At this month’s investment club meeting, we launched our website proper over at BenHurInvestments.com. Much more than Just Another WordPress Blog, this site is dedicated to the ongoing investment activities of our club. Our motto is “Empowering Personal Investment Through Group Education.”
What this means is that, above all, the point is to learn and teach, not to immediately get rich (but someday!) So we necessarily create a lot of great artifacts, such as stock presentation videos and investment guidance commentary, so now we have a place to put them. We even share a spreadsheet with all of our current and past holdings! (We’ve been beating the market for more than 2 years, by the way…)
We would also like to eventually get around to opening up more information about how to start an investment club yourself, such as incorporation, choosing good members, managing the funds in various accounts, and basic stock research methodology.
I am particularly excited about the blog because it gives me a better platform for my stock videos than just leaving them on my channels at YouTube or Vimeo. Not that there’s nothing wrong with those sites, it just makes good sense to have all of our videos about stocks in one place.
So what are you waiting for? Go grab the RSS feed and stay ahead of the market with BenHur Investments!
If an investment club member withdraws all interest in the club (assuming the club sold shares for a capital gain in order to pay the withdrawing partner), how would this affect his/her tax liability?
How would the club make sure the withdrawing partner assumes the tax liability as opposed to the club (club is filed a as partnership)?
Comment by James — July 14, 2009 @ 8:53 pm
Hello James! Thanks for stopping by and commenting.
First of all, I just want to say that we work VERY hard to minimize member withdrawals from the club. Our policy is to seek out partners who expect to be in for the long run, and we hope that it is only in exceptional instances that one withdraws. But there are always exceptions…
As to how we handle the tax implications of a withdrawal, I’m afraid I don’t actually know the details! But I am forwarding your question on to our board who have actually handled this situation already, and I think they’ll have a quick explanation for you, James.
Thanks again for the comment!
Comment by loren — July 14, 2009 @ 10:48 pm
I’m not 100% sure. but I think that the gains/losses are allocated according to the operating agreement (it may be on a flat percentage like 1/n or it might be based on the contributions of each member, so the real answer might be “it depends how the club was setup.” However, one way to attempt to avoid this situation is to try to find a combination of positions to sell so that you have either a small loss or a small gain (try to offset a gain with a loss).
For a more definitive answer, you’d probably need to talk to your accountant and have them look over your partnership/LLC/Inc. and tell you how it’s setup.
Comment by Joey — July 14, 2009 @ 11:19 pm
Do you penalize any withdrawing members, and if so what is your policy? Pam
Comment by Pam — November 2, 2009 @ 4:58 pm
Great question, Pam.
We do have an extra fee associated with leaving the club. It is more of a processing fee than a penalty, and it is very small when compared with an equal equity stake in the club already.
When we are seeking out new members, we are looking for people who we don’t expect to ever want to leave the club. The club itself isn’t about money, but rather education. The intent is that you make your money on your personal investments, fueled by the knowledge gained in the group environment of the club.
Still, obviously circumstances arise where a member may want or need to make an exit from the club. We don’t seek to create artificial barriers to exit (‘penalties’), but we do have to take into account the actual cost of making our various investment assets liquid for such an occurrence (transaction fees if we sell stocks, opportunity costs for having an empty bank account, etc.)
Comment by loren — November 2, 2009 @ 6:40 pm