Private funds are not created to invest in certain financial instruments. The founder transfers the capital to a private fund so that the council of the fund manages this capital and distributes the income to members of one family or a limited group of people who, for one reason or another, are important for the founder.
Nowadays, it is possible to establish a private fund both in America and other jurisdictions. In the United States, Delaware Delaware is most often chosen to open a private fund, and the Cayman Islands are best to establish offshore funds. Request a one-on-one consultation on investment business in the United States to learn how to set up a private fund in the US or other requested jurisdictions.
There are no shareholders in the private fund, there are no holders of any depositary receipts or other securities that can replace shares or shares. In such a fund there is a founder who has a certain asset and transfers it to the fund. There is a council of the fund, which in fact is the only executive body that exists within the framework of the fund after its establishment. The founder delegates responsibility to the board through a fund investment management agreement.
Private funds in Delaware have a limited partnership structure with a general partner or investor who manages the fund. Also included are limited partners.
The establishment of a limited partnership in Delaware is governed by the Law on Limited Partnerships. The charter document of the partnership is the LPA. The main document for the placement of shares of a private fund is its Memorandum on Private Placement (PPM), which provides investors with information.
A private fund is always created for some clear, definite purpose. In the charter, the fund founder must specify the purpose for which the fund is established. And in order to achieve this goal, some kind of asset must be transferred, because the fund itself cannot conduct any kind of commercial activity, and it must be provided with some kind of property for its functioning.
Please note that by registering a private fund in Delaware, no organizational documents of the fund will be publicly available.
If you plan to register a limited liability company in the USA, then it must have a registered agent, as well as an office in the state, otherwise, registration will be rejected.
Private funds in the USA are allowed to conduct only a private offer, which should be sent exclusively to accredited investors.
If you intend to establish a private fund in America, we draw your attention to the fact that despite the ban on closed-type funds from using publicly available advertising and media for their offer, the US Securities and Exchange Commission recently allowed the use of a general tender. At the same time, persons engaged in the offer of a private fund are subject to registration as a broker.
An investor may be considered accredited if he has:
- net capital in excess of 1 million USD;
- income in excess of 200,000 USD in each of the previous two years and expected income in excess of 200,000 USD in the current year;
- assets over 5 million USD for the purpose of acquiring securities.
It is important to note that in order to open a private foundation in the United States, a special license is not required, but state authorities must be notified.
Those who intend to establish a private fund in the United States should also be aware that such a fund is not subject to federal income tax, and income and capital gains are transferred to the fund's investors.
Learn more about how private funds operate in the United States and how to conduct investment business in America by contacting us in a way that is convenient for you, as described below.