| The number one mistake newbie clubs make is that | | | | responsibilities, term length and purpose of each |
| they do not have an investment club agreement in | | | | position. |
| place before they begin investing. It is imperative | | | | - Responsibilities of each individual member, including |
| that an agreement be developed and agreed upon | | | | description of proper and improper behavior. |
| by all members right at the formation of a club. | | | | - Procedure for removing an unethical, dishonest or |
| The agreement serves multiple purposes: | | | | any other type of unwanted person from the club. |
| - Assures checks and balances to keep all activities | | | | - Due dates and structure of reports necessary for |
| legitimate. | | | | review by the members. |
| - Defines the responsibilities of the club management | | | | - Topics to be covered in regular meetings. The |
| and who is to fill those roles. | | | | meetings may be weekly, monthly, annually, or all of |
| - Serves as a guideline and mediator when there are | | | | the above. |
| disagreements in the club. | | | | - The number of maximum and minimum members. |
| - Sets expectations of when meetings and various | | | | - Procedure for taking on new members. |
| reports on the club's activities are due. | | | | Once an agreement has been drafted and all |
| There are several ways to find existing agreements | | | | members of the club have agreed to it, it is a good |
| that can be modified and tailored specifically to any | | | | idea to have an attorney review it. This way, if there |
| club. The internet is a good resource, as well as an | | | | are any problems in the future, either between |
| attorney or checking at the library. A good | | | | members or any questions from the IRS, then the |
| agreement will include: | | | | club is assured of having conducted their affairs |
| - Job descriptions for each role, including all the | | | | lawfully. |