With your officers in place club members may feel that they are ready to start their investment journey, but there are a few legal and financial details that need to be settled before they can purchase their first stock. First off, your entrepreneurial investment club will need to decide what type of business model it will use.  Clubs can be corporations, general partnerships, or limited liability partnerships.  Each business model has its own advantages and disadvantages.

Corporation: An entrepreneurial investment club will generally avoid becoming a corporation.  This business model is a taxable business entity that requires 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.  An entrepreneurial investment club will frequently 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 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 entrepreneurial investment club a bit more liability protection.  Keep in mind that this type of business entity can be expensive and will need more paperwork.

The entrepreneurial investment 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 club at http://www.nass.org/sos/sosflags.html

The United States will assign a Federal Tax ID Number to your entrepreneurial investment 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 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 schedule.