Getting an Investment Club Started - Step 4 The Business Model
Your investment club will need to decide what type of entity youre going to adopt for business purposes. Youll have to decide whether youre going to be a corporation, a general partnership, or limited liability partnership. Each of these business models has their own advantages and disadvantages.
Corporation. Most investment clubs will avoid becoming a corporation. This is because corporations are taxable business entities that require knowledgeable accounting skills to make them run smoothly and in accord with government regulations. A corporation generally means a lot of paperwork. This paperwork can be avoided by choosing another business model for your purpose of running an investment club.
General partnership. This type of business model requires less paperwork and knowledge about taxes and other financial issues. Most investment clubs choose a general partnership as their choice of a business entity. A general partnership has nominal paperwork and costs associated with it because the taxes are passed to each partners tax returns. This type of business model will let you accomplish what you need to do to run your investment club with the least amount of tax influence.
Limited liability corporations. This type of a business model is much like the general partnership but it gives individual members of your investment group a bit more liability protection. Keep in mind that this type of business entity can be expensive and will need more paperwork.
Members of your investment group will have to decide which of the above business models works best for your club.
You will have to make a decision one way or the other since establishing a business entity is a requirement for tax purposes.
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Most of these inexpensive brokers charge anywhere from to per trade.
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Once youve agreed on all of the above issues youre ready for your second meeting where youll be taking care of more of the finer points of investing, such as legal details and tax issues. Make sure that you find out if there are any other incentives offered that make you want to hire the broker. Youll have to contact your local government to find out what your own requirements are. Club name.
Youre not counting on the government for your future financial requirements.
Take a vote if the group is divided about any investing issues. Limited liability corporations. : Microsoft common stock or Acorn International Fund). A main feature of the investment group is to start to learn how to invest your money and to invest for a long term rather than a short one. Tax ID Number. This shouldnt discourage you, but rather it should inspire you as you do something that interests you.
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