Hello fellow investors !
I will explain to you how European residents can invest and trade US stocks and American ETFs on an Interactive Brokers (IBKR) account through a legally created Limited Liability Company (LLC) in the United States at a low cost.
Before diving into the subject, let me remind you of the advantages of IBKR: It is one of the most popular online brokers in the world. First of all, it offers very competitive brokerage fees for stock transactions, options, futures, currencies, and cryptocurrencies. In addition, their trading platform is highly advanced, with a wide variety of tools and features for professional traders. Finally, IBKR is regulated by several financial authorities, providing great security and additional assurance to investors.
However, European residents have encountered a problem with IBKR in recent years. Due to the translation of Key Information Documents (KID) for US exchange-traded funds (ETFs), Interactive Brokers can no longer offer European residents access to US ETFs. This has been a real puzzle for European traders who want to invest in US ETFs, which are often very attractive in terms of diversification, returns, and prices.
But there is a solution for European residents who still want to trade US ETFs on IBKR. It involves opening an LLC in the United States, in a state like Delaware or New Mexico, where the formalities are simple and the creation costs are low. The LLC can then be used to open an IBKR account and trade US ETFs.
The main reason this works is that an LLC is considered a legal entity in the United States, which means it is subject to different tax rules than individuals. For example, an LLC can have access to investments and tax options that are not available to individuals.
There are also other advantages to creating an LLC to trade on IBKR as a European resident. Firstly, it allows for limited liability in case of significant losses. If you trade in your own name, you are personally responsible for all losses. However, if you trade through an LLC, your liability is limited to the capital invested in the LLC.
Additionally, creating an LLC in the United States can also provide a certain level of legal security. If you trade in your own name and are sued.
The advantage of using an LLC for your IBKR account is also security: (State guarantees) for U.S. residents such as an LLC in New Mexico or Delaware.
These advantages include asset protection of up to $500,000 per client under the Securities Investor Protection Act (SIPA) .
Furthermore, IBKR is a member of the Securities Investor Protection Corporation (SIPC), which provides $500,000 of protection for securities and cash held with a broker that goes bankrupt .
However, for individual IBKR accounts of European residents, the state guarantees are less advantageous. It appears that assets are protected up to a maximum of €20,000 per client under the Investor Compensation Scheme (ICS) .
Therefore, for security purposes, it is more advantageous to open an account with Interactive Brokers using your own LLC.
However, European residents can still trade European ETFs on IBKR. Therefore, this also offers a wide variety of investment options.
Now, let’s move on to the proposed solution to bypass this issue. European residents can create an LLC in U.S. states such as New Mexico or Delaware. This allows them to invest on IBKR without any restrictions.
Creating an LLC may seem complicated and expensive. However, in reality, it can be done quickly and at a low cost using online services such as Incfile.
It offers numerous advantages. Limiting liability, tax flexibility, and privacy protection are essential. An LLC is considered a separate legal entity from its owners, which means that the company’s assets are separate from the owners’ personal assets. Therefore, in case of a dispute, only the company’s assets will be used to cover damages. This protects the owners from potentially significant financial losses.
Additionally, an LLC offers great tax flexibility, allowing owners to choose whether to declare the company’s profits on their personal income tax return or pay taxes as a separate entity. This can be beneficial for owners seeking to optimize their tax situation.
Finally, creating an LLC helps protect the owners’ privacy. Information about the owners of an LLC is not public, unlike the owners of a sole proprietorship or partnership. This is beneficial for individuals looking to protect their privacy.
Therefore, European residents can bypass the restrictions related to American ETFs on IBKR by legally creating an LLC in U.S. states such as New Mexico or Delaware. Creating an LLC is simple, fast, and cost-effective. Thanks to available online services, creating an LLC offers privacy protection, tax flexibility, and limited liability. This makes it an attractive option for investors looking to invest on IBKR.
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Thank you in advance for sharing your feedback. Please let me know if there are any errors in my article in the comments…
Disclaimer: I would like to emphasize that I am not a professional financial analyst or wealth manager. The information I provide is based on my personal online research and general knowledge. It should not be considered or interpreted as professional financial advice. I recommend consulting a financial expert or tax advisor before making any investment decisions or financial strategies.
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