Hi. I would like to know how arrangements for backing a trader are typically organized with respect to business structure (LLC, partnership, etc.). Basically, if person A is going to back person B by providing x dollars with the expectation of being repaid x + y dollars at the end of a certain period of time, how should such a relationship be structured? The current plan is that the arrangement would be discontinued if a drawdown of z percent or more would occur, which is the risk being taken on by the equity provider. Thank you. SWO
I have also wondered this, but from the trader's standpoint (someone looking for funding). I believe the funder/investor must be an accredited investor...anyway, I hope to see more replies on this. Maybe this helps? http://www.sec.gov/info/smallbus/qasbsec.htm
have you considered joining a proprietary firm and having your "sponsor" become a class C member of some sort where he puts the money up for you to trade and split the profits? I've seen a few prop shops do this.
This would be strictly futures, no equities. I would prefer that the equity provider not be viewed as an "investor", but rather a partner/principal in the business. Ultimately, input is needed from an accountant or attorney, but I'm just curious how these arrangements are typically structured.
If the equity is coming from a 'provider' he would have to be active in the business in order for him to be consiered a 'partner' or 'member'. What would the provider do for the biz?
SWO- Sounds like what you want to do is start a private investment company with an LLC structure. Those backing you will have to be made partners as well and the LLC will have to be member of NASD, SIPC, and NFA. Edit: Also, I believe that at least one of the partners or yourself will have to be RIA series 65 registered as well.
This is not true. You can have non-active partners. There is no way for the government to define "active."
Does that mean I can start an LLC and sell interests of the LLC to partners? Isn't that considered a 'security' in the eyes of the SEC?
Not true. A classic LP has STRICT divisions. The General Partner(s) have ALL management authority and responsibility... The Limited Partner(s) NONE... they can ONLY invest capital. Every LP is ** custom created ** by a Law Firm. Except for basic legal guidelines like the above... The LP Agreement can include almost anything... And be one paragraph or 1,000 pages. My LP Agreement is about 35 pages.