Checklist for Starting an Investment Club
by Doug Gerlach PUBLISHED December 4, 2000

f you have decided to give the investment club concept a tryout, here are the steps you need to take in order to get your club up and running. We have provided plenty of helpful links to stories on Investorama and other web resources to help you in your quest. Good luck!

Prior to First Planning Meeting

        Understand the basics of investment clubs and how they work.
        Buy a copy of Starting and Running a Profitable Investment Club.
        Get acquainted with the National Association of Investors Corporation (NAIC). You can request information and brochures to be sent to you in the mail, but all their printed material is available free on their web site. You might consider setting up a club membership right now in your name to get the ball rolling.
        Contact your local chapter of NAIC; attend a chapter meeting or model club meeting.
        Understand how club accounting works, and why the unit value system is best.
        Understand what tax returns a club must file.
        Determine which organizational structure is best for your club. Your club could form as a general partnership or limited liability corporation, for instance. Most clubs will stick with the tried and true method of partnership.
        Prepare a draft partnership agreement & bylaws.
        Create a private Investorama Member Group to track your portfolio and communicate with members.
        Schedule your first planning meeting.
        Recruit 10-20 potential members to attend the planning meetings. Distribute copies of our article, "So you want to start an investment club?", to people.
        Visit Investorama's Investment Club Message Board to ask any other questions you may have.

First Planning Meeting

        Keep it fun! Nobody wants to sit through two hours of lectures, so try to keep an element of humor in your meeting planning.
        Provide snacks. People think better on a full stomach.
        Review the final version of your partnership agreement and/or bylaws.
        Come up with prospective names for your club. Many clubs like to have fun names, like the "Blue Chip Posse" or the "Stockettes."
        Explain to members how club accounting and the unit value based system works; consider purchase of NAIC Club Accounting Software.
        Determine your club's investment approach; make sure all club members agree on the approach.
        Review NAIC's Stock Selection Guide and their suggested long-term approach to buying growth stocks.
        Elect officers.
        Record all member contact information, including email addresses (Secretary).
        Adopt regular meeting time, date, and place (or mechanism for how locations are set)
        Set monthly contribution amount
        Discuss banking and online brokerage options; have Club Treasurer investigate for next meeting.
        Establish expectations of members.
        Schedule second planning meeting.

Second Planning Meeting

        Adopt club name.
        Adopt and sign partnership agreement and/or bylaws.
        Club Treasurer reports on NAIC Club Accounting Software; authorize purchase.
        Club Treasurer reports on banking and brokerage accounts; choose a bank and/or broker.
        Vice-President sets the club's educational program.
        President sets agenda for next meeting.

Following Second Planning Meeting

        Club Treasurer applies for a Tax ID number (officially called the "Employer ID Number," or EIN) from the IRS.
        Make business filing (also known as a "DBA" or business certificate) at local county clerk's office; make partnership filing with state office, if required.
        Purchase NAIC Club Accounting Software.
        Join NAIC (or add members to existing club membership, if you've already joined).
        Avoid common pitfalls as your club gets off the ground.