How to Start an Investment Club - Business Model

Your investment club will need to decide what type of entity you're going to adopt for
business purposes. You'll have to decide whether you're going to be a corporation, a general
partnership, or limited liability partnership. Each of these business models has their own
advantages and disadvantages.

· Corporation. Most investment clubs will avoid becoming a corporation. This is because
corporations are taxable business entities that require knowledgeable accounting skills to
make them run smoothly and in accord with government regulations. A corporation generally
means a lot of paperwork. This paperwork can be avoided by choosing another business model for
your purpose of running an investment club.

· 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. A general partnership has nominal paperwork and costs associated with it because the taxes are passed 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 influence.

· 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.

Members of your investment group will have to decide which of the above business models works
best for your club. You will have to make a decision one way or the other since establishing a business entity is
a requirement for tax purposes.

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