Hi.
I'm helping with upstarting an investment club but I am
confused about how to set it up so that each member can file
their own individual tax returns while reporting any
gains/losses from our investments as a group and keep costs
down. Do I need to file an SS-4 and file for fictitious
business name? What type of entity are we, e.g. general
partnership, corporation, other: investment club? Please
help. Thanks.

Susan:

If the charter members have not yet signed a document
creating the club, then I suggest you use the model club
agreement provided by Better Investing as a starting point
to drafting the agreement creating the club. Following the
model agreement will result in the creation of a general
partnership. I understand that the vast majority of
investment clubs use the general partnership form and the
club accounting software provided by Bivio is designed to
work with the general partnership legal entity.

If the charter members have already signed a document
creating the club, then you will need to read the document
to know what type of legal entity the document created.

Regardless the nature of the legal entity used to create the
club, it should apply for a tax identification number from
the IRS for tax purposes as the club will be filing a tax
return; either an informational return if it is a general
partnership or a corporate return if by some chance the
members really want to be a corporation.

You say you want to file so the gains and losses are
reported as a group. This is unusual. Most clubs use the
partnership route so the gains/losses of the club are
apportioned to each member based on their percentage
ownership in the partnership and are reported by that
individual on their separate return via the use of a K-1
that transfers the gains/losses and expenses to the 1040 of
the individual. Going the general partnership route will
keep the costs associated with creation and administration
of the legal entity down compared with a corporation.

I hope this helps.

Jack Ranby


Susan Cobar wrote:
> Hi.
> I'm helping with upstarting an investment club but I am
> confused about how to set it up so that each member can file
> their own individual tax returns while reporting any
> gains/losses from our investments as a group and keep costs
> down. Do I need to file an SS-4 and file for fictitious
> business name? What type of entity are we, e.g. general
> partnership, corporation, other: investment club? Please
> help. Thanks.

Thank you, John.

Sorry about the confusion. We want the gains/losses to be
apportioned to each individual member, not as a group.

Do you know if we have to register our club with the county
or state? I looked up the California Treasurer/Los Angeles
County Treasurer websites but found nothing.

Thanks,
Susan

John W Ranby wrote:
> Susan:
>
> If the charter members have not yet signed a document
> creating the club, then I suggest you use the model club
> agreement provided by Better Investing as a starting point
> to drafting the agreement creating the club. Following the
> model agreement will result in the creation of a general
> partnership. I understand that the vast majority of
> investment clubs use the general partnership form and the
> club accounting software provided by Bivio is designed to
> work with the general partnership legal entity.
>
> If the charter members have already signed a document
> creating the club, then you will need to read the document
> to know what type of legal entity the document created.
>
> Regardless the nature of the legal entity used to create the
> club, it should apply for a tax identification number from
> the IRS for tax purposes as the club will be filing a tax
> return; either an informational return if it is a general
> partnership or a corporate return if by some chance the
> members really want to be a corporation.
>
> You say you want to file so the gains and losses are
> reported as a group. This is unusual. Most clubs use the
> partnership route so the gains/losses of the club are
> apportioned to each member based on their percentage
> ownership in the partnership and are reported by that
> individual on their separate return via the use of a K-1
> that transfers the gains/losses and expenses to the 1040 of
> the individual. Going the general partnership route will
> keep the costs associated with creation and administration
> of the legal entity down compared with a corporation.
>
> I hope this helps.
>
> Jack Ranby
>
>
> Susan Cobar wrote:
> > Hi.
> > I'm helping with upstarting an investment club but I am
> > confused about how to set it up so that each member can file
> > their own individual tax returns while reporting any
> > gains/losses from our investments as a group and keep costs
> > down. Do I need to file an SS-4 and file for fictitious
> > business name? What type of entity are we, e.g. general
> > partnership, corporation, other: investment club? Please
> > help. Thanks.

Susan:

If your club is organized as a general partnership; then the
income (gains minus losses) on your investments, interest on
your cash, and deductable club expenses will be allocated to
each member in proportion to their number of units and
reported by each individual on their federal and state
income tax return. The club will file an informational
return also and issue K-1s to each member showing the
amounts each member is respnsible for reporting: Bivio; the
club accounting software, will prepare your federal
inforatiomal return and k-1s for you: It may prepare the
state return depending on your state [I don`t remember
whether it does California). Ask Bivio support:

I don't know the answer to your second question. Perhaps you
can contact your local Better Investing Chapter leaders for
help. In my state, Arizona, there is no requirement to
register; but if one wanted to do so, it would be with the
Secretary of State.


John Ranby

 Susan Cobar wrote:
> Thank you, John.
>
> Sorry about the confusion. We want the gains/losses to be
> apportioned to each individual member, not as a group.
>
> Do you know if we have to register our club with the county
> or state? I looked up the California Treasurer/Los Angeles
> County Treasurer websites but found nothing.
>
> Thanks,
> Susan
>
> John W Ranby wrote:
> > Susan:
> >
> > If the charter members have not yet signed a document
> > creating the club, then I suggest you use the model club
> > agreement provided by Better Investing as a starting point
> > to drafting the agreement creating the club. Following the
> > model agreement will result in the creation of a general
> > partnership. I understand that the vast majority of
> > investment clubs use the general partnership form and the
> > club accounting software provided by Bivio is designed to
> > work with the general partnership legal entity.
> >
> > If the charter members have already signed a document
> > creating the club, then you will need to read the document
> > to know what type of legal entity the document created.
> >
> > Regardless the nature of the legal entity used to create the
> > club, it should apply for a tax identification number from
> > the IRS for tax purposes as the club will be filing a tax
> > return; either an informational return if it is a general
> > partnership or a corporate return if by some chance the
> > members really want to be a corporation.
> >
> > You say you want to file so the gains and losses are
> > reported as a group. This is unusual. Most clubs use the
> > partnership route so the gains/losses of the club are
> > apportioned to each member based on their percentage
> > ownership in the partnership and are reported by that
> > individual on their separate return via the use of a K-1
> > that transfers the gains/losses and expenses to the 1040 of
> > the individual. Going the general partnership route will
> > keep the costs associated with creation and administration
> > of the legal entity down compared with a corporation.
> >
> > I hope this helps.
> >
> > Jack Ranby
> >
> >
> > Susan Cobar wrote:
> > > Hi.
> > > I'm helping with upstarting an investment club but I am
> > > confused about how to set it up so that each member can file
> > > their own individual tax returns while reporting any
> > > gains/losses from our investments as a group and keep costs
> > > down. Do I need to file an SS-4 and file for fictitious
> > > business name? What type of entity are we, e.g. general
> > > partnership, corporation, other: investment club? Please
> > > help. Thanks.