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Investment Clubs
Common questions related to investment clubs.
This overview is provided for informational purposes only, and is not intended to constitute legal, financial, tax, or other advice. You should not act or refrain from acting based on any information in this overview. Please check with your legal and tax advisors to make the best decisions for your specific circumstances.
Here are some FAQs that could be applicable, depending on your location. This information is provided for informational purposes only, and should not be relied upon.

What is an investment club?

An investment club is a group of people who pool their capital and make investments together.
  • Up to 99 members (individuals)
  • All members must actively participate in investment decisions
  • No performance fees (aka carry)
  • No public solicitation
  • Must not make, nor propose to make, a public offering of its securities
  • If investing in assets that require accreditation, such as most startup equity off-chain, then club members must be accredited
  • No transferability
  • Responsible for following laws and tax obligations
For additional information on how the SEC (Securities and Exchange Commission) defines investment clubs, please see this link.

What are the criteria to create a club on Syndicate?

  • Member size: No more than 99 members
  • Member participation: All members must be actively involved on all investment decisions through a vote
  • Fees: No performance fees (aka carry)
  • Accreditation: Your club's accreditation needs to match the assets it buys. For example, if your club invests in startup equity off-chain that is only available to accredited investors, then all the members of your club must be accredited. If your club only invests in tokens or NFTs on-chain that are available to unaccredited investors, then your club's members do not need to be accredited
  • Solicitation: No public solicitation of funds and no public offering of the club's membership interests

How long does it take to create an investment club?

  • If you do not need a legal entity, it takes less than two minutes
  • If you bring your own legal entity, your investment club will be up and running same-day
  • If you need to create a legal entity with Syndicate's help, your investment club should be up and running by the end of the next business day.

What is the gas cost to create an investment club?

On average, it costs around 0.05 ETH to create an investment club on Syndicate. This may vary based on the Ethereum network's usage and capacity. Please see this page here for more information on gas costs on the Ethereum network.

Will members receive K-1s for filing taxes?

Syndicate does not help with your tax forms. Please consult with your tax advisor for tax related support. If you set up a legal entity through doola (Syndicate's partner for entity creation and tax services) and paid for tax assistance, they will be able to help you. Please reach out to their support at [email protected]
Syndicate in partnership with doola can help you create a Delaware LLC (standalone), Delaware Master Series LLC, and Wyoming LLC. Please check this page for more information. You can also choose to bring your own entity. Please check with your own legal counsel to ensure you have the right documents to create and run an investment club for your specific entity and circumstances.

Do all members in a club need to be accredited?

Your club’s accreditation needs to match the assets it buys. For example, if your club invests in startup equity off-chain that is only available to accredited investors, then all the members of your club must be accredited. If your club only invests in tokens or NFTs on-chain that are available to unaccredited investors, then your club’s members do not need to be accredited.

Are there documents that club members need to sign?

If you choose to use Syndicate's template legal documents, the admin(s) and member(s) will need to sign both an Operating Agreement and Subscription Agreement for the investment club which will be served within our webapp. You can also bring your own legal documents instead of using our basic templates. In either case, Syndicate encourages all clubs and their members to consult with their own legal and tax counsel on documents for your club based on your jurisdiction(s) and circumstance.

Can people outside of the U.S. create clubs on Syndicate?

Yes. If you have non-U.S. members, it is your responsibility to ensure that your investment club does not take funds from any OFAC-sanctioned countries or individuals. You can check for OFAC-sanctions here.

Who is allowed to join my investment club?

Only members who you have a close relationship and are a part of your community should be allowed to join your investment club. Currently, anyone who has your investment club's deposit link can join and deposit into the club. As such, you and your club's members should be very careful in how and who the link is distributed to. The addition of unknown and inactive members can lead your investment club to be non-compliant with the rules of an investment club—resulting in potential regulatory and legal risks to the club and its members. Syndicate encourages all clubs and their members to consult with their own legal and tax counsel.

What can I do with my club's tokens (ERC-20)?

The club tokens (non-transferrable ERC20s) can be used by the club and its members for purposes like snapshot voting, on-chain governance, coordination, and more. Syndicate will be adding some of the features natively into the Syndicate.io app and your investment club's dashboard in the future, but for now, your club can immediately utilize a wide array of Web3 tools like Snapshot, Coordinape, and many others.

Am I allowed to transfer my club tokens?

No. Club tokens are non-transferrable ERC-20s that represent your ownership percentage of the club, are intended for things like on-chain governance, and can only be minted and burned. When you leave the club, the tokens will be burned.
Carry is a performance-based fee associated with investment advisers. The SEC’s guidelines on investment clubs note that if a club member receives payment for providing investment advice or for selecting investments, that person may be acting as an investment adviser who must register with the SEC or one or more states unless an exemption applies. Having an investment adviser may also interfere with the requirement that all investment club members must actively help decide what investments to make instead of expecting to make a profit from the efforts of others.
Similarly, finder’s fees and other payments based on connecting investors and securities issuers may trigger broker-dealer regulations and other laws. If you are considering performance or transaction-based fees, we encourage you to consult with an attorney to ensure compliance with the laws in your jurisdiction.
For operational expenses, consider whether your investment club has an operating agreement or similar document in place. There, the investment club may have already determined whether the admin member may receive compensation for certain services, as well as a process for reimbursing gas fees or other expenses.
For example, the investment club may have agreed that it will maintain capital reserves so that the admin member can use those to cover gas fees and other operational expenses. The investment club may also have agreed that if no capital reserves are available, it will instead owe the admin member an amount that would cover eligible expenses or services (such as those associated with the preparation of any applicable tax forms or government filings, for example). In such cases, once investments are liquidated, the admin member’s debt may be paid before any club members receive distributions.
To determine the best course of action for your particular situation and jurisdiction, please consult with your own tax and legal counsel.

When and how can I do KYC?

KYC (Know Your Customer) checks are needed to make sure the sources of your club's funds are legitimate. How you do KYC for your club will depend on how well you know the members. It can range from reviewing the Subscription Agreements and associated documents to hiring a third party service like Persona or World-Check. Syndicate encourages all clubs and their members to consult with their own legal and tax counsel for their specific jurisdiction(s) and circumstance.

Can I transfer ownership of the club?

Yes. You can transfer ownership of the club using the instructions found here. This feature will be available within the webapp interface soon.

How can I manage potentially diluting existing members' ownership when adding new members (and capital) to my club?

Potential options include:
  • Create multiple clubs.
  • Adjust the deposit ratio for new member deposits to match your club's NAV (Net Asset Value).
  • Manually mint tokens to new members at an agreed-upon rate.
Option 1 is currently available in the interface, while options 2 and 3 are currently only available at the protocol level - We are working hard to add these options to our interface soon!
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Outline
What is an investment club?
What are the criteria to create a club on Syndicate?
How long does it take to create an investment club?
What is the gas cost to create an investment club?
Will members receive K-1s for filing taxes?
What legal entities are supported for clubs?
Do all members in a club need to be accredited?
Are there documents that club members need to sign?
Can people outside of the U.S. create clubs on Syndicate?
Who is allowed to join my investment club?
What can I do with my club's tokens (ERC-20)?
Am I allowed to transfer my club tokens?
Can an investment club admin or member receive carry or other compensation for club-related work?
When and how can I do KYC?
Can I transfer ownership of the club?
How can I manage potentially diluting existing members' ownership when adding new members (and capital) to my club?