Investing as a Family Business
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Investing as a Family Business A reader recently asked..........
Can you offer a suggestion for
structuring/formation of my family's investing activites. We want to invest our
money, but are not sure of what is available to us.
Can we form an investment club for our family, (at least initially), FLP, C corp, etc...? Our desire is to operate as a business,
in some fashion or form. The business purpose will be
investing.
Yes, you can form an investment club for your family. I recommend that you form it as a general partnership. In this way, gains, losses, and income are taxed only once. This would not be true of a C corporation. You could set up a LLC or LLP, if your state allows it, but I see no reason for you to be paying the fees associated with those entities for your family partnership. I have written some articles on the various types of entities for investment clubs, which you can find at.......... Investment Club Liability
LLC, LLP, Limited Partnership or what
I'd like to clear up a possible misunderstanding.
As an investment club, you will not be operating a business. The IRS does not
consider investing a business. This means that your club, regardless of the
entity that you choose, will be limited to deductions allowed to investors. This
really is no great hardship, because most legitimate expenses of investing will
be allowable. The notable exceptions are food, refreshments, and attending
investment seminars. You can read more about investment deductions in the IRS
publication 550, which can be found at.......
Thank you for the interesting question and for
using bivio.
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