An investment club is an investment club if every partner in that club has an equal say in how the funds are invested. If one person makes these decisions exlcusively, and the others are regulated to being 'silent' partners, that's a private investment partnership, like a hedge fund, in other words. So be careful about this. There are allowances for you to handle such private investment partnerships of a limited nature from a small number of 'clients', where you would not need to deal with the otherwise required paperwork of both Fed and your State, that you should investigate. Then, if you have a club, you can open a brokerage account under the name of that club. Or, you may just look to use a 'friend and family' type account without needing a club to be formed at all, such as offered by IB and others. Some links you may wish to check out: http://www.sec.gov/investor/pubs/invclub.htm http://www.sec.gov/info/smallbus/qasbsec.htm#eod6 http://www.better-investing.org/articles/web/3462 http://www.better-investing.org/about/software/nca.html
I hope you have done something about this, but if you havent, here's a way to get out without your friend feeling the pinch.... If he declares bankruptcy the entire account will be subject to the bankruptcy estate. Close the account, get the joint check mailed to you, tell him that you didnt want to lose the money to a possible bankruptcy, and that your little deal is not kaput forever, just until he gets his act together in terms of the bankruptcy. He'll probably be much easier to deal with when he signs the back of that check. Futhermore, make sure you have a paper trail showing where the 2000 originally came from (hopefully directly out of your personal bank account) in case the bankruptcy trustee wants to know what happened to that joint account, and make sure that when you cash that check, that you have a paper trail showing that it went right back in your pocket. good luck