how to set-up a tiny fund

This is a discussion on how to set-up a tiny fund within the Trading Systems forums, part of the Methods category; Actually there was one other structure now I think of it... You get your 'investors' to enter loan agreements. The ...

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Old Mar 9, 2012, 6:47am   #16
 
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Re: how to set-up a tiny fund

Actually there was one other structure now I think of it... You get your 'investors' to enter loan agreements. The loan has to be structured for the working capital of your business and the lenders have no claim over any other asset in the business or your personal life in the event that the value is impaired. You then need a section on interest payments which are essentially variable and related to the performance of the business. The problem with this is that for your investors they have to take any gains as interest income and so will be taxed at their highest income band which might not be attractive for them. Anyway, I never went into it in detail as by this stage I'd decided friends and family money wasn't worth the aggro.
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Old Mar 9, 2012, 8:07am   #17
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Re: how to set-up a tiny fund

gayaku started this thread OK, I will look at that too. It has to be simple too, especially for the investors (who are individuals). I'm afraid they won't bother if it seems too much trouble or if the profits are taxed at their highest tax rate.

What are the best persons/entities which could help me : UK government, accountant, FSA, HM Revenue & Customs... ?

You're right, I'd rather avoid trading family and friends money. In fact, it's more ex colleagues (although friends too), who work in finance, have money and understand the risk, I won't ask to somebody outside of finance. Also, if I have a proper structure, I can raise money from "strangers". I believe what I do can interest a lot of people, thanks to the potential return and the diversification, but it has to be simple and tax-efficient, otherwise nobody will bother for 20 or 50K.

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Old Mar 9, 2012, 4:09pm   #18
 
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Re: how to set-up a tiny fund

What are the best persons/entities which could help me : UK government, accountant, FSA, HM Revenue & Customs... ?

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Old Mar 9, 2012, 4:18pm   #19
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Re: how to set-up a tiny fund

gayaku started this thread I don't understand why you talk about scams and Ponzi scheme ?!

What's so unusual about being reasonably successful in investment, and want to start trading other people money? And to want to start with small and slow, with no cost for me and my investors (50% on the profit or $1M a year business cost is not possible) ?

G
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Old Mar 9, 2012, 5:50pm   #20
 
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Re: how to set-up a tiny fund

You have to admit it's a bit shady doing this under a different name and talking about ex colleauges.
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Old Mar 9, 2012, 7:13pm   #21
 
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Re: how to set-up a tiny fund

what do you trade if you don't trade through broker ? dark pool ? vegetables stand on the corner ? you are a bit too mysterious
and you don't look like you are serious (to me)

why you can't trade their money under your account ? why do you need their funds ? don't they trust you ?
you just created something in your imagination and would like to see how this, or whether this can be accomodated in reality, thats ok

But in reality, in such weird case as you showed I would delay opening a company as long as possible would give tham access somehow to see the balance and thats it

raising funds is reasonable when someone has a perfect idea and can't do his job with the kind of money he has or when he wants to unresponsibly risk other peoples money for (only potentially) bigger profits or for a thrill of handling it
To run a fund or "own a trading firm" its impressing in itself, attracts money itself and because of this the idea is extremely attractive I had a chance to observe the psychology of this
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Old Mar 11, 2012, 6:00pm   #22
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Re: how to set-up a tiny fund

gayaku started this thread The only reason why I want to raise money from other people is because I can't put much myself more cash on my system as I don't have more cash left, otherwise I would keep it all for myself. I have a few strategies coming live soon which could allow me to trade much bigger size.

Keeping all the money on my account, even my friends' money, would be doable for small amounts, like 5K-10K, but I don't think it would work for 50K-100K. Nowadays, whenever you do a bank transfer over a few Ks, you get a phone call from your bank, which is fine.
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Old Mar 11, 2012, 10:42pm   #23
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Re: how to set-up a tiny fund

Perhaps you should give your fund a legal frame to begin with. Download an IN01 form from companieshouse.gov.uk and incorporate a limited company. If you do it yourself it will cost only about £30. Keep major share in the company yourself to always protect your control of it. Do the company's accounts yourself using GNUCash software. Sooner or later you will need to re-classify the company as an investment company, do your research or consult a solicitor. Also, prepare to establish an offshore investment vehicle asap, your fund will need to protect its financial gains. Once this is ready, move the company's activities into the offshore vehicle. By this time I am sure you will know yourself what to do next...

