Oh wise investors please teach me your tricks!

March 21, 2009 8:12 PM

Starting a Canadian Investment Club in Ontario. 10 people will contribute $100 each per month for 5+ years. We are looking to do a stock buy every 1 - 2 months. What do I need to know from a tax standpoint? How should I structure the club (i.e. Incorporation has too many fees)? Also I'd love tips, advice or Canadian specific links from anyone who has done something similar. Google provides great American info but I didn't find stuff for Canucks!
posted by saradarlin to work & money (4 comments total)

You should pay a qualified accountant (CA or CGA are both fine, as this is mostly tax law) for a few hours of advice about how best to structure things to keep your taxes as low as possible. There is certainly not enough information in this question to determine the answer, and you will end up saving in taxes more than you pay for good advice.
posted by jeather at 8:45 PM on March 21

When I filled out the paperwork for an Investorline account many years ago they had specific language in the contract for investment clubs - they may be able to provide some guidance.
posted by GuyZero at 9:23 PM on March 21

I was really wondering about how the group should be organized. As a partnership? A corporation? Just put it in one group members name (I know this is wrong but I'm just throwing it out there!).
posted by saradarlin at 1:52 PM on March 22

Well, an investment club is not a partnership for federal tax purposes. This doesn't mean it's a bad idea. A corporation would likely be the best, because it is liable to have the most freedom wrt adding and removing members. Maybe a trust is good. Seriously: this is what accountants are trained to tell you about.

The answer will also depend on: are most of the members of the group in the same tax bracket? are you looking more for dividends or for growth? what about new members? old members leaving? what if someone has a cash flow problem? A tax lawyer or accountant who specialises in tax law can answer these questions and bring up concerns that you haven't considered.

The amount of money you're talking about deserves more investment than 5$ for a Metafilter account. Consider that your first month's investment into the club is for expenses in setting it up.
posted by jeather at 3:31 PM on March 22