold investments, before I came to Switzerland I was experimenting with algorithmic trading with small amounts, mostly for fun. This can rack up a large number of leveraged trades, which if run for a prolonged time would likely breach most of the “5 rules” (except the “50% of income” one). It’s obviously not worth doing this if it means having the gains from the other 95% of my investments taxed as a professional investor, so I was wondering if it was possible to separate these two activies. I know (from this forum) that professional status isn’t given that easily, but it doesn’t seem worth the risk in this case for a small side activity of questionable profitability.
(I’ll admit the results have been mixed, probably broadly consistent with a random market… but I wanted to see if there was a way to keep tinkering with it.)

Thanks! I’m new here and this is great forum!

2

May I ask why you don’t just stop this side activity and save yourself the hassle of setting up a company etc. for something that is “just for fun” and has “questionable profitability”?

3

Sometimes I’m optimistic and I think these kinds of strategies can work and are uncorrelated with the market :slight_smile:
You’re right though, I probably have better things to do. I want to work less, not more :slight_smile:

4

Even though in practice professional trading taxation might only be applied to part of your investments or even specific trades, you generally cannot differentiate investment portfolios and have a different status associated with them. That means a sole proprietorship is not sufficient, as you will still be taxed as one subject.

Also, a sole proprietorship wouldn’t work anyway, as you would need a proper reason and target for its existence, which cannot just be managing your own trading. This would only work if you start managing other people’s money too.

5

Cool thanks. I’ll ditch this idea then. It’s annoying but it wasn’t very high on my priority list.

6

Lets say my residence c permit is about to expire and I make all of my income from trading, if according to the info above I wont be able to set up a company for my own trading activities, would that mean my residence permit cant be renewed unless I work for a real company?

Also does one need a certain license to manage other peoples money?

7

Residence C permits don’t expire, or what do you mean exactly?

If you manage other peoples money, you would probably be an asset manager and therefore need to be authorized by FINMA. But don’t quote me on that.

8

Employment or work is not required to receive (or renew) a residence permit.

9

theres an expiry date on the c permit, so it has to be renewed every 5 years

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10

Why don’t you write down your trading project including the capital amount you want to invest in this way and send it to tax authorities? Ask them if you would be considered a professional trader, if you do this.

11

I’m a full-time solo algo trader. My recommendation is to keep it under your own name while it’s legit a hobby/side gig and you have a full-time employment. Especially if your trading makes less than your employment income, you have no reason to worry. If you quit you’re job, you should create a company to book your profit (within a year or so) because it will become hard to argue that trading isn’t what is sustaining your living. If you don’t quit your job but start to make significantly more than your income, consult a tax lawyer.

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12

C does not expire.

You need a new permit ID card and need to renew that yes, but the permit itself does not expire.

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