setting up investment club - brokerage? joint? 3rd party legal entity?

Don't know if anybody is a part of an existing investment club but I'm considering starting one with a friend and wonder if anybody here has any experience logistically how it works wpen / a brokerage

Do you just open a joint brokerage acct. with Ameritrade or izone?
How would taxes work then?
What if other members decide to join....how does tax implications work? Does it just funnel through one individual?

Starting a corporate entity, or "ghost company" where each investor is a member and owns shares in the company and thus its' "earnings" seems ideal...but seems like a lot of work.

Did a quick search and didn't find anything.

EDIT: This link - http://www.ehow.com/how_3505_start-investment-club.html

suggests a limited partnership..that seems like good approach. Just wondering if anybody's done it before, how simple it is, etc. etc. What are the tax implications

I know at least some brokerages have special account types. ETrade, for example.

Have you checked out the National Association of Investors Corporation?

I've never seen it before now, but Investmentclubhelp.com looks like it has a good amount of information. I think that it could probably answer some other questions you may have as well.

If you're opening up a regular investment club, you would get an EIN from the IRS, probably as a general partnership, and then set up an "investment club" or "business" brokerage account somewhere. If you set up as some type of partnership or regular llc, your club would have to file a tax return, but the members are the ones who pay taxes on their personal returns. If you set up as an llc taxed as a corporation, the llc would pay taxes on its earnings and the members would pay taxes on their dividends from the llc. You're probably not going to want to set up as a corp due to possibly being classified as a personal holding corp.

Check out those sites, especially the NAIC site for more info on keeping track of member units, adding new members, and taxes.

Great question! Here's the guidelines you're looking for. They're how our club got set up.

http://www.iclub.com/clubs/club_starting.asp

Organization: General partnership is the way to go. LLCs and LLPs cost money you don't need to spend.

Broker: We like Firstrade - reliable, and a very small fee. Remember, if you're spending more than 1% of your investment on a
commission, you're spending too much.

Taxes: A club is a pass-through organization. The club reports taxes, but doesn't pay taxes. Individuals do, and the club Treasurer gives each member a k-1 form, usually in Feb. or March.

New members: Have a partnership agreement - details are on that site. It covers new members joining.

Dan Abraham
Club Treasurer

All good responses... limited partnership may be the way to go since this "investment club" idea is exactly what Private Equity Funds are (i.e., those run by KKR, Blackstone, Fortress, Carlyle). The General Partner manages the money, the Limited Partners invest their money.