INVESTMENT CLUB:
General thoughts and I'm going to use this as the start of my plan to research and report back to thread.
Please not I'm just throwing down comments and or issues at this time. Don't be alarmed by the issues they can be resolved but it will take some time. We'll have to come to agreement as we keep moving forward.
1) There are SEC limits on "investors". I think the statute limits to 50 (although it may be 20), this is main reason why hedge funds are established offshore (tax is not "primary" driver) and there are mutual funds. I'll talk to some people next week on this.
2) Many investment clubs in US have more than this but they just don't realize its breaking some rules. Not sure how the clubs report the gains but the eaisiest method would be partnership tax return (see LLC below) but a partnership would be difficult for this group.
3) Tax considerations. Need to either establish an off shore fund,
mutual fund or limited liability company, LLC, (partnership won't do in this case, i.e any increase or decrease in partners resolves partnership and requires a new one, LLC gets around this but still allows partnership treatment.
4) Off shore US citizens still taxed under Subpart F provisions of code (sections 950 to 957 cover foreign tax credit, income, etc.). Non resident aliens are not taxed (see my earlier tax post on this).
Creation Plan:
1) Resolve SEC and Tax issues.
2) Set up operation plan. - Many issues here. Ownership, leadership, financial control's, deposit / witthdrawal authorization,
3) Set up business plan.
4) Project set up and operational expenses. LLC by itself probably cost $1,500 in CT (any CT attorneys out there?). May want another state like Florida or New Hampshire, CT has a steep state income tax.
Rules out CT where I live and I know we don't want NY.
5) I'm trying to land a Bermuda Re-Insurance Company account as part time controller, if I land it I may be able to establish something in Bermuda?
There will be brokerage fees, legal fees, accounting fees, etc.. Why the funds have expenses. The expense we'd be elimination is the fund managers and analyst's.
Just a start.
Tim
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