Running Smoothly

Once you’ve established your club, you need a few chicky items to keep you running smoothly. We’ve provided samples of them below. Pick and choose any or all of them to help your club stick with it and keep you moving along.

A. Operating Procedures
Formation of Partnership, Name of Partnership, Term, Purpose, Meetings, Attendance, Quorum, Officers and Their Responsibilities, Members and Their Responsibilities, Dues, Philosophy, Withdrawal of Partner, Valuation, Management, Book of Accounts, Money Market Account, Broker Account, No Compensation, Additional Partners, Death of a Partner

B. Agendas
C. On-Line Meetings
D. Chick Rules
E. Meeting Minutes
F. The I.R.S.

A. Operating Procedures

Chicks Laying Nest Eggs COOPerating Procedures (We called it that to go with the whole chick-nest-egg theme.)

1. Formation of Partnership: Each member of the Chicks Laying Nest Eggs must sign our Cooperating Procedures.

2. Name of Partnership: The name of the partnership shall be the Chicks Laying Nest Eggs.

3. Term: The partnership began on June 1, 1998 and may be dissolved at any time by majority consent.

4. Purpose: The purpose of the partnership is to place the assets of said partnership in investments for the benefit of the partners.

5. Meetings: There will be eight general online meetings per year. The meetings will be held on the first Sunday night of the month except for those that fall on a Holiday weekend. The meeting will then be held on the second Sunday of the month. There will also be two face-to-face meetings each year. Location of meetings should rotate from east, west and central locations and be voted on by the club.

6. Attendance: A member is required to attend at least 70% of the meetings, or 7 of the 10 meetings. We will have a Rotten Egg Patrol who will decide what the punishment will be for missing any unexcused absences. ie. massage everyone's feet for ten minutes or buy drinks at next get-together. If attendance falls below this, and there is no correspondence with said partner, the partner’s membership will be evaluated by the club. If the other partners unanimously vote it on, their membership could be terminated. It will then be treated as if she had submitted a letter of resignation, as per the withdrawal of partner rules below.

7. Quorum:  A quorum will require that at least six members be present for a meeting to be permissible.

8. Officers of the Partnership and Their Responsibilities: The officers shall consist of: President from now on called Head Hen, Vice-president a.k.a. 2nd Chick in Charge, Secretary (a.k.a. Chicken Scratcher), and Treasurer (a.k.a. Egg Carton) and the Rotten Egg Patrol. The election of new officers shall be at will. Term of office is three years, unless someone wants to step down. Officers can stay in their position after the three years if voted back in, (and they still want to).

Head Hen: The Head Hen will conduct meetings starting at 9:00 PM Eastern Standard Time. The president will also set the agenda for the each meeting in advance and have it out to the members the day before the meeting. The president will also be in charge of the twice yearly face to face meetings and where they will take place.

Second Chick in Charge: The 2nd Chick in Charge will conduct the meetings in the absence of the president. She will also be responsible for keeping track of our portfolio and comparing it to the market average. (We will use the S & P 500 as our benchmark.)

Chicken Scratcher: The Chicken Scratcher will copy and paste our online Chat Room meetings and email them to everyone following the meeting. She will also summarize the meetings and post the minutes to the message board.

Egg Carton: The Egg Carton will prepare a monthly financial report and email it to all of the members and have it in their email box a day before the online meeting. She will also buy and sell all of our stocks online and prepare the tax return. Be nice to her. [Read more about the Treasurer.]

Rotten Egg Patrol: Decides punishment for missed meetings and missed assignment deadlines.

9. Members of the Partnership and Their Responsibilities:

a) Members are required to track one company. Tracking involves getting the companies news releases, summarizing it in your own words and posting to the message board.

b) Post the companies numbers as per Chicks Dozen four times a year. The numbers should be posted during the week leading up to the deadline dates of 6/15, 9/15, 12/15, and 3/15.

c) Each Chick is responsible for getting online and posting once per week. Also the message board should be read (only required to read asterisked posts) once a week.

d) Each Chick is required to track and report on one NEW company (not already held) once per year. (This is only after we have a full portfolio.)

10. Dues: Monthly dues will be $50.00. These must be in the hands of the Egg Carton by the fourth day of every month. A five-dollar fine will be levied when the payment is late. The Egg Carton will notify all members via email a week prior to the money being due. If the full payment is not made by the first of the next month, the late fee for that month become $10.00, bringing total due to $115.00. If a partner has not paid their dues by the beginning of the third month it will be made known to all the partners and her membership can be revoked by a majority vote. It will then be treated as if she had submitted a letter of resignation, as per the withdrawal of partner rules below. No further fines will be charged, however, the club will retain 10% of the delinquent members share value at the time of the sale or buyout, as a penalty for the forced transaction. The delinquent member will be responsible for all fees and expenses pertaining to the sale of any stock or transaction. All unpaid dues and fines will be deducted from share value at the time of final settlement. If payment is made, the total due by the beginning of the third month will be $165.00. ($50 +$5 + $50 + $10 + $50.)

