Legal Question in Business Law in California

Re: Business Sales,Revenue

You can form a California for-profit corporation for any lawful purpose other than the banking, trust company or insurance business. Since buying and selling stocks for your own account is lawful, you can form the corporation.

However, I don't understand what possible purpose or benefit there might be in repeated buy-sell transactions. If the purpose is to manipulate the price of a particular security, that would be unlawful. If you (or the corporation) were using other folks' money without being a licensed broker or a registered mutual fund or the like, that would be unlawful.

And, if the sole purpose is to create a company that appears to have a large sales volume to impress someone ("My company did $2 million in sales last year!") I don't think many would be impressed when they looked behind the numbers.

Buying and selling stocks is considered investment activity for tax purposes unless you are a licensed securities dealer buying for and selling from inventory. Investment activity is reported differently than other business purchases and sales. For example, an individual reports purchases and sales of merchandise on Schedule C, but purchases and sales of investments on Schedule E.

The answer would be the same regardless of the nature of the security traded.

The IRS rules would also deny you any special tax advantages from using a corporation to do your personal securities-trading activity.

So, the bottom line is that there is no advantage that I can see to what you propose.