Both Rip and Stu have stated arguments that I agree with.  My club has a one-person-one-vote rule, no cap on percentage ownership, we have no penalty for not contributing (rarely happens), and all expenses are on a per-person basis rather than by percentage ownership.

Bob Mann

Lunch Money Investment Club

On April 28, 2016 at 12:08 PM rip west <ripwest8@gmail.com> wrote:


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If the club has been around many years it is inevitable that members of the club from inception will have a much larger stake than newer members, even just contributing monthly dues. This becomes highly relevant in decision making regarding sale of stocks with a considerable gain because the long term members may incur considerable capital gains taxes unaccompanied by income and therefore have an inherent bias against sales that result in considerable gain.
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That's not exactly true. If the club sells a stock with substantial gains, each member will share in that reportable gain in proportion to the percentage of ownership. So, under the writer's premise, a short-term member will have a lower investment, and thus a lower percentage of the gain to report. A short-term member who has made a substantial contribution WILL be in the unfortunate position of reporting capital gains where no gain has actually occurred.

As to the merits of putting limits on the percentage of ownership, I have always been a believer in the 'one-person, one-vote rule'. If a club operates on that platform, high percentage of ownership by one person does not present a problem.

Rip