how does one start an investing club (as a company)?
"As for the letting the ""wise"" people only make the decisions, I guess that would be a bit odd in the long run. Especially when you get more experienced or when you don't agree with their decision. What you could do, is make an agreement that always 3/4 (+/-) of the partners must agree with an investment. This promotes your involvement in the investments and it will also make the debate about where to invest more alive, fun and educational). As for the taxes I can't give you any good advice as I don't know how tax / business stuff works in the US. Here in The Netherlands we have several business forms that each have their own tax savings. The savings mostly depend on the amount of money that is involved. Some forms are better for small earnings (80k or less), other forms only get interesting with large amounts of money (100k or more). Apart from the tax savings, there could also be some legal / technical reasons to choose a specific form. Again, I don't know the situation in your country, so maybe some other folks can help. A final tip if your also doing this for fun, try to use this investment company to learn from. This might come in handy later." "+1 for noting that you are in it for the long haul. I also think this is a great project and activity to do with friends.  Setting up and start-up investment company could be done as a simple LLC.  The decision making process can be decided among the members -- if you want to defer to the others then so be it. Make it flexible so that you can change your mind in the future.  If this is not intended to be a source of revenue or income for you (note your ""in it for the long haul"") One way of sourcing the capital and managing the resulting taxes you might want to consider is setting up a self-directed retirement account and making the investment from there. proceeds as you and your friends choose to take them would flow back into the retirement account.   As with most investment and tax related questions we should all take the little extra time and money to follow up on internet-based advice  with your own lawyer, investment adviser and accountant. These licensed individuals when under contract assume a degree of responsibility for their answer which is not available online. :)" Taxes are the least of your concerns. Your friends need licenses. Although this COULD be avoided entirely with certain craftily worded disclaimers and exemptions and the WAY that money is given to them.
Sounds like you are starting an investment club. What you need is an investment club partnership agreement. Have a look at this free document. EDIT Based on OP's comments, it appears that the OP will be acting as an adviser/manager of a private investment fund. If the fund is not open to the public, it may still be treated as a type of investment club, but different rules -- including possibly having to register with the SEC -- may apply (quoted from the first link): If the adviser is compensated for providing the advice regarding the club's investments, the adviser may need to register according to the Investment Advisers Act of 1940. Also, if one person selects investments for the club, that person may have to register as an investment adviser. In general, a person who has $25 million or more in assets under management is required to register with the SEC under the Investment Advisers Act of 1940. A person managing less than $25 million may be required to register under the securities laws of the state or states in which the adviser transacts business. "I tell you how I started as an investor: read the writings of probably the best investor of the history and become familiarized with it: Warren Buffett. I highly recommend ""The Essays of Warren Buffett"", where he provides a wise insight on how a company generates value, and his investment philosophy. You won't regret it! And also, specially in finance, don't follow the advice from people that you don't know, like me." I had the same experience as Jeremy: made investments in both Prosper and Lending Club and got a much better returns with Lending Club, although in my cases both investments were ok: after 18 months i made 4-5% on prosper and 11-12% on Lending Club. I think they just have better underwriting standards. Yes. Private companies have shares, they're just not liquid and there may be restrictions around selling them; founders get shares when they found a company (not options), as do VCs that invest. An options pool is oftentimes created as a result of a VC financing (when the cap table is being carved up and the existing owners are being diluted, anyway) for the purposes of attracting future employees. Ask your colleagues!  I know that sounds obvious, but just go to where people who do your sort of business hang out (or better, find some venture capital firms and ask their portfolio companies).  