member percentage
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member percentage We are an older club and members have come and gone. We have two original members and two others that joined shortly. Four of us own 70% of the club assets. As club treasurer it does concern me a little bit. Should we just let it ride or do a partial withdrawal of some? Does any other club have this quandary? Am I jusst a worry wart? Lucile Sorrells Our partnership agreement prohibited any one member from owning more than 25% of the club, and we also had one vote per partner no matter the percentage. Expenses were still allocated per ownership percentage. We felt that all of these things kept things balanced and fair. Carole Jansen Wise Investment Club We are an older club and members have come and gone. We have two original members and two others that joined shortly. Four of us own 70% of the club assets. As club treasurer it does concern me a little bit. Should we just let it ride or do a partial withdrawal of some? Does any other club have this quandary? Am I jusst a worry wart? Lucile Sorrells Thanks, we have one vote per member also. How did you control the ownership, but I guess that ship has sailed for us.
Hi Lucile, Our Club has been together for 29 years; while some have left over time, the current group is comprised of half original, while the other half have joined at various times along the way, the most recent member joined last year, so partner ownership percentages are all over the map. About 10 years back, we amended our Partnership Agreement to include language that essentially said: If the Club's total assets were greater than 'X' each member could choose (annually) to take a voluntary withdrawal of their proportionate portion from the Club total over 'X.' They can take it in cash or stock. This was done for multiple reasons, one being that most of the members are older (only 2 are under retirement age and still working), but it's also had the effect of somewhat evening-out membership ownership percentages over time. Not all members chose to take an annual payout - new members rarely do, but longer-term members occasionally do. As Treasurer, I produce a list each spring that shows each member's proportionate available $ (over 'X' amount of Club assets) available for withdrawal, and then members advise if they will or will not take take a withdrawal. For example: If the Partnership Agreement states any $'s over 400k are available for withdrawal this year, and current Club assets total 510k. This would mean $110k would be available for withdrawal this year. I use % ownership of each member to determine how much of the available 110k each member could withdraw. Example: If a member owned 12%, she could take 12% fo 110k, or $13,200. If Club assets dropped below 400k, then no $ would be available to withdraw that year. All that said, no member has ever taken more than $8,000, even if they could have taken much more. Most take no payout, and the average payout for those who do take it is 2-3k, or under. Over time we have (three times) restated our membership agreement to change where the 'magic line' is drawn. This is because club assets can grow to a point where the magic line is so far below current asset $, the Club would take too heavy a hit all at once if we didn't increase the 'magic line.' We all vote to change where the line will be when we are in that position - we could also vote to move the line down, if assets decreased dramatically. Say the line was at 100k and club assets grew to 600k, then 500k would be too much to make available to withdraw in a single year - no one wants to destroy the club! Thus in this case, we'd take a vote to move the magic line higher. Perhaps this will be helpful for you folks. I don't know how common it is, but it's worked well for us. Lynda Feit Thursday Evening Investment Club We are an older club and members have come and gone. We have two original members and two others that joined shortly. Four of us own 70% of the club assets. As club treasurer it does concern me a little bit. Should we just let it ride or do a partial withdrawal of some? Does any other club have this quandary? Am I jusst a worry wart? Lucile Sorrells We limited each member to 20% ownership of the club. We used one vote per member except for stock purchase/sales. For voting on purchase/sales any member could call for a vote by percentage of ownership. RG Robinson
We are also one vote per member regardless of ownership percent. I'm not sure what you are asking me re: how did we control ownership - could you tell me more specifics on that?
