STOCK CLUB PARTNERSHIP -- MAXIMUM MEBERS ALLOWED?

Don Wagner on

What is the maximum number of members allowed in a stock
club partnership? A number of years ago I understood that
the maximum number was 15 and that restriction was put in
place to satisfy an IRS requirement for partnership tax
reporting. But -- it seems to me that I have heard of some
clubs with more that 15 members.

Can someone provide some insight into this issue.

Don Wagner
Pyramid 350 Investment Club

Lynn Ostrem on

I'm sure Rip or Ira will answer the legal aspect of this question but let me share my situation. We're a 7+ year old club (my 3rd. I've been clubbing for 15 years now). Our bylaws limit our club to 15 - not because of the law, but because we thought it was a good number.

We've been trying to get over 10 for 7 years! Seems like every time we got there, someone was retiring, moving, transferring jobs, having kids, etc. Finally, last year, we got over the hump. In fact, we made our 15 member goal (with 3 on a waiting list).

Now that a year has passed, I can safely say that, with the time the veterans have to train the newbies, and the space and time available for our meetings, 15 is WAY TOO MANY for us. Some of the officers have discussed letting the club naturally drop to 10-12 by not replacing people who eventually leave. I like everyone in the club. It's not that. But the intimacy is definitely gone, and with more personalities in the mix, we have more conflicts.

Be careful what you wish for! I would kill to be in a club of 10 right now. Too much work organizing all these people! Yikes!

Lynn Ostrem, VP

Crow River Investment Club

www.bivio.com/crowriver

Rip West on

A number of years ago I understood that the maximum number was 15 and that restriction was put in place to satisfy an IRS requirement for partnership tax reporting.

There is no IRS restriction on the number of members allowed in a partnership, nor has there ever been.

Rip West
Saint Paul, MN

Gene Rooks on

As Rip says, the IRS has no limit. And I may be corrected on this, but I believe the SEC does looks askance at an investment club of over 100, as not meeting SEC guidelines for an all member participating form of club to avoid formal mutual fund designation.

Practically speaking, 12-15 is a good working number. It rder to accumulate sufficient investment funds in a reasonable time with less than ten, and if you push up to 20 or over, you lose control and participation. Gene Rooks, SWIM, Orlando

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