Things You'll Need:
- EIN Number
- Accounting Software
- Brokerage Account
- Members
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Step 1
Choose a name and find members for the investment club, you will need this first to complete all your documents.
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Step 2
Determine which type of business model you want for the investment club. For example: Partnership, Limited Liability Company, Corporation, etc. It is generally recommended that investment clubs are set us as partnerships, since it is the simplest and most cost effective method.
For the remainder of the article, a partnership business model will be assumed for the purpose of documentation, but all other methods will also have similarities. -
Step 3
Apply for an EIN (Also known as a Federal Tax Identification Number). This number will be used to identify your business, and is necessary to open a brokerage and bank account.
To apply for an EIN visit:
http://www.irs.gov/businesses/small/article/0,,id=102767,00.html -
Step 4
While waiting for the EIN number to arrive, club documents can be completed. For a partnership, two documents are necessary.
The first is the partnership agreement. It lists all the general rules and regulations of the club. An example of a partnership agreement can be found at:
http://assetbuilders.org/pdf/Sample%20Partnership%20Agreement.pdf
It is recommended that you use this example as a general outline, and add or remove statements as required for your individual club needs.
The second document is the club By-Laws. The By-Laws list specific duties of members, how voting will take place, when meetings will take place, how payments will be made, etc. An example of By-Laws can be found at:
http://www.iclub.com/clubs/sample_bylaws.asp
Again, this should be used a general outline and items should be removed or added based on your specific club needs. -
Step 5
Choose a brokerage and bank. These should both be selected based on the needs of the investment club.
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Step 6
Choose an accounting program. The purpose of this is to keep track of all investment and member allocations. A good accounting program is Bivio , www.bivio.com , since it automatically updates itself daily based on changes in the stock market.
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Step 7
When the EIN arrives, it is time to fill out the documents.
Firstly, the bank account should now be opened.
Secondly, the brokerage account should now be opened as well. -
Step 8
Now, the member's money should be collected and deposited into the bank account.
At the same time it is recommended to connect your bank account to your brokers account so money can be easily transferred electronically between the two. -
Step 9
After the money is deposited in the bank account, proceed to transfer it to the brokers account.
If your signed up for Bivio, connect Bivio to the brokers account as well. -
Step 10
You can now begin trading.