Members usually contributed $50 per month and until we got down to 4 members (from a high of 12), it seemed to work itself out. At the end, we just made a change to the partnership agreement to allow more than 25%, because we were in the process of disbanding. With one vote per member, it is less of a problem because no one has a voting advantage. Carole
Ah, that's interesting. So four of you own approximately 17.5% each. We don't have a restriction on ownership %. I just looked at our range of ownership %, and we range from 0.1% - 15.2%. The longer-term members range from 12.7-15.2%. When I first joined (18 yrs ago), most longer term members owned higher percents, but the annual withdrawal (and fairly minor turnover over time), has changed that. One other thing we changed in our Agreement about 5 years back, is allowing new members a one-time chance to buy-in up to 2k max when they first start. A couple of people chose that option, but our latest addition did not. That probably also helped even things out a bit. And many years back we changed the min and max that any one person can contribute. I guess I'm saying that as things change, we are willing to make changes to our ByLaws/Partnership Agreement if it makes sense. Making a change has always required 100% of the members agreeing to the change. We have 13 members total, and still meet in person each month, so it's much easier than a club that has a large number of members. Lynda
We also changed contributions to allow a range ($50 - $150/mo), and that has helped too. So are you disbanding now? With 2 of our members turning 80 this year, disbanding is somewhere in our future, and so far, luckily, no deaths. I don't look forward to that time, as it's a wonderful group of women, and as much social as business when we get together! I agree, one vote per member is the way to go.
Like others who have commented, we too have several older, retired members who have been members for many years. Occasionally, we have a member who desires to make a partial withdrawal for personal reasons. This will prompt a discussion as to whether others would like to make withdrawals, and an analysis as to members that have built up an extraordinary amount of shares. It is recognized as an opportunity to even out the playing field so that overall, the shares are adjusted to be more equitable. That being said, we have had several deaths over the past several years. Members look at our stock holdings and decide what we are willing to sell to pay the cash owed to the deceased member's estate. When there are holdings that we loathe to sell In that situation, members that are willing to invest extra funds into the club will volunteer to make up the difference. Of course, this starts another cycle of imbalance in the share distribution. However, over time, it seems the ebb and flow of withdrawals and contributions seems to work out. Communication is the key. We are an older club and members have come and gone. We have two original members and two others that joined shortly. Four of us own 70% of the club assets. As club treasurer it does concern me a little bit. Should we just let it ride or do a partial withdrawal of some? Does any other club have this quandary? Am I jusst a worry wart? Lucile Sorrells Yes, we dissolved the partnership late last year and made the final withdrawals in stock to the remaining 4. We formed the club in 2001 with 10 members (soccer moms mostly) and I have been the treasurer for the life of the club. I am the oldest by 10 years, at 75, and I had to push for a stock transfer withdrawal. Couldn't afford the tax hit, or the income hit for Medicare fee, that comes with the capital gains of a cash withdrawal. The younger members don't get it. Ours has always been more social, but as membership dwindled, it actually got harder to get together for monthly meetings, our annual meeting trip to the Texas Hill Country, and happy hours, as people got busier with grandkids and retirement. After 24 years, it was time to let it go. Our first investment was Enron 🙄, but except for that, we did pretty well and we all left with a nice nest egg. Carole
You and I are in the same boat then. I'll be 74 in a couple of months, and have had all the same experiences. We were with TD Ameritrade from 1996 until about 2 yrs ago when we were moved to Schwab. i thought Schwab would be okay, because I have a personal account with them and have never had any issues with them, however, it became clear very fast that they were not very customer-orientated if the account was an Investment Club. Specifically their rule forbidding members to take withdrawals in stock, rather than cash. So for all the reasons you already know, I pushed the Club to move to Fidelity because Fidelity would let us take withdrawals in stock. We've done very well for ourselves, so the tax and Medicare implications are paramount - why spend all those years investing, just to spend the profit on taxes? I guess we could die a slow, prolonged death and empty out the account a little bit at a time, but how old will we be by the time it's empty! Every February the Club votes on the disbanding issue, and we just voted last month NOT to disband this year. I don't look forward to the day we do, but (like most things at our age) you know it's coming to an end eventually. It's been great talking to you, and I wish you all the best going forward! I'm sure you won't miss filing the Club taxes :) Lynda
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