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What possibilities does a private person has to merge his capital (mostly stocks) with 2-3 more different private persons? Apart from having lesser transaction costs, which advantages or disadvantages could we have?

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You can form an investment club with other people.

Some of the benefits include:

  • Education

  • Sharing ideas

  • Spreading costs

  • Social interaction

Drawbacks:

  • Inexperienced members and poor results

  • Investment clubs tend not to be regulated by the SEC but in some cases they are

  • Disagreement on how to trade/invest

  • Difficulty withdrawing money if you want to leave the club

  • Loss of autonomy

  • Theft

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In the U.S., the LLC or partnership for investing must be a non-issuer company or else it would be subject to regulation as an investment company. But personnel running the LLC or partnership, or party to it, might be subject to broker/dealer regulation or to investment advisor regulation.

Now if the non-issuer company is claiming investing as its core operation then I suppose that it is not subject to capital-gain tax but to one of two methods of corporate income tax. Also, expenses could be charged against earnings.

  • Then an investment club is a partnership, with investing as its core operation, that is obviously subject to capital-gain tax. So there are three different methods of taxation. – S Spring Apr 23 '20 at 21:01
  • Oh, if a company with 100 or fewer beneficial owners is claiming to be a non-regulated investment company, then pass-through taxation would probably be required. Then an issuer C-corp is actually possible if with 100 or fewer shareholders and if electing pass-through taxation. – S Spring Apr 24 '20 at 21:21
  • A hedge fund requires the 100 or fewer beneficial owners to be accredited investors. I suppose the difference is that the administration of the hedge fund are themselves not beneficial owners but are investment advisors. – S Spring Apr 24 '20 at 21:28

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