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Paperwork Needed to Start An Investment Club

The world is filled with paperwork which you need to fill out, and starting an investment club is no exception. Fortunately, once your club is set up, there will be a minimum of paperwork and most of it will be related to actual stock purchases and sales, so might seem more fun.

Your club will probably decide to form a partnership, as this is the easiest way to deal with taxes. To form a partnership, your investment club will need to file for an Employer Identification Number, which can be done by filling out an SS4 form from the IRS site.

You then fax the form to the IRS, and should be able to get your EIN immediately. Each individual member then needs to file a schedule K on their yearly income tax returns.

You might also need to file as a business in your community. Each area will have different rules about this, but it is usually a quick and painless process of filling out a form and registering your name.

You will also need a bank account or brokerage account. This is another decision to be decided at your first meeting. The bank or brokerage agency will need a copy of your Partnership agreement or Articles of Incorporation if you have decided to incorporate.

You can find information and copies of these forms online, so as to have them filled out before you head to the bank.

Every member should sign a copy and receive a copy of an operating agreement or a set of bylaws that the club draws up and agrees to at the first meeting. Every club has to have a complete operating agreement that covers what they expect to happen over the course of the club. This prevents future problems and allows everyone to feel certain they know what the club’s plans are and that they agree to them

You may also want to set up a message board for your club. This can be done by starting a private chat room, or actually going to a forum building website and setting up a message board which is private. This can be a great convenience, as this way all members can see what is going on, and emails won’t be lost or forgotten.

For most clubs, the only legal issue that needs to be dealt with is taxes. Each individual member is required to include their percentage of the investment income earned by the club in their personal income tax return. Or, if there is a loss one year, that loss could be deductible on members’ personal tax returns. Also, any investment expenses, such as each member’s share of the brokerage fee, may be tax deductible. Each member should discuss this with their own accountant when it comes time to pay taxes.

For many clubs, the partnership agreement and operating plan that the bank requires to open an account covers most other legal issues.