It's not something people would keep secret from you... "Don't do it until you have educated yourself enough to know what you are doing. I hope you won't take this personally, but given that you are wandering around asking random strangers on the Internet how to ""get into investing,"" I feel safe in concluding that you are by no means a sophisticated enough investor to be choosing individual investments, nor should you be trusting financial advisors to choose investments for you. Believe me, they do not have your interests at heart. I usually advise people in your position to start by reading one book: A Random Walk Down Wall Street by Burton Malkiel. Once you've read the book by Malkiel you'll understand that the best strategy for all but the most sophisticated investors is to buy an index fund, which simply purchases a portfolio of ALL available stocks without trying to pick winners and losers. The best index funds are at Vanguard (there is also a Vanguard site for non-US residents). Vanguard is one of the very, very, very few honest players in the business. Unlike almost any other mutual fund, Vanguard is owned by its investors, so it has no profit motive. They never try to pick individual stocks, so they don't have to pay fancy high-priced analysts to pick stocks. If you find it impossible to open a Vanguard account from wherever you're living, find a local brokerage account that will allow you to invest in the US stock market. Many Vanguard mutual funds are available as ETFs which means that you buy and sell them just like any other stock on the US market, which should be easy to do from any reasonably civilized place." In theory you can buy shares directly from someone else who owns them. In practise, if the stock is listed on an exchange, they are unlikely to own them directly, they are likely to own them through an intermediary. You will have to pay fees to that intermediary to transfer the shares to your name. There are thousands of small companies owned by the guy who started it and a few other investors. You can buy stock in that kind of company directly from the existing owners, as long as they are willing to sell you some. It's a super-high risk investment strategy, though. This is the kind of deal that happens on Dragons Den. My understanding is you can create a company 0 value. Then you need to either loan the company the money to buy the building (it will still have 0 value as it will have a debt equal to it's assets) or sell share to investors at any price you like to raise the money to buy the building.  Once shares have value (as valued by a chartered accountant - not anyone can do this) then anyone recieving shares will have to pay income tax. This is why keeping the shares as no value for as long as possible can be preferable. Also a benefit of using share options. talk to your investors, see what they require. I don't know if this is exactly what you're looking for but Seedrs sorta fits what you're looking for. Private companies can raise money through funding rounds on Seedrs website. It wouldn't necessarily be local companies though. I've only recently found it myself so not sure if it has a uk or European slant to it. Personally I think it's a very interesting concept, private equity through crowd funding. "There obviously is not such a list of companies, because if there were the whole world would immediately invest in them. Their price would rise like a rocket and they would not be undervalued anymore. Some people think company A should be worth x per share, some people think it should be worth y. If the share price is currently higher than what someone thinks it should be, they sell it, and if it is lower than they think it should be they buy it. The grand effect of this all is that the current market price of the share is more or less the average of what all investors together think it should currently be worth. If you buy a single stock, hoping that it's undervalued and will rise, you may be right but you may equally well be wrong. It's smarter to diversify over lots of stocks to reduce the impact of this risk, it evens out.  There are ""analysts"" who try to make a guess of which stocks will do better, and they give paid advice or you can invest in their funds -- but they invariably do worse than the average of the market as a whole, over the long term. So the best advice for amateurs is to invest in index funds that cover a huge range of companies and try to keep their costs very low." "Question 1: How do I start? or ""the broker"" problem Get an online broker.  You can do a wire transfer to fund the account from your bank. Question 2: What criticism do you have for my plan? Dividend investing is smart.  The only problem is that everyone's currently doing it.  There is an insatiable demand for yield, not just individual investors but investment firms and pension funds that need to generate income to fund retirements for their clients.  As more investors purchase the shares of dividend paying securities, the share price goes up.  As the share price goes up, the dividend yield goes down.  Same for bonds.  For example, if a stock pays $1 per year in dividends, and you purchase the shares at $20/each, then your yearly return (not including share price fluctuations) would be 1/20 = 5%.  But if you end up having to pay $30 per share, then your yearly return would be 1/30 or 3.3% yield.  The more money you invest, the bigger this difference becomes; with $100K invested you'd make about $1.6K more at 5%.  (BTW, don't put all your money in any small group of stocks, you want to diversify).  ETFs work the same way, where new investors buying the shares cause the custodian to purchase more shares of the underlying securities, thus driving up the price up and yield down.  Instead of ETFs, I'd have a look at something called closed end funds, or CEFs which also hold an underlying basket of securities but often trade at a discount to their net asset value, unlike ETFs.  CEFs usually have higher yields than their ETF counterparts.  I can't fully describe the ins and outs here in this space, but you'll definately want to do some research on them to better understand what you're buying, and HOW to successfully buy (ie make sure you're buying at a historically steep discount to NAV [https://seekingalpha.com/article/1116411-the-closed-end-fund-trifecta-how-to-analyze-a-cef] and where to screen [https://www.cefconnect.com/closed-end-funds-screener] Regardless of whether you decide to buy stocks, bonds, ETFs, CEFs, sell puts, or some mix, the best advice I can give is to a) diversify (personally, with a single RARE exception, I never let any one holding account for more than 2% of my total portfolio value), and b) space out your purchases over time.  b) is important because we've been in a low interest rate environment since about 2009, and when the risk free rate of return is very low, investors purchase stocks and bonds which results in lower yields.  