Question 1

Why do I need separate entities for crypto trading vs. long-term holdings?

Accepted Answer

Two reasons: tax treatment and risk separation. Active trading income and long-term holdings create different accounting and audit exposure. If both live in the same entity, problems in the trading activity can spill into the entity holding your long-term positions. With separate entities, the structure is cleaner and the exposure is compartmentalized.

Question 2

What is the Section 475 mark-to-market election and how does it help?

Accepted Answer

Section 475 is an IRS election available to traders who meet 'trader status' criteria. It converts capital gains and losses to ordinary gains and losses, which: eliminates the wash sale rule (no more disallowed loss headaches), allows full loss deduction in any amount (not limited to $3K/year for capital losses), and can significantly simplify tax accounting for active traders. The election must be filed by April 15 of the tax year — or within 75 days of forming a new entity, which resets the window.

Question 3

Does Wyoming have specific advantages for crypto?

Accepted Answer

Yes. Wyoming legally recognized digital assets as property under state law (2019), created a legal framework for DAO LLCs, chartered Special Purpose Depository Institutions (SPDIs) for digital asset custody, and has no state income tax on any trading or capital gains activity. It's the most crypto-friendly state jurisdiction in the US for entity formation.

Question 4

How do exchange accounts work with entity-based trading?

Accepted Answer

Most major exchanges (Coinbase, Kraken, Gemini, Coinbase Prime) support business account registration. You open a business account under the Trading LLC's EIN, complete business KYC (Articles of Organization, EIN letter, operating agreement), and exchange accounts are held by the entity — not your personal name. Your personal identity still goes through KYC at the exchange level, but the account is a business account.

Question 5

What about DeFi — does entity structure apply to on-chain activity?

Accepted Answer

Yes. DeFi positions — LP tokens, staking rewards, airdrops, yield farming — can be held by the LLC. The entity owns the wallet. For the Long-Term Holdings LLC in particular, keeping cold storage under the entity rather than personal name provides both asset protection and cleaner accounting. We include a DeFi documentation framework to help track entity-level positions for IRS compliance.

Question 6

Can I pay for my crypto entity formation with DERO?

Accepted Answer

Crypto-native payment and document-delivery paths are part of Default Privacy's direction, but availability depends on the current infrastructure in place. If private payment options matter for your situation, contact us before checkout and we'll confirm the current path.

Question 7

What happens to my existing exchange accounts when I form the entities?

Accepted Answer

Existing personal accounts can continue operating. Going forward, new accounts are opened under the LLC. For existing positions, the process depends on the exchange — some allow re-titling to a business account, others require opening a new business account and transferring. We provide a transfer guidance checklist as part of the onboarding package.

If you trade actively and hold long-term,those positions should not live in the same legal bucket.

What one entity exposes you to

The crypto entity stack

Why Wyoming is the right state for crypto entities

Crypto-specific additions

Crypto entity setup — common questions

Your holdings deserve a structure designed for crypto.