I have been trading/investing in stocks for 6 years and I have a fantastic track record. Now friends and family want me to manage their money for them. I'd be managing about $1.5 million to start.
I want to do this the legal, legitimate way. Does anyone know what I should do? A lawyer I talked to said I could set up a LLC and use it as a holding company, make my clients limited partners, and draw up contracts with them about my fee schedule and all the details. He said it'd cost probably 20k to start, then $1,500 each time I add a client. Others have suggested I let them keep their money in their accounts, but they sign me up for trading authority.
Additional info: My plan is to collect a fee of 15% of the cumulative outperformance of the money vs. the S&P500. So if the portfolio goes up 20% while the market goes up 15%, I collect .75% of the original portfolio amount. If the market goes down or the portfolio underperforms, I get nothing.
I have been trading/investing in stocks for 6 years and I have a fantastic track record. Now friends and family want me to manage their money for them. I'd be managing about $1.5 million to start.
I want to do this the legal, legitimate way. Does anyone know what I should do? A lawyer I talked to said I could set up a LLC and use it as a holding company, make my clients limited partners, and draw up contracts with them about my fee schedule and all the details. He said it'd cost probably 20k to start, then $1,500 each time I add a client. Others have suggested I let them keep their money in their accounts, but they sign me up for trading authority.
Additional info: My plan is to collect a fee of 15% of the cumulative outperformance of the money vs. the S&P500. So if the portfolio goes up 20% while the market goes up 15%, I collect .75% of the original portfolio amount. If the market goes down or the portfolio underperforms, I get nothing.
Thank you so much for any replies!
Of course, starting a business requires a solid business plan. I recommend consulting a business plan expert with expertise in setting up financial institutions. He will be formulating what are the checklist that you need to do as well as reviewing your business strategies that you are going to implement. The primary reason is that you cannot just implement whatever you like particularly that these type of businesses are regulated and controlled by the government because of the massive frauds that happen in the past.
Then once the plan are completed, you start by properly registering your business with the government. Setting up your office then working with your clients.
OK lets say its not family. Im actually asking this -- would this be an easier and much cheaper path to go?
Set up an LLC or C corp as a financial consulting business and also to protect yourself. Then do the authorization to trade paperwork, but under the corp name.
Or because you are actually physically trading/managing other people's money/brokerage accounts, does this entail a whole bunch of other logistics?
I don't know who you trade with, but the best option is setting up a Friends & Family account with IB. Each individual has their own account and you are the authorized trader, but all accounts are combined into an omnibus account to which is makes managing the money much easier and seems like one fund. Then, you instruct IB the fee schedule and they handle it for you. All tax reporting is the responsibility of the individuals. So, you have no LP's, no K-1's, no accountant fees, no lawyer headaches, etc.
Cost next to nothing to start up.
Next step, if you are successful and growing, is to go the LP route. That will take registration with certain states and the SEC once over $25MM.
Can you get them loan the money, then loan it back to you LLC. Or they can loan directly to your LLC on a promisorry note.
Trade, and give them profits as you wish as pay back of loans !!
This way you dont have to register with the govt.
