Ever been in an investment partnership?

January 26, 2008 8:52 AM

Tell me about your experience with investment partnerships. (Multiple questions inside.)

I’m interested in pooling some funds with some friends and to try our hands in market investments. (This is in the US, Georgia)

I gather that we’ll need to establish a tax identity with the IRS. Where can I find more details about the tax implications?

How did you decide how to assign ownership of the partnership’s assets? What happens if a new person wants to buy in, or someone wants to cash out?

Which banks and brokerages work well for multiple account owners with low costs?

posted by ijoshua to work & money (2 comments total)

Just in case you didn't know, you'll have the best luck searching for "investment club" rather than "investment partnership."

The Motley Fool has a pretty good writeup here.

And I can tell you that no discount brokerage really wants this kind of business, unless you'll be trading frequently or carrying a large cash balance. You'll be filling out a goodly number of forms every time someone sneezes. When you want to add/remove a trustee, for example, you'll need a form (often) with multiple signatures, sometimes with signature guarantee, sometimes with a notary endorsement, etc.

Usually the bookkeeping is easiest with equal shares. Buy-ins and buyouts should happen as of a pre-determined closing date. So if a one-fifth partner wants out, s/he will get out as of, say, next Friday, or the last Friday of the month, etc. But you have to set these policies in advance. That way, there's no niggling over what prices or levels will be used.
posted by Kwantsar at 9:02 AM on January 26

I was involved in one for a year but after 12 months we didn't have enough people with the time and energy to continue to do research each month so the group dissolved. I wouldn't bother to do it again unless it was people that I knew well and were really committed to the project.
posted by metahawk at 12:52 AM on January 27