March 22: Creative Ways to Organizing Your Investment Stock Trader Club – Part 3

by David Jenyns on March 22, 2006

In parts 1 and 2 of this series I gave some broad guidelines on the business set up of your stock trader club. In this article we`ll go into some more detail. First off, your investment stock trader club will need to decide what type of business entity it is. Clubs can be corporations, general partnerships, or limited liability partnerships. Each of these business models has their own advantages and disadvantages.

Corporation. Most investment stock trader clubs avoid becoming a corporation. This is because corporations are taxable business entities that require a great deal of accounting knowledge to be run smoothly in accordance with government regulations.
General partnership. This type of business model requires less paperwork and knowledge about taxes and other financial issues. Most investment stock trader clubs choose a general partnership as their choice of a business entity. With this model, general taxes are passed on to each partner`s tax returns. This type of business model will let you accomplish what you need to do to run your investment stock trader club with the least amount of tax issues.
Limited liability corporations. This type of a business model is much like the general partnership but it gives individual members of your investment stock trader group a bit more liability protection. Keep in mind that this type of business entity can be expensive and will need more paperwork.

The club will need to decide which business model suits its needs best, and declare it when the club is registered. What information is required to register your club depends on where you are located. Each government has slightly different expectations, and you`ll need to contact your local government to determine what yours requires. If you live in the United States you can contact the Office of the Secretary of State for more information about registering your investment stock trader club at:

http://www.nass.org/sos/sosflags.html

The United States will assign a Federal Tax ID Number to your investment stock trader club. You`ll need to use this number on all your tax returns, and you`ll also need the ID number to deal with your brokerage firm and your bank when you`re opening up accounts for your investment stock trader club.

To obtain a Federal Tax ID Number you need to get an IRS Form SS-4, which can be obtained at any local library. Or you can contact the IRS website directly on the Internet to obtain a copy at:

http://www.irs.gov/businesses/small/article/0,,id=102767,00.html

The procedure, and process, of obtaining a government ID number for tax purposes will vary depending on what country you live in. But no matter what country that you live in, it`s important that you request your Tax ID Number as soon as you can to avoid delay to your investment stock trader club schedule.

You`ll also want to come up with an appropriate mission statement for your investment stock trader club.

This isn`t something that you need to do right away, but within a few months of your startup the club should have one in place.

Your mission statement should state, in two or three sentences, the reason your club was formed and what it hopes to accomplish. For example, your mission statement could be: to improve members` understanding of investment stock trader club management; to help members develop practical investment stock trader club skills and test them in the markets; and to double their investment stock trader club within five years.

You`ll want to write down your mission statement and make sure that each member of the club, and any future members, has a copy of the mission statement. Your mission statement will keep your club focussed on the goals it has set and keep it moving towards them.

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