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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Always keep in mind that you can switch brokers at any time that you want if youre not happy with the first broker that youve been working with. This includes any registration papers, member information, stock purchases, and any other official records that need to safe guarded. The secretary also lets other members know of any upcoming meetings. The goal of an investment club is to learn more about the stock market and if you have dreams of becoming rich youll be starting the club for the wrong reasons.
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Youll be able to see many discount brokers offering you their services both locally and on the Internet. http://www. Fundamental analysis #1. Youll want to come up with a name for your investment club. The definition of an investment club is simple: a group of people who share an interest in the stock market pooling their resources into one large investment.
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