With your officers in place club members may feel that they are ready to start their investment journey, but there are a few legal and financial details that need to be settled before they can purchase their first stock. First off, your investment club will need to decide what type of business entity it is. Clubs can be corporations, general partnerships, or limited liability partnerships. Each of these business models has their own advantages and disadvantages.

Corporation: Most investment clubs avoid becoming a corporation. This is because corporations are taxable business entities that require a great deal of accounting knowledge to be run smoothly in accordance with government regulations.

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. With this model, general taxes are passed on to each partner s 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 issues.

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. Investment Club - Read More.