As the risk free rate of return is expected to finally start slowly rising in 2017 and gradually over time, there should be gradual downward pressure (ie selling) on the prices of dividend stocks and especially bonds meaning you'll get better yields if you wait.  Then again, we could hit a recession and the central banks actually lower rates which is why I say you want to space your purchases out." "It is such a touchy subject for many people, I have to say that simple ""set it and forget it"" kind of investing isn't likely in the near term. Instead, if this is something you believe in, treat it like any other business opportunity and do some detailed research into people operating in the field.  Look into their business plans and visit their operations.  If there is a plan, and idea, a team and the intangible it you might consider doing some direct investing with a local company. Basically become a small business owner, silent partner or investor.  If you believe in it go for it.  If you don't believe in it that much, I think this is a market somebody else needs to develop before we invest." "Investing in an existing company is almost like buying a house, or even becoming an ""Angel investor"" in a start-up. Before you start the process, decide how much you want to be involved in the day-to-day and which industries you would feel most comfortable in.  The latter is an important consideration since you would have to know sufficient about the industry in order to evaluate the quality of your prospective investment. Searching for a suitable business is a time-consuming process: The guidance for evaluating any company has been answered in another question, so I'll simply link. Most business owners are looking to their businesses to provide them a pension, so they often look to sell around retirement age.  Buying such a business is tricky - you may be assisting the next generation to finance the purchase which can have it's own struggles. Ideally you'll be looking for a young(ish) company with proven sales and which is looking to finance growth in an optimal way.  Such a company may have many options for raising capital so you'll be competing to invest. As to whether or not it's a good idea...  KFC only became a household name and global franchise after Pete Harman joined Harland Sanders as a partner.  Richard and Maurice McDonald may have founded McDonald's but it was Ray Kroc who made it a success. New partners bring in new ideas and fresh energy which the original entrepreneurs may have lost during the difficulties of starting out. But that goes back to my first query; just how much do you want to get involved?" "You can learn very little from it. Company directories are often given share options or shares as a bonus, and because of that they are unlikely to buy shares. When they sell shares, you'll hear people shouting ""so-and-so sold his or her shares, they must know something bad about the company"".  The truth is that you can't eat or drink shares. If that company director owning shares worth a million dollars wants to buy a new Ferrari, he will find that Ferrari doesn't give free cars to people owning lots of shares. He actually has to sell the shares to get the money for the car, and that's what he does." At this point the cost of borrowing money is very low.  For the sake of argument, say it is 1% per year for a large institution. I can either go out and find a client to invest 100,000$ and split profit and loss with them. Or, I could borrow 50,000$, pay 500$/year in interest, and get the same return and loss, while moving the market half as much (which would let me double my position!) In both cases the company is responsible for covering all fixed costs, like paying for traders, trades, office space, branding, management, regulatory compliance, etc. For your system to work, the cost to gather clients and interact with them has to be significantly less than 1% of the capital they provide you per year. At the 50% level, that might actually be worth it for the company in question.  Except at the 50% level you'd have really horrible returns even when the market went up.  So suppose a more reasonable level is the client keeps 75% of the returns (which compares to existing companies which offer larger investors an 80% cut on profits, but no coverage on losses). Now the cost to gather and interact with clients has to be lower than 2500$ per million dollars provided to beat out a simple loan arrangement.  A single sales employee with 100% overhead (office, all marketing, support, benefits) earning 40,000$/year has to bring in 32 million dollar-years worth of investment every year to break even. Cash is cheap.  Investment houses sell cash management, and charge for it.  They don't sell shared investment risk (at least not to retail investors), because it would take a lot of cash for it to be worth their bother. More explicitly, for this to be viable, they'd basically have to constantly arrange large hedges against the market going down to cover any losses.  That is the kind of thing that some margin loans may require.  That would all by itself lower their profits significantly, and they would be exposed to counter-party risk on top of that. It is much harder to come up with a pile of cash when the markets go down significantly.  If you are large enough to be worthwhile, finding a safe counterparty may be nearly impossible.