In this post are your comments in regards to "managed accounts" (unregistered investment advisor) or are you referring the original post and a "small fund?" Why would you need a series 7? I thought if you wanted to become a registered IA, you needed a series 65, and for an unregistered one you didn't need either? Also, is this 15 investor limit in all/most states or does each state differ? Thanks for the info.
I thought the whole purpose of the incubator fund was to provide a bullet-proof legal structure where such incidents would be excluded...
Series 7 is wrong, you need a 65. Some states require a 65 and some do not. You have to register in CA no matter what size.
I was part of a LLP investment partnership in 2007 and 2008 - the legal and accounting required some specialization (read $$), and taxes could get pretty complicated in a hurry. In a limited partnership, the investors are generally limited partners (LPs); the organizer is the general partner (GP). Each gets different tax treatment, and the distributions are handled differently. You can also segregate the schedule K-1 gains from the advisory fees, and if you really make a killing you should consider re-structuring your incentive fees for "carried interest" which may or may not be legal depending upon what Congress and Obama end up doing here. Once again, the lawyers and accountants suck the lifeblood out you. My situation was a bit complicated, because there were Class A, B, and C partners and I had my own LLC and employees as one of the partners. There's no reason why you couldn't set it up yourself provided that you really did your homework. It would be mandatory IMO for you to pay a specialist for a few hours of his time ($$) to review and comment upon your structure. The big issue is that every lawyer and accountant says they can do the work, but you want to deal with specialists that have done this before - rest assured that the IRS looks at every one of these.
Thanks. What do you think is the most cost effective way to manage a small amount of money for a small amount of people? I've had a lot of success especially over the last 5 years, but in general over the last 10 years trading for my personal account and my close family's account. Now I'm getting requests to trade for other people that are not so close. I live in the state of Washington. Should I go the "small fund route" which i assume is a limited partnership where you are the primary partner, so basically this is a small company where everyone invests in the company and gets a certain slice (i'm assuming, i haven't investigated this all that much). Or the Investment Advisor route, where since I would be managing a small number of individual accounts, I wouldn't need to register. The money would be held at a broker, say IB, in the individual's name, I couldn't withdraw/deposit any money, but I could access their account to trade for them. It seems to me that the 2nd way is the most cost effective way, not to mention simplest.
True, you don't need to register but are still required to register your exemption with the NFA. And, you have to research what the registration requirements are for each state you have an investor in. California requires you to register as a Registered Investment Advisor even if you are exempt as far as the NFA is concerned.
Where can I find information in regards to registering as a RIA in California even if you are exempt per NFA, i.e., you are not taking a profit for the trading. Any recommendations of specialists to set up trading for a small group of people? If the investors are just a friend and me, 2 people, who will have starting capital of around 20k, and continue to add to that on a monthly/quarterly basis at a run-rate of 100k a year, and if my primary reason of putting structure to it is so that I can create a marketable track record for future growth, would structuring it as a LLP with me as the general partner and the friend as a limited partner work? A secondary need is so that profits are distributed in a way that allows each of us to pay taxes accordingly. 1. Would the trading in this set up be auditable for performance track record? Would the constant adding of money create an issue with calculating performance? i.e., can it be converted to NAV at each and therefore, even if there are deposits, performance can still be calculated? 2. What would be the cost of setting this up? 3. Do I need to register as a RIA? I am in California. Thanks for any help anyone can provide.
even for a small fund, you still need to draft up some good contracts. where did you find the subscription agreements