Join the Right Alliance for Your Hard Assets
Alex Long- Commodities are a market where raw or primary products are exchanged, and trading them requires a different strategy than trading stocks.
- Commodities are physical goods, such as oil, sugar, and gold.
- Trading commodities is different than trading stocks.
- Commodities are measured in physical units rather than in dollars, and they tend to move in smaller increments.
- Commodities can be traded via futures; however, most investors use ETFs or funds.
Some investors prefer to trade commodities rather than stocks. That's fine, but commodities aren't like stocks. They're often priced in dollars, not stock shares, and they tend to move in smaller increments. That makes trading them a challenge, but with some practice, it's possible.
What Does the ATF Do?
The ATF is a federal agency that oversees all firearms and explosives. The ATF also enforces all federal firearms laws and regulations.
The ATF oversees the following activities:
Licensing dealers who buy and sell firearms and explosives.
Conducting background checks on those who buy firearms and explosives
Inspecting firearms and explosives.
Investigating the illegal use of firearms and explosives.
Enforcing firearms and explosives law.
Educating the public about firearms and explosives.
Understanding ATFs
An ATF is an asset-based financing vehicle that structures your hard asset as collateral for a loan. The lender pays you and then sells the asset at a profit and uses the profit to pay off the loan.
Advantages of ATFs
The ATF process typically takes less than seven days.
You receive cash for an asset you already own.
The lender assumes the risk of holding and selling the asset.
Your loan-to-value ratio, or LTV, is typically higher.
You receive 100% of the asset's current value.
A lower interest rate because the lender assumes more risk.
Disadvantages of ATFs
Interest rates are generally higher than those of traditional lending.
The lender may require you to offer the lender an option to buy the asset at a predetermined price.
The lender may take over the asset management, which may incur management fees.
Not all lenders provide the same amount of liquidity.
The lender may charge liquidity fees or require you to put up additional collateral, such as cash or other assets,
Types of ATFs
There are many different types of business alliances, including:
Joint venture
Strategic alliance
Licensing alliance
Technology alliance
Supply chain alliance
Venture capital alliance
Strategic marketing alliance
As an investor, you should select an ATF that aligns with your investment goals. For example, if you invest in hard assets such as farmland, copper, or oil, you might wish to partner with an ATF that invests in the same hard assets. A joint venture may be appropriate.
If you invest in private companies, your ATF might be a company that provides capital to privately held companies. Such companies invest in a variety of sectors, including:
Technology
Healthcare
Finance
Energy
Retail
ATFs Offer Tax Advantages
ATFs are a powerful way for individuals to take advantage of favorable tax benefits. Some may believe that since they are structured as partnerships, the IRS will view them differently than a traditional LLC. In fact, ATFs are structured in the same manner as a traditional LLC, but they offer several advantages.
First, because they are structured as partnerships, ATFs aren't subject to corporate income tax. Instead, ATFs are subject to a flat tax rate of 21%. Second, ATF owners enjoy unlimited deductions for all ordinary and necessary business expenses, including salaries, rent, and royalties. This contrasts with some taxes, such as the self-employment tax, where business owners are limited in what they can deduct.
ATFs Are Self-Directed
In addition to favorable tax advantages, ATFs offer the ability to defer taxes through gains and losses. These gains and losses can be passed onto future owners, which can allow owners to defer taxes on profits for years.
