Starting A Crypto Investment Club: A Beginner's Guide

Starting a crypto investment club is a great way for beginners to learn about investing in cryptocurrencies without taking on too much risk. A crypto investment club is a group of people who come together to pool their resources and knowledge to make informed decisions about investing in cryptocurrencies. It's a great way to learn about the market, share ideas, and diversify your investments. The first step in starting a crypto investment club is to establish an agreement with the club. This agreement should include the purpose of the club, the rules for membership, and the responsibilities of each member. It's important to have a clear understanding of what each member is expected to contribute and how decisions will be made.

Define goals and purpose

The first step in starting a crypto investment club is figuring out the purpose of the club. Understanding and agreeing on the motivation behind the investment club can help like-minded members craft a mission statement and bylaws. Being clear about the goals and purpose of the club will also help weed out members who might be happier in a club with different goals.

There are several reasons to start a crypto investment club. Some people want to invest with friends to pool resources and enjoy the camaraderie that comes with a mutual goal. Others want to explore specific areas, such as impact investing, or invest in alternative investments such as startups or mineral rights.

Some clubs may have annual membership fees for expenses such as speakers, meeting spaces, and supplies, as well as a monthly expected contribution for investing. It is important to have a clear understanding of what each member is expected to contribute financially and whether this is consistent with the club's goals.

Most investment clubs use a buy-and-hold strategy, so it is important to determine whether members are interested in short-term or long-term investing. It is also worth discussing whether members share a general investing philosophy and approach.

Once the goals and purpose of the club are clear, it is a good idea to observe a few existing investment clubs in action to get a sense of how meetings are run and whether they have guest lecturers or operate casually or formally.

Find members

The first step in starting a crypto investment club is to find potential members who share your interest in investing in cryptocurrencies. Look for like-minded individuals who are willing to contribute to the club's success and are committed to its purpose and goals. The ideal group size is typically between 5 and 20 people.

It is important to ensure that all members are aligned in their investment strategies and goals. There should be a mix of people with different backgrounds and expertise, but they should all be united in their desire to learn and make informed investment decisions.

You can find potential members by networking within your existing community, attending crypto-related events, or utilizing online platforms and social media groups dedicated to cryptocurrency and investing. It is crucial to take the time to find the right people who are dedicated to the club's success and willing to actively participate and contribute.

Once you have identified potential members, hold initial meetings to introduce the club, explain its purpose, and discuss the responsibilities and expectations of each member. These meetings will help establish the roster of members, elect club officers, and ensure that everyone is on the same page regarding the club's goals and operations.

During this process, be transparent about the club's structure, rules, and any agreements that need to be made. This includes deciding on the frequency of meetings, contribution amounts, and the process for making investment decisions. By laying a strong foundation and finding dedicated members, you can create a successful and cohesive crypto investment club.

Set up legal structure

Setting up a legal structure is a crucial step in establishing your crypto investment club. Here are some detailed instructions to guide you through the process:

Step 1: Form a Legal Entity

Firstly, you need to establish your club as a legal entity in the eyes of the government. This involves choosing the appropriate type of "business entity" that suits your club's needs. The most common structure for an investment club is a general partnership, which allows taxes to pass through to the partners' personal tax returns and is typically the least costly option.

Step 2: Create a Partnership Agreement

After deciding on the legal entity, you need to create a partnership agreement. This document outlines the rules, responsibilities, and expectations of each member. It should include the purpose of the club, membership rules, and decision-making processes. You can use online resources or seek professional help to draft this agreement.

Step 3: Obtain an Employer Identification Number (EIN)

Apply for an EIN from the IRS. This number is necessary for opening bank and brokerage accounts for your club. The process for obtaining an EIN is usually straightforward and can be done online.

Step 4: Register with Relevant Authorities

Depending on your location, you may need to register your club with the appropriate state or county authorities. Contact your local Secretary of State's office, licensing board, or county clerk to understand the specific requirements for your club's registration.

Step 5: Open a Bank Account

With your legal structure and EIN in place, you can now open a bank account for your crypto investment club. This account will be used to deposit member contributions and manage the club's finances.

Step 6: Choose a Brokerage Account

Finally, select a brokerage account that suits your club's needs. Consider factors such as fees, services offered, and the level of support provided. Some popular options include full-service brokers, discount brokers, and online brokers. Compare the costs and benefits of each option before making your decision.

Establish operating procedures

Now that you've formed a legal entity and created a partnership agreement, it's time to establish the day-to-day operating procedures for your crypto investment club. These procedures should be reviewed periodically by club members to ensure they effectively represent how the club wants to function.

Firstly, you'll need to select club directors, including a president, vice-president, treasurer, assistant treasurer, and secretary. It's a good idea to have two people managing the club's finances, and it's important to decide how these people will be elected and how long they will remain in their positions. Outline the responsibilities of each role, including who will be in charge of taxes and who will place trades.

Next, decide on a time and place to meet. Most clubs meet monthly, but some meet more or less often. Meetings can be held at a member's home or a public place like a library or coffee shop. Meetings should last around one to two hours.

You'll also need to establish club rules. These should include guidelines for buying and selling, handling payouts and distributions, and adding or removing members. It's important to plan for life changes and potential conflicts so that the club can continue running smoothly.

Record-keeping is another crucial aspect of operating procedures. Each member will want to know their percentage of equity, so accurate records must be kept at all times. A simple way to do this is by using a shared Google Spreadsheet.

Finally, consider how you will handle new members joining and existing members leaving. You may also want to implement an initiation fee to weed out any potential freeloaders and ensure members are dedicated to the club's success.

Open accounts

Opening accounts is a crucial step in setting up a crypto investment club. Here is a detailed guide on how to go about it:

Brokerage Account

Opening a brokerage account is necessary for the club to start investing in the stock market. The club treasurer will be responsible for handling the funds and making investments. There are several types of brokerage accounts to choose from, each with its own set of services and associated costs. It is recommended to keep the costs associated with stock investments as low as possible to maximise returns.

When choosing a brokerage, consider the level of service and support required, as well as the fees charged. Full-service brokers often provide advice and may even attend meetings, while discount or online brokers typically offer lower fees but leave the decision-making to the club.

Bank Account

It is advisable to establish a business account at a local bank for the investment club. This account can be used to deposit member contributions and send a single club check to the broker. Any leftover funds can be parked in this account until needed.

Legal Structure and Employer Identification Number (EIN)

Before opening the above accounts, it is essential to set up a legal structure for the club. The most common legal structure for an investment club is a partnership, which requires a partnership agreement and operating agreements. Online services or legal professionals can assist in drafting these documents.

Once the legal structure is in place, the club can apply for an EIN from the IRS. This number is necessary for partnership tax returns and opening the bank and brokerage accounts.

Operating Procedures and Accounting Methods

The club should also establish day-to-day operating procedures and accounting methods to ensure accurate recording and reporting of each member's share of club funds. The club treasurer is responsible for record-keeping, but it is recommended that all members familiarise themselves with the process.

Brokerage Platform Selection

When selecting a brokerage platform, consider factors such as fees, security, user-friendliness, and the range of cryptocurrencies offered. Compare different platforms and choose one that best suits the club's needs and investment strategy.

Funding the Accounts

Once the accounts are opened, the club members will need to contribute funds to start investing. Decide on the minimum monthly contributions and ensure that the contributions are proportional to the returns expected by each member. The club treasurer will handle the pooling of funds and endorse member checks to the broker.

With these steps, the crypto investment club will have the necessary accounts and funding in place to start investing and pursuing its financial goals.

Frequently asked questions