11. Philosophy of Chicks:

a) Follow the Chicks' Dozen investment criteria for purchasing a stock for our portfolio.

b) Follow the Chicks' Sell Philosophy when considering whether to sell a stock.

Chick Sell Philosophy

• We are able to discuss selling a company after we have held it in our portfolio for 2 years. There is no limit to the number of companies our club owns, however, each company must be tracked quarterly by a club member.
• We are able to discuss selling a company if it has not met the Chicks Dozen in the following ways:

       Buy What You Know - The company has changed its focus or core business to something we don't understand or like or support.
       The Industry - The company has experienced a downturn in its industry as a whole; or a company we own has been replaced by new product or service; or a company we own has fallen behind industry changes at large.
       Leader In Its Field - The company we own has lost market share. A rival have introduced a new product or service that affects our company's core product(s).
       Repeat Profitability - The company is consistently making less money than before.
       Quantifiable Criteria - Gross Margins, Net Margins, Cash Compared to Debt, Flow Ratio and Increasing Growth; you know the drill here.
       Change in Management - The company has suffered key losses in strategic positions, CEO, President, et al., anything that has impact on a company.

• We only vote to sell at regularly scheduled meetings.
• We sell only if agreed upon by a majority vote.
• We sell if we feel the need to rebalance our portfolio.
• We sell if we found a better company to invest in
• We sell if we screwed up when we made the initial purchase decision.

Procedure to sell: Any Chick can present any company we own that meets our sell philosophy, but it must be done one week prior to a scheduled meeting. This, similar to our modus operandi when purchasing a company, allows us to assimilate the information and make thoughtful decisions.

c) Follow the Chick Rules when conducting club meetings.

d) Reinvest all dividends and capital gains.

e) Travel at least twice a year for a face to face meeting.

f) Have fun, keep the tone light.

g) Perform one Random Act of Kindness per month.

12. Withdrawal of Partner: A partner wishing to withdraw from the partnership must submit a letter of resignation to any one of the officers at least 48 hours prior to the commencement of a scheduled monthly meeting. She will at this time forfeit her privilege of attending the scheduled monthly meetings. The withdrawing member will be obligated to pay her dues without fine for the three months following her resignation. She will be released from this obligation at such time as a new partner has assumed her financial position or the remaining partners have purchased the share. When stock must be sold to pay the withdrawing partner, said partner is responsible for all fees and expenses pertaining to the sale of the stock. It shall be sold no later than the Monday following the third scheduled meeting after her resignation was accepted. The withdrawing partner’s check will be sent via U.S. registered mail within three working days of the treasurer receiving the funds of the transaction. The share value will be the current value most recently reported before the settlement takes place minus any outstanding obligations.

If a partner withdraws within the first year of the club’s inception, she will only be reimbursed the lesser of either 1/10th of the club’s worth (or her equal share if less members) or, of her total dues paid during her time. She will not be entitled to any market gains during the first year.

13. Valuation: The current value of the assets of the partnership less the current value of the debts and liabilities of the partnership, (herein after referred to as “value of the partnership”) shall be determined by the close of the market the Friday before the Sunday night meeting. This value will be determined by the Egg Carton and will be reported in the monthly email the day before the meeting. It will be discussed as the first order of business in the meeting so the Egg Carton’s report can be passed.

14. Management: Each partner shall participate in the management and conduct of the affairs of the partnership equally. It will take a majority vote of the membership to buy or sell a stock. If you are not present at the time of the vote, you can vote via a proxy email addressed to all members. The vote should be sent in an email to all members, or, or posted to the message board. Any member wishing to buy or sell stock between meetings may obtain agreement of two-thirds of the membership and will then contact the treasurer giving their approval of such transaction. A reasonable attempt shall be made to contact all members via phone, email and message board. A reasonable attempt allows for two days of the email and message board notice being posted or sent.

15. Book of Accounts: Books of accounts of the transactions of the partnership shall be kept and be available and open to inspection and examination by any partner at all times.

16. Money Market Account: The partnership shall select an online broker that allows for a money market account with free checking privileges.

17. Broker Account: None of the partners of this partnership shall be a broker. The club shall select a discount online broker whose fees are below $25.00 per trade. Each member will have access to the club’s brokerage portfolio but only the treasurer may have the password to buy and sell stock.

18. No Compensation: No partner shall be compensated for services rendered to the partnership, except reimbursement for expenses.

19. Additional Partners: Additional partners may be admitted at any time upon the unanimous consent of the partners in writing or at a meeting so long as the number of partners does not exceed ten.

20. Death of a Partner: Upon the death of a partner, the club will buy her membership. The partners shall pay the withdrawing partner or her estate, as the case may be, a purchase price equal to 97% of her capital account or her capital account less the actual cost of selling the securities, whichever amount is smallest. Settlement shall be paid within two weeks of the valuation date used in determining the purchase price.

In Witness Whereof, the Founding Members have signed and executed these Articles of Association the ______ day of ______, ______ at __________________(City and State)

That’s it!!! Signed Operating Procedures!! You’re a partnership!!!

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B. Agendas

Need Help with your First Meeting Agenda? Well here’s a sample agenda you can you use to get started and then just re-use it as you go along.

Meeting Agenda for ___________ Investment Club

Date & Time of Meeting:_____________________

Any Requirements before the Meeting?_(like read message board or research companies?)________

Items to Be Discussed (You can set up time limits for each of these to keep the meeting manageable or just go with the flow.)

1. Set time and dates of meetings
2. Amount of money invested per month
3. How often to invest
4. Discuss computer availability for each member
5. Discuss and pick an investment philosophy
6. Assign companies to research
7. Assign person to research online brokers
8. Decide on a name
9. Drink and Dessert Break (Lynn’s cheesecake with fresh raspberry topping)
10. Discuss Operating Procedures “The Coop Policy”
11. Elect Officers
    a. President (Head Hen)
    b. Vice President (Second Chick In Charge)
    c. Secretary (Chicken Scratcher)
    d. Treasurer (Egg Carton)
12. Sign partnership bond
13. Assign someone to open a message folder
14. Adjourn

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C. On-Line Meetings

As an option to face-to-face meetings, you can meet online using your club's message board at the Meeting Place. If you haven't registered a club yet, you can get more information as well as register at Club Central.

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D. Chick Rules

1. Cock-A-Doodle Do….The meeting begins. Call to order….or a simple, “Wake Up Chickies, we’re starting!”, will suffice.
2. Follow the Agenda
3. Chick Chat-Discuss anything you may need to as a club
4. One sentence. Take your agenda point and re-word the understanding of the agenda point into one sentence.
5. Chicken Scratcher (Secretary) Repeats, makes sure everyone is clear on the new idea
6. Agree/Disagree
7. Majority Rules

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E. Meeting Minutes

So you’ve had your first meeting and somebody took some great notes but now you need some help organizing them into the meeting summary? Well, we call them the meeting minutes. Here’s a sample Minutes Form that might help. Feel free to use this for every meeting you have and you can then place it on your club's Home Page (a feature which soon will be available on this site) for everyone to see.

Minutes for _____________Investment Club

Meeting Came to Order on ___________(date) at __________(time)

Those Present at the meeting (on-line or in person): (List Members)

Items Discussed:
1)
2)
3)

Items Voted or Decisions Made during the Meeting:
1)
2)
3)

Agenda Items or Assignments for Next Meeting or on-going assignments:
1)
2)
3)

Meeting Adjourned at _________(time).

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F. The I.R.S. - The Internal Revenue Service

Below are descriptions of the forms your club will need in order to be an official partnership and get your investment club off the ground.

Click here to see samples of these forms.
Click here to go to the IRS site where these forms can be downloaded.

SS-4 Form Application for Employer Identification Number (EIN)

This form needs to be filed with the IRS for your club to get an Employee Identification Number. Just like any individual has to have a social security number to file his or her tax return, a partnership needs an EIN.

1065 U.S. Partnership Return of Income

This is the tax form for partnerships. If you have filed as a partnership using the SS-4 form, then this is the year-end tax form that needs to be filed for your club. Just like when individuals have to file a 1040 tax form, partnerships have to file a 1065 form. Usually the treasurer will file this for the investment club. Whoever files the 1065 form for the club is required to send each club member a K-1 Form. (Detailed instructions on how to fill out these forms are in our book, Chicks Laying Nest Eggs.)

1041 (Schedule K-1) Beneficiary’s Share of Income, Deductions, Credits, etc.

The K-1 form divides your club’s earnings by the number of members in your club. A K-1 should be filled out for each member citing their share of the whole club’s income. This share (profits or losses) from the 1065 is what is included on each individual’s tax return.

Schedule D Capital Gains and Losses Form

A club needs to file this form with the IRS to inform them of your profits or losses for the year. (They need to keep tabs on this stuff…even if it isn’t more than your phone bill.) You show purchase date, what you bought it for, sell date and what you sold it for. If there are GAINS, then taxes are applied, (again, even if it is less than your phone bill.) There are two types of taxable gains… short term or long term.

Being a Chick, we are only going to tell you about the LONG TERM. If you own a stock for more than a year, and then decide to sell it, the maximum your tax will be is 20% on your gains.

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