The club's portfolio is determined and constructed by its members. With the help of financial publications, advisors, their own research, and a little common sense, most Investment Clubs can construct a solid portfolio. One or two members are usually selected to deal with the club's discount or full service brokerage, which executes buy or sell orders. The value of each member's share is determined on a percentage basis by his or her total capital contributions to the club's total portfolio value. In the US, the NAIC provides help with club accounting guidelines and software that make the process of bookkeeping relatively easy.
As we mentioned above, most clubs are set up as legal partnerships. Canadian clubs can either request partnership documents from their provincial government to set the agreement up themselves or consult a lawyer familiar with this area of the law (a good idea). Again, in the US the NAIC provides a wealth of information on this topic. Generally speaking, in terms of tax liability, a partnership agreement as an entity is usually not liable for taxes on the investment gains or losses, but rather each member is responsible for reporting his or her share in the partnership, and the capital gain or loss involved.