How to Become a Full-Time Investor

Should you chose to take on a partner you will share the risks, rewards and responsibilities of the business. However, be forewarned: Entering into a partnership is in many ways like getting married, so the relationship should not be taken lightly.

I decided to go at it alone. Starting a business was difficult enough. Adding a partner on top of a wife and five kids was injecting more complexity and unnecessary stress than I wanted at that time in my life. I always knew I could take on partners at a later date, if it made sense. So far, I have not had to do so.

Step 3. Decide on a Legal (and Money) Structure: Once you have decided whether to go at this alone or with partners, you need to decide on how the business will be legally structured. I cannot emphasize enough how important this step in the process is, as it has critical legal and taxation ramifications.

This is a matter of personal preference that depends on your own tax situation, cost of doing business, the level of risk you are willing to bear and the amount of additional clerical and paperwork you are willing to handle. While I do not want to provide tax and legal advice, I will list for your further research some of the structural options available to you:

Unincorporated Sole Proprietorship: Under this structure, you and your business are essentially one and the same. You will be directly taxed and you will have unlimited liability.

Limited Partnership: Simply put, you act as the general partner and your clients act as limited partners. This is the most prevalent structure for hedge funds. All income and expense is passed through to the partners. The limited partners are liable only to the extent of their capital contributions. The general partner may have unlimited liabilities.

Corporation: This legal vehicle is fully taxed as an independent taxable entity. The benefit is that the corporation has liability protection for its shareholders under the law.

Limited Liability Coropration (or LLC): This is structured much like a partnership or sole proprietorship for tax purposes but has the liability protection of a corporation.

Before you make a decision, I implore you to seek the help of qualified professionals, such as attorneys and accountants. The optimal structure for me was to set-up LakeView Asset Management as an LLC.