Stock Management
So lets say me and a friend want to partner our trading skills in a new LLC to help grow some capital. I fund the initial capital for the business since I have the funds to do so, but we both are trading from the stock accounts we open through the business, and we both benefit from the profits at a 60/40 share (I own 60% of the company he owns 40%). Do either of us need any licensing to do this? My understanding is we would only need brokerage type licensing if we were accepting money from people who are not owners in the company, is this correct? My understanding is that because we are not managing other people's money besides the capital that is in the company, that we don't need any licensing to do so, but I want to make sure that is correct.
2
Answers
International Tax Attorney and U.S. CPA
Based on the fact pattern you provided, it sounds like the entity would be classified as an investment club, so there are no licensing requirements, nor is the entity regulated by the SEC. If all of the LLC members are actively participating in the investment decisions, and you do not accept capital from outside passive investors, then you should be okay. However, you still need to be mindful of all state and local regulations that may apply to LLC's in your jurisdiction. I would recommend consulting an attorney to discuss your specific facts and circumstances.
Answered over 5 years ago