Member fees vs. club startup expenses
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Member fees vs. club startup expenses Norm Osterman wrote...
Being we are starting investment club #2 I am wondering if the correct procedure is to place an assessment fee on the members for startup costs. I did this prior with our other club but it might be better to use the general funds for start-up expenses. What are your views on this? As long as current fees match current expenses I have no problem with the use of fees. Fees that are assessed in a punitive manner and not tied to current expenses, such as late fees, withdrawal fees not directly associated with costs of withdrawal, etc., are also a legitimate use of fees. You must, however, understand that those fees will be allocated to the members of the club in proportion to each members ownership in the club. When starting a new club, unless there were
significant differences between member interests in the club, I would treat all
member deposits as payments. When ownership interest in a club is
equal it makes no difference if member deposits are treated as payments or as
fees. Ultimately the results are the same.
Expenses are paid from "general funds"
regardless of whether those funds originated as fees or
payments. All funds held by the club are "general
funds". There are no "expense funds", nor
"investment funds", just "general funds" that can be used for any purpose that
the club deems appropriate.
My colleague, Rip West, wrote an article that you
might find useful. It can be found at http://www.bivio.com/trez_talk/mail-msg?t=518700003
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