Hannah Terhune Articles

Should I Set Up a Managed Account Business or a Hedge Fund? It costs more money to set up a hedge fund and the process takes a little longer. If you have customers ready, willing and able to commit money now, start by setting up a managed account business and add a hedge fund later. With a managed account business, you do not have to hire an auditor and an administrator. Your customers will open trading accounts at the broker you direct them to and you will manage their accounts pursuant to the managed account agreement you ask them to read and sign before committing to you and your trading program. Contact Us for Assistance Setting Up a Managed Account Business

How long does it take to start a hedge fund? It really depends on your circumstances because no two funds (including the people who want to start them) are completely alike. In the United States, companies can be formed in a matter of just a few minutes. For example, in the State of Florida, a company can be formed over the Internet in less than ten minutes for about $120 USD. In the United States, no minimal capital is needed to form a company. Even a U.S. tax identification number (i.e. EIN or employer identification number) can be obtained from the U.S. Internal Revenue Service over the Internet. In general, and assuming no registration is required, the average U.S. hedge fund takes about four (4) weeks to organize including the time needed to prepare offering documents and to arrange for the hedge fund’s bank and brokerage accounts. Learn More About Hedge Fund Offering Documents Starting a hedge fund? Contact Us for a Free Fee Quote & Consultation

How many investors can invest in a U.S. hedge fund? If you set up a U.S. hedge fund you have two choices. If all of your investors, without exception, are qualified purchasers, your U.S. hedge fund can accept up to 500 investors. This type of hedge fund is referred to as a 3(c)(7) fund. Qualified purchasers are generally those that have $5 million in net investment assets. Once a 3(c)(7) fund reaches 500 investors, it may be required to register under the Securities Exchange Act of 1934. Learn More About Hedge Fund Regulation If you are not able to satisfy the qualified purchasers only requirement, your U.S. hedge fund will have to operate on a smaller scale; one that can accept up to 100 investors. This type is of hedge fund is referred to as a 3(c)(1) fund. Of the 100 investors it can accept, only 35 can be non-accredited investors. Learn More About Accredited Investors While Section 3(c) of the Investment Company Act of 1940 provides exemptions from registration, it does not negate the need to file a Form D with the U.S. Securities Exchange Commission (SEC) for the hedge fund and state blue sky filings. Learn More About Hedge Fund Law and Learn More About SEC Form D & State Blue Sky Hedge Fund Filings Additionally, operating under one of the Investment Company Act exemptions does not negate the need of the hedge fund’s manager to register as an investment adviser.

Equity Funds If the hedge fund trades securities, ETFs, etc. and has U.S. investors, the hedge fund manager will have to register either with the SEC or its home state unless an exemption from investment adviser registration is available to it. Learn More About Investment Adviser Registration We offer SEC and state-level investment adviser registration services. Contact Us for Assistance

Why a U.S. Hedge Fund? Even if you are based in another country, consider forming a U.S. hedge fund. The United States offers easy low cost access to the legal, tax, accounting, retail and institutional brokerage, and the regulatory services needed by a hedge fund sponsor to organize a hedge fund. Despite what some hedge fund sponsors think about the purported negativity surrounding the United States, many more establish U.S. based hedge funds because of the minimal expenses associated with starting a U.S. hedge fund and the sheer convenience of having their U.S. based family members and/or other U.S. investors able to invest in the hedge fund.

Offshore USA Hedge fund sponsors (i.e. the organizer(s) of the hedge fund) based outside the United States are usually surprised to learn about the light touch of U.S. regulation and low costs associated with forming a U.S. hedge fund. Read Our Leading Media Article American the Beautiful Tax Haven

Minimal U.S. Legal Infrastructure Needed To start a U.S. hedge fund, you generally need to form two business entities: the hedge fund and its investment manager. The hedge fund is typically set up as either a Delaware Limited Partnership (LP) or Limited Liability Company (LLC). Learn More About Delaware Company Formations The investment manager can be set up as a LLC, or as some other type of business entity in your home state or country. We can form both entities for you quickly and for a low fee. Contact Us for Assistance Hedge fund sponsors based offshore can set up both a hedge fund and its management company in the United States. Learn More About U.S. Company Formations

The United States Allows Hedge Fund Advertising The United States lifted the ban on hedge fund advertising for hedge fund’s operated by fund managers registered with either the SEC or a state regulator. The decades-old restriction on how hedge funds can raise money is gone! Hedge fund managers can speak publicly about their hedge fund’s strategies and performance and advertise through normal channels. Learn More About Hedge Fund Marketing & Raising Capital However, Rule 506(c) bans industry bad actors (i.e. certain felons) from operating or marketing a hedge fund under Regulation D in the United States. The full text of the SEC’s rule adopting the Bad Actor Disqualification rule is available here. The U.S. SEC’s fact sheet summarizing the Bad Actor Disqualification rule is available here and a summary of the law available here .

The United States is a Safe-Haven for Business A 2006 Government Accountability Office report, found that most other states do not require ownership information when businesses are formed or don’t have to submit periodic reports. Read the GAO 2006 Report of U.S. Company Formations In addition to Delaware, Nevada and Wyoming are advantageous places to set up a company. Learn More About U.S. Company Formations Given the depth, privacy, predictability and pro-business cast of Delaware’s company law, it makes good business sense to set up a hedge fund in Delaware. Contact Us for Assistance We offer company formation services, registered agent, registered office & virtual office service in Delaware.

Where do I set up a U.S. Hedge Fund? In the United States, hedge funds are found chiefly in Delaware. U.S. hedge funds are established primarily in Delaware because Delaware offers the most advanced business friendly law in the United States. In fact, Delawares business friendly environment is attractive to companies across the globe, not just hedge funds. Learn More About Delaware Companies Governing law matters. Contact Us for Assistance We offer company formation services, registered agent, registered office & virtual office service in Delaware.