You might want to get materials from NAIC on how to set up an investment club. They have sample agreements, regulations, etc. Having set one up, I know it's not as easy as it sounds. You have to plan out, for example, when you will allow redemptioins and how, whether to value contributions on the date received or on a fixed date each month (and contributions that come in the next day don't get included until the next month), etc. You will need to figure out the operating agreement and rules, and set up a way to have each person sign the operating agreement.
Also, you will have to decide whether to set it up as a partnership, LLC, or S-Corporation. Also, who will do the tax return each year. You will need a tax return, you know. NAIC has software on keeping the records and doing the tax return, but it costs something each year, so how will that get paid for -- out of profits, or by a membership fee assessed annually? Or will some person volunteer to do the tax return and send out the proper 1099 or K-1 forms (not trivial), and and can you keep finding a volunteer after five or ten years?
I admire your commitment, but can advise you from experience that the devil is in the details. But at least you don't need to reinvent the wheel -- in addition to the standard NAIC forms (which we modified for our club) there is at least one on-line investment club operating under the auspices of NAIC, and its members would probably be willing to share their experiences and recommendations with you.
One thing I do NOT recommend is just doing it on faith that people will be fair and reasonable and skipping a written operating agreement. Don't forget that some of these people will die, and their heirs will inherit their interests and will probably have no interest in anything but getting their money out, and a "we'll cross that bridge when we come to it" response will be a probable magnet for litigation, given the way lawyers are <g>, especially if you are successful and the stakes become "real" money within a couple of years. NAIC is found at
better-investing.org |
