You have fairly wide latitude to determine how large you'd like to let your club become. Many have found an optimal investment club size is 10-20 members. There are certainly very successful clubs who are much smaller and some who are much larger. You might want to begin on the smaller size and then add members as you get rolling.

The only restriction on size is related to the fact that we recommend you "opt out" of the Centralized Partnership audit procedures. To do this your club must issue less than 100 K-1's for any given tax year. This means that if you count all the people that were members in the club for any part of the calendar year, it has to add up to less than 100.

It is important that your operating procedures spell out the conditions new members need to meet to be admitted. An investment club should be a long term commitment. It is important that a potential new member feel comfortable about making such a commitment and that all of the current members are comfortable accepting the new member into the partnership.

Since the addition of a new member is, in effect, a dissolution of the original partnership, it is important that you officially document the vote for the new addition in your records and add your new member to your partnership agreement. more information

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Disclaimer: statements are opinions expressed by bivio Customer Support and are not official statements from any government agency. These statements are not intended to replace professional legal or accounting advice. When in doubt, follow the advice of your lawyer or accountant who is familiar with your particular circumstances and the laws of your state.