Form a club with member residing in different states
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Form a club with member residing in different states Investment clubs need to be general partnerships because members should all have an equal voting position and you do not want to be labeled a mutual fund. Opening accounts or changing officers is a nightmare when it comes to signatures. Many states require a tax return if a member resides there. This may be costly if you need an accountant to file the returns. It depends what states are involved and the types of investments. I would not recommend a club with members in different states. Linda Tax preparer Sent via the Samsung GALAXY S(R)4, an AT&T 4G LTE smartphone -------- Original message -------- From: Raka maka <rakamaka@inbox.com> Date:08/20/2015 9:16 AM (GMT-05:00) To: club_cafe@bivio.com Cc: Subject: [club_cafe] Form a club with member residing in different states What will be difficulties expected regarding, 1. physical signatures required on same page of club documents? (digital signatures may not be accepted) 2. opening brokerage(fidelity or scottrade) account with members dispersed across places 3. preparing K1 and tax filing issues and state deductions 4. will it be better to register club as LLC or LP when members are spread across different states? Thanks See below. On Thu, Aug 20, 2015 at 10:59 AM, Linda <wiltse@optonline.net> wrote:
No, investment clubs do not NEED to be general partnerships, although that is the easiest entity form to work with. There are investment clubs that operate as LLCs or LPs. Equal voting position is a red herring because equal can be defined many ways. Does your club use "one member, one vote" or "vote by percentage ownership? While those are two of the most common methods, there are other acceptable ones. The key distinction between an investment club and mutual fund with regard to voting is that in an investment club each member must have the direct right to affect club decisions. In a mutual fund, the investor has no direct say in the actions taken by the fund.
Actually not that many. At present only six states (GA, MO, NJ, NY, PA, and WV) require a tax return simply because one of the partners is a resident of that state. There are many states that require a partnership return if the partnership is based in that state.
Correct. For several years, bivio has provided a cost-effective option to clubs that need state returns prepared which aren't included within the program. Although it's a bit early to know what tax year 2015 will bring, I would expect this to continue.
That's your personal opinion and you're welcome to it. I know of many successful interstate clubs. Yes, there's more work involved. But as an old friend of mine used to say. "Don't let the tax tail wag the investment dog." If you have specific questions about how your potential club might need to interact with specific states, send a request to support@bivio.com Ira Smilovitz
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