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An investment club is a group of individuals who meet on a regular basis for the purpose of investing money.
The invested sums can be as little as $10 a month. The first investment club on record dates back to the 1800s in Western America. Various online communities devoted to this type of investing have recently emerged and have contributed to the personal investing boom in the United States. One of the reasons that people come together in investment clubs is to learn how to invest. While investment clubs are commonly organized with members contributing money and investing as a group in a single club portfolio, members of other self-directed investment clubs simply meet and learn about investing but invest on their own. With the advent of computers and the internet investment clubs have also moved into cyberspace.
Investment clubs are generally formed as general partnerships, but could also be formed as limited liability companies or limited liability partnerships (in states that allow them). While an investment club could incorporate, the double tax treatment on corporate distributions makes the corporate structure less desirable than a partnership. Typically, a general partnership does not generate any tax liability on its own; instead, any tax liability is passed through to members each year.
In the United States Investment club partnerships must file Form 1065 and Schedule K-1s with the IRS each year, and with states that require partnership filings. In the United Kingdom investment clubs and their members are required to submit form 185(new) to HMRC each year. Investment club accounting software can facilitate the management of a club's books and the preparation of tax filings.
Clubs offer the structure and support that many people need to get started investing, and clubs make it possible to get into the market without a big initial investment.
See also
- List of finance topics
- National Association of Investors Corporation (also known as NAIC and BetterInvesting)
External links
- Investment clubs and the SEC - A FAQ on investment clubs provided by the SEC
- ICLUBcentral Inc. - Resources for starting and running an investment club
- Jacobs University Investment Club - A Student Investment Club in Jacobs University Bremen
Further reading
- Investment Clubs for Dummies by Douglas Gerlach and Angele McQuade (ISBN 0-7645-5409-3), published in 2001