Good luck. I hope to see you getting there.
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Old Mar 12, 2012, 9:44am   #24
 
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Re: how to set-up a tiny fund

Lol
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Old Mar 12, 2012, 11:27am   #25
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Re: how to set-up a tiny fund

gayaku started this thread zaq1, that sounds good. This is very helpful, as I have no knowledge of accountancy, law, legal... My skills are more into trading and IT. I have the feeling this last sentence will generate yet another cynical comment on this forum

Why do I need an offshore investment vehicle ? Does it mean setting up two firms, a UK one and on offshore one ? Offshore always sounds "dodgy", but it seems the thing to do in the UK. I heard not a single UK hedge fund is registered in the UK, they're all offshore.

How can I pay my investors, my partners and myself with this set-up ? Is it dividends, salary...?
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Old Mar 12, 2012, 7:16pm   #26
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Re: how to set-up a tiny fund

There are many great people here, I guess they are mature adult personas. Then there are also some bitter ones, too. If you wish to drive a "Chelsea tractor" and live in Campden Hill Sq asap, try to ignore negative remarks and get ahead with your idea. That means planning and ACTING on your plans.

The UK limited company first, because it is easier to incorporate and you need to be running, otherwise it is still just an idea (ideas are dime a dozen, as we all know...). The offshore entity later, it will be more difficult as this is actually setting up a company in another country, with different laws and rules. Why incorporate abroad? Lower or no taxes, benign legislation, investor identity/capital protection.

As for payments, you are right - pay yourself by dividends, directors' remuneration, through petrol/other travel allowances...
But, when putting your own capital into the company, only a minimum amount needs to be assigned in company shares - any substantial amounts you put in should be invested into the company against the company's debentures so that if the company goes bust you have preferential right to any monies before other creditors and shareholders.

Preferable follow other forums as well, mainly UK accounting/company secretary/company law/enterpreneur/venture capital forums, there are some good around. And, go for your plan. ACT now.

Last edited by zaq1; Mar 12, 2012 at 10:32pm. Reason: Additional info
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Old Mar 12, 2012, 11:00pm   #27
 
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Re: how to set-up a tiny fund

Given that you & i suspect your friends are all UK-based, you should be able to get spread-betting accounts set up for all your clients and get them to sign a 'power of attorney' thereby trading in a similar fashion to a small fund.
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Old Mar 13, 2012, 1:49am   #28
 
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Re: how to set-up a tiny fund

Quote:
Originally Posted by zaq1 View Post
There are many great people here, I guess they are mature adult personas. Then there are also some bitter ones, too. If you wish to drive a "Chelsea tractor" and live in Campden Hill Sq asap, try to ignore negative remarks and get ahead with your idea. That means planning and ACTING on your plans.
You do realise he hasn't even taken his A levels yet, let alone been to university? Isn't willing to work on acquiring his own funds and trading it. Seems to be too interested with just talking about elaborate plans and asking people what he should study/where amongst elaborate trading stuff when there's much better things to do at his age. The amount he's spent talking about all these things he could have stacked shelves in sainsburys and made at least £5k. I really don't get why he's doing this under another account as if it suddenly gains some legitimacy because it's not affiliated. oh...he's multi-accounting. Nice and honest, those skills serve well in the scamming business (where these things inevitably end up)

I already told him to do power of attorney and spread bet it weeks ago and here we are.

Last edited by Masquerade; Mar 13, 2012 at 1:54am.
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Old Mar 13, 2012, 8:47am   #29
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Re: how to set-up a tiny fund

gayaku started this thread I've asked all these questions because I believe I will be very soon in the position to raise money, and I'd like to start planning the next steps, which should be to find a good solution to manage other people money, and of course find investors willing to commit.
For the moment I'm focused on the core of my business : trading strategies, Java code, and risk management.

I don't need to justify myself to the bitter people in this site who have nothing better to do than criticize or pollute a legitimate question (how to manage other people money when the amount is below 100K). Those who can't do teach
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Old Mar 13, 2012, 9:04am   #30
 
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Re: how to set-up a tiny fund

Legitimate question: why are you using 2 accounts? Perhaps I should ask the seniors if it's allowed